The Hard Truth: 30 Money Questions You Should Ask Yourself
This post is simple. My goal is to give myself and the readers of Frugal Pinoy the chance to be completely honest with ourselves about our money. While I’m generally doing ok, there are some aspects of my financial life that still need improvement.
Let’s take the time to review this questionnaire. You don’t have to write your answers in the comments. In fact, I just recommend that you print it out and answer it in your private journal or a piece of paper. As for me, I’ll do my best to disclose what I can below, without sacrificing my privacy too much.
Without further ado, let’s get honest, shall we:
Finances
1. How much monthly income do you have minus taxes? Apart from your salary, include other side income streams such as businesses, allowance, etc. [FP's note: My income is ok, but I want to earn more.]
2. What is the exact amount of money you spent last month? Including utilities, debt repayment – everything. [FP's note: All my expenses are in a spreadsheet, so I only have to open it to answer this question.]
3. When you subtract your answer to question #2 from your answer to question #1, do you get a positive or a negative number? If it’s a negative number, you are obviously living beyond your means. [FP's note: Positive! But if I include savings, obviously the answer is zero, since I "spend" every centavo.]
4. If you don’t have an answer to #2, how come you don’t know how much you spend? Too busy? Not sure how to track your money? Overwhelmed at the thought?
5. How much debt do you have? Credit card debt, loans, borrowed money from friends and family. [FP's note: No debt.]
6. If you suddenly lost your job and other sources of income, how long would you survive without resorting to debt or receiving money from relatives/friends? This points to your emergency fund, if you have one. [FP's note: Personally, my family and I could go on for over 6 months, even longer if I tap into my savings outside of my emergency fund.]
7. What’s your definition of being wealthy/rich? It could be a specific amount, a feeling, a lifestyle, etc. Usually, though the answer doesn’t lie in a specific amount, because it’s not the money per se that we want, it’s the experiences and things it can buy.
8. Do you think you have what it takes to be rich? Why or why not?
9. If you want to be rich, what steps have you taken to reach that goal? What additional steps do you need to take?
10. What large expenses will you have within the next 10 years? For those in their 20s and 30s, it could be a wedding, kids, travel, a new home, starting a business, etc. [FP's note: For me it's a house, travel, and kids.]
11. Are you financially prepared to handle your listed expenses from #9? True, you can take out loans to pay for many of these large expenses, but consider this question with the thought that you shouldn’t incur additional debt. [FP's note: Yes, I'm on track with my saving goals.]
12. Do you have any investments? Not just limited to stocks. May include businesses, sources of passive income, bonds, real estate (intended for rental or selling), etc. [FP's note: I have a few investments, but would like to be more aggressive.]
13. How do you make financial decisions? Do you do your own research? Rely on advice from experts? Or do you just go with your heart? [FP's note: A little bit of all three. But the most important factor for me is to gain as much informational advantage as I can.]
14. Do you tithe regularly? Apart from contributing to causes you care about, volunteering your time and giving donations gives you a feeling of abundance. [FP's note: I donate to causes, but want to do more volunteer work.]
15. Are you part of the 10% of Filipinos who save up for retirement, or are you part of the other 90% who don’t? [FP's note: I'm part of the 10%.]
Read MoreHow much happiness can money buy?
People say that money can’t buy happiness. Is this the truth or just a meaningless saying? When I think about this more, I realize not having enough money for your needs can be a source of stress. If you just 
got laid off, for example, how can you be happy if you spend sleepless nights worrying about where to get your kids’ tuition? Isn’t the lack of money a typical reason why some couples fight? Or if you work at a job you hate just for the paycheck, won’t you be more miserable compared to someone who has enough money to invest in a business they are passionate about? True, you can borrow the cash you need from friends and relatives, but that tends to put a strain on your relationships.
I suppose money can buy some amount of happiness in the sense that you won’t have to feel stressed or worried about the basics. Here’s what some psychologists found out about the matter:
People with more money tend to be happier than those with less – but only up to a point. That is the conclusion of psychologists Ed Diener at the University of Illinois at Urbana-Champaign, and Martin Seligman of the University of Pennsylvania, Philadelphia, who have reviewed numerous studies looking at the psychological effects of wealth. They report that money’s impact on happiness suffers from diminishing returns: once you have enough for food and shelter, more cash doesn’t bring much extra joy.
Source: “Why money messes with your mind” NewScientist.com
While money can’t buy happiness, it can give you the security and opportunities you need for pursuing the things, relationships, and experiences that make you happy.
In my experience, this is true because having enough money for your necessities allows you to spend your time and energy on the other things that do make you happy. But once you have enough for food, rent, and the bills, acquiring more money doesn’t necessarily mean you’ll be happier. After you’ve made yourself financially secure, true happiness and joy is something that you have to create for yourself, after all.
So if I were to rewrite the saying for accuracy, it’d be: Money can buy security, but more money can’t buy happiness.
Here’s another interesting fact from the study: if you have some extra money to spend on fun things, paying for experiences rather than material things can bring more pleasure.
The researchers found that people reported “experiential purchases”, such as trips to the theatre or travel, as bringing them more happiness than material purchases such as clothes. A concrete purchase may have cost more and lasted longer but a good experience brought more pleasure.
Source: “Why money messes with your mind” NewScientist.com
I guess this means that if you do end up with some extra money that you can spend for personal rewards, you can maximize the happiness it gives you by spending it on a trip rather than an expensive watch.
What can you say about the study? Do you think it reflects your personal experience with money and happiness?
Read MoreWhen listening to experts, use your brain
Did you know that whenever you’re receiving advice from an “expert” (real or otherwise), it’s likely that you’ve turned off your own ability to make decisions?
According to a recent study, research participants were asked to choose between receiving a sure amount of money or gambling on a riskier, yet higher paying lottery. Scans showed that the participants were activating the brain circuits that weighed risk vs. reward.
But, when an “expert” (actually a computer program) offered his advice, those brain circuits showed no activity. This means that when faced with seemingly expert opinion, our natural tendency is to stop weighing the decision ourselves.
“Most average people have this tendency to turn off their own capacity for making judgments when an expert comes into the picture,” says Gregory Berns, a neuroeconomist at Emory University in Atlanta.
Source: “Brain quirk could help explain financial crisis”, NewScientist.com
While I don’t think that this is solely to blame for the financial crisis, it explains why some people would make risky decisions without thinking twice about it.
So how do we prevent ourselves from relying too much on experts and making blind financial decisions? We need to do the research. In a previous post, I talked about how I only invest in things I understand well. If I don’t understand something yet I want to invest in it, I do the legwork and conduct research from multiple sources. I try to gain an above-average understanding about it. True, this limits the amount of things I can invest in, but at least I know what I’m doing and I don’t lose my money. Or my head.
With that said, I’d like to remind everyone that although I give advice here at Frugal Pinoy, I’ve always been an advocate of doing your own research. If you go back and read my previous posts, I always phrase my advice this way “…this is a personal choice for me, but do what’s right for you…” or “it depends on the situation”. I do this because I know that we all have different habits, priorities, and needs.
Don’t listen to anyone’s advice blindly – even mine. Because you should be the prime expert of your own finances.
Read More6 Signs That You're Living Beyond Your Means
“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.
Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:
You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.
Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.
You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.
You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.
This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.
Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.
Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.
You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck – because I’d already run out of money before it arrived. This is a very stressful way to live.
You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.
You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second – getting into more debt to pay for other debts. Not really a sign of financial health.
Have you ever experienced any of these symptoms? What have you done about them?
Image by Steve Woods
Read More"You Don't Really Want Money" by Ron Davis
Today I found this great video by Ron Davis, whose personal development blog, Distinctions For Life, contains great advice on living better.
I thought I’d share this video entitled “You Don’t Really Want Money”, mostly because it points out several things I believe in:
- That when people want money, they don’t really want the money per se, rather, they want what they think the money will bring.
- You don’t necessarily need more money to get what you want.
You can play the video below:
You Don’t Really Want Money from Ron Davis on Vimeo.
At the end of the video, Ron tells us to ask ourselves the following questions:
- Why do you want money?
- How will you know when you have enough money?
- What picture appears in your head when you think about having enough money?
- Can you have that moment or feeling without money?
Think about them.
Read MoreHelp Iligan and CDO
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