- If I die today, how much money will my family be left with?
- How much of this money will come from my savings/investments and how much from the insurance?
- Will the money be sufficient for my family to take care off their day-to-day expenses, future goals, pay-off all loans and help maintain their life style?
- What would happen to me if my spouse passed away suddenly or lost his/her job? Will lose of second income throw my life out of balance?
- Do I know all the financial goals that I need to be saving for?
- If answer to the above question is yes, then do I know which are the more important ones and have I prioritized them?
- Do I know how much I should invest every month for each goal?
- Do I know how much can I actually invest for each of these goals?
- Do I have a plan to tackle the shortfall in the investment amount – if not today, then after some years?
- Is the health of my family and myself insured? Is the insurance sufficient?
- Do I really know the answer to the above question of it being ‘sufficient’? If not, do I understand the price I will pay in case of any unfortunate event? Doesn’t that scare me?
- If I lose my job tomorrow, how many months can I manage my household expenses (including EMIs), without breaking into my long-term savings (like retirement corpus)?
- Since we are talking about emergency funds above, if answer to previous question is less than 6 months, then should I not be worried about this grave mistake I am committing?
- If I am targeting early retirement, am I saving more than what normal ready-to-retire-at-60 people do? If not, how do I plan to retire earlier than others?
- Are there any big expenses (like property downpayment) coming in the next few years (< 5 years). If yes, am I saving money for that or I am betting on withdrawing money from some other sources (retirement savings, savings for kids’ education, etc.)? Do I understand the impact of doing that (withdrawing money from retirement savings)?
- Sum up the total annual incomes that you have earned during your working life. Now compare this with your current networth? If the networth is not big enough to be compared with total-life-earnings, then do you have a rational justification for being in this state? Where has all the money gone?
- If you die suddenly, will your dependents know what to do with the money they will get (savings/insurance)? If no, then do you think they will be able to live their life in financial peace in years to come? What are you doing to help them understand how to manage money?
If answer to most of the above questions has you worried, then it serves my purpose.
But honestly, I did not want to write such a pessimistic post.
But then I thought that it was necessary. The sooner people start asking some tough questions from themselves, better it will be for their own good.
Now ofcourse this is not a comprehensive list. But it will help you think on the intended line. When it comes to money, most people are worried about earning more, saving taxes, getting rich overnight. But what people fail to do is to ask some fundamental questions like these.
Your relationship with money depends a lot on your regular self-evaluation. If you want to succeed at money, you need to constantly evaluate and re-evaluate your own life, financial goals and money choices. Every single Rupee that you spend, should pass through the filters of above questions.
Most people have the common sense to answer these questions. This also means that they know what they should be doing with their money.
But still, they don’t do it and postpone taking the correct action. Isn’t it (unfortunate) justice that they don’t get to live a financially happy life?
Sorry for sounding so brutal. But as I said in my previous post too, ask yourself some tough questions.
A nice, informative and useful post. Thank you. Suresh