Ten Questions To Ask Yourself To Diagnose How Good A Budgeter You Are?

In school we were graded on every subject. You knew from term to term how well you were travelling by the teachers’ and the school’s standards. However in life, there is no report card as to how you’re travelling as a worker, family member, home budgeter, or even a health report.

There are warning signs which you can look for to give us clues on each of these subjects. If you constantly get fired and move from job to job, this signals you are struggling as a worker. If nobody in your family wants to talk to you, this could indicate how well you fit in or not. If you know your doctor by their first name and where they have been on vacation for the last five years, your health might not be the best.

 But what about home budgeting? Are you doing well or not? What grade would you give yourself if you had to assess your own performance? We have come up with ten questions you might like to answer. These should give you a clue as to what your home budgeting skills are right now. If you answer all these questions in the positive, this should tell you that you are on the right track. However, if a few of these questions are negative then you can give yourself a lower score. Be honest with yourself. Don’t hold back; be your harshest critic. Only when you deal with the facts will you know what to do next.

You will become the teacher on this one. Rate yourself from A to F. Just like grades in school, A is a high pass, B is a good pass, C is satisfactory pass, D is a fail and F is a complete failure. Then at the end, give yourself a total score of the averages.

Please note, while these are not all the questions we could have asked, they do cover a lot of bases and should really give you an insight as to how you are travelling.

Question One: Are all your bills paid on time?

Do you make it a priority to pay before the due date thus avoiding late payment fees? Or are you at the opposite end of the scale; do you have an ongoing relationship with the companies calling you up looking for payments?

Why aren’t you paying on time; because you forget or because you don’t have the money? If you have the money but forget, you can give yourself a higher grade. But if it is because you have to borrow money to pay back money and are juggling debts, give yourself a lower grade. Perhaps even an F.

In my experience, most people have the money but they just forget. They don’t make it a high priority on their “to do” list. They incur fees and reminder notices just through forgetting. If this is the case, you can quickly turn a low grade into an A by shifting your focus.

Start paying bills as soon as they arrive, don’t put them in the “to do” pile. Or, you can go to all your billers and set up direct debit - the easy way to pay. Now each time a bill comes in, you can safely file it away, knowing it will get paid.

Question Two: Are you a big emotional spender?

This can be hard to quantify, however just think about the last 30 days. I want you to think about all the products you have purchased; both big and small purchases. Which of these did you really need? And which did you really WANT. Wants and needs are two completely different types of purchases. Do you have a bunch of trinkets around the house you just purchased on a whim? Or when you go to the shops are you like a robot, programmed to only purchase what you have on your shopping list? Emotional spending is the opposite of rational spending.

Humans are funny creatures. We make emotional decisions all the time, even though some of those decisions are not good for us. Look at car adverts. Most car adverts don’t advertise the car; they show a family driving in the hills or to a picnic. They are suggesting that you look at all the fun you will have in this car. They are tapping into your emotional side, not your rational side. They want you to get a great feeling when watching the advert or thinking about the car. And they do it because it works.

Emotional spending is an interesting subject. The one thing we come across time and time again is parents unable to say no to their children. They want their kids to have whatever they want, whenever they ask. This is emotional spending. They feel good when they provide what their kids want. The rational parent/ spender has to say no to the children. While in most cases this is a better purchasing decision and better for the budget, it brings on bad feelings.

Now think about all the big purchases you have made over the past 12 months, anything over $1000. Did you do your homework on the purchase e.g. looking at reviews on the internet? Did you shop around for the best price? Did you check your budget to see if you could afford it? And the big question, did you really need it? If you didn’t need the product, it was probably an emotional purchase.

This mark involves being honest with yourself.

Question Three: Do you know how much money you are worth right now?

No, we are not talking about how much money you have in your bank account. We are talking about if you sold everything and paid off all your debts. What would be left over? This is an interesting question.

Most people have no idea what they are worth if you asked them. At least once a year you should take stock of yourself. Do a quick calculation as to what your total worth is. Plus keep it on record, so the following year at the same time you can see if you are going forward or backwards.

Your goal should be to increase this overall value each year.

Every stock exchange listed business must once a year send out a detailed financial statement on their worth and financials. This is a good thing because their shareholders can see if they had a good year or bad year and if their overall net worth is growing. However as householders, we don’t really put this on ourselves. Shouldn’t we at least try once a year to spend time working out just how much we are worth to see if this value is falling or going higher.

Question Four: How much money do you spend a month? No, really?

Do you as a household track your monthly outgoings? Do you keep all your receipts so you can tally up each dollar? Or do you just keep spending until the bank balance gets low? To run an extremely good budget, you need to know where each dollar is going.

If you are spending more than you bring in each month, long-term this will catch up with you. But how do you know unless you track it? The key to any happy household is to spend less than they bring in. But you need facts to determine if you are doing this. There is no use trying to guess this.

You would be surprised how many people tally up their total monthly outgoings only to realise they are spending more than they made. They make up the difference with credit cards, personal loans, and interest free deals.

What’s your grade for this question? If it is a low one, our advice is to start doing this ASAP. You might have a rude shock awaiting you!

Question Five: What is your partner doing right now?

Some families operate from a joint bank account. However a big proportion operate single accounts. Let me assure you, if your partner gets into financial trouble, even without you knowing or approving it, this is your problem too.

The number of times we have heard of one partner opening a credit card up, without the other partner knowing is incredible. They’re running up debts in both your names. The excuse, “I didn’t know what he/she was doing” will not hold up in court. You are both responsible.

 You have to treat your marriage like a plane with two wings. Both need to be present to fly. And both partners need to have a good understanding of what the other is doing. This not only protects you, but your family unit.

Right this very second as you are reading this, can you answer how many credit cards your partner has? What are the balances? This is not about going and accusing your partner of wrongdoing. However you need to be open and discuss exactly where you both are financially. Only then will you know your true wealth.

Question Six: If you lost your source of income tomorrow when would you run out of money?

A study was done in the USA which pointed out over 36% of households would be broke within 6 weeks if their income stopped. This is quite an alarming statistic. Ask yourself the same question. If my income stopped tomorrow when would my money run out?

Now a quick warning here. When we talk about this topic to people we never get the answer we want. In fact, people give us every type of response to try and not reply to this question. Some of the common ones are:

I work for the government, so my job is 100% safe.

My company needs me, I’m a valuable employee; they will never let me go.

We work for ourselves so we will always have a wage.

My profession is in demand so I could get another job right away.

While all these might be true, it’s not the question we asked. You need to think about if your money stopped tomorrow how long you could survive until it runs out? Nobody has a guaranteed job. Something might happen to prevent you from working. New technology might make you as a highly regarded professional obsolete. Or the economy might go into a depression, meaning no jobs for anyone.

If you have enough money to survive for over 12 months, give yourself an A. Anything under that, you grade yourself.

Question Seven: What insurance do you have? What does it cover?

Having no insurance is akin to asking for trouble. How many times have you heard on the news about a house burning down? With the classic line at the end, the damage bill is expected to be ..... What sort of insurance do you have on your biggest asset? Could your home budget take a $100,000 plus charge due to fire, flooding, or vandalism?

What about insuring your wage. Personal injury can strike at any time. If it strikes at a non-work situation there is no work cover available. Your wage could literally stop overnight. You need to be able to insure your incoming wage. Wage protection insurance; do you have it?

It’s not something we like to think about, but what if you or your partner died? This would stop their wage overnight and likely cripple you in grief. At least if you both have death insurance, in most cases a lump sum can be paid. This will allow you time to grieve in your own time without companies calling you for money.

Grab all your insurance policies out and give yourself a self-assessment and remember to give yourself a grade.

Question Eight: Where is your super hiding?

Can you name off the top of your head which super company you are with? How many companies are you with? And how well have they performed over the last five years?

Do you know most Australians have three super funds? Each super fund has fees eating away your hard-earned money. There are all sorts of websites which will find your super for you, if you have lost track. Spend an afternoon contacting your super companies and request forms to roll them all into one.

Now once a year, monitor the one you have. Make sure it’s competitive. If it’s not, switch. Don’t kick yourself when you hit 65 because you didn’t spend one day a year filling out paperwork.

Question Nine: Do you fight about money?

A big clue about the health of your budget is how often you and your partner fight about money. Normally people with heaps of money don’t fight about money, because there’s plenty for each partner. I couldn’t see Bill Gates and his wife having a stoush about someone splurging on a takeaway lunch. However people with overdue bills, little money in the bank or debt up to their eyeballs are in never-ending screaming matches.

You probably have heard the statistic that more marriages end due to fights about money than any other reason. Don’t become a statistic. If you recognise that you and your partner are spending more and more time yelling about money then this is a giant clue that something’s not quite right.

Question Ten: Do you double check your bank and home loan statements?

There is no harm in grabbing your home loan, bank or credit card statements and giving it the once over. You don’t need to be a detective but an unauthorised transaction will stand out quite easily.

All companies make errors, and for some reason it tends to be to their advantage. The quicker you jump on it, the better chance you have of a refund. 

A story only last week came out about a lady in Victoria. She had joined a Gym back in 2001, where she paid by a monthly direct debit. She stopped going to the gym 2 years later, and she claimed she had cancelled her monthly direct debit. However, fast-forward 8 years, and one day while flipping through her bank statement, there was a direct debit for the same gym. In fact, she had spent over $8000 during this time on a service she hadn’t used. She did admit that she never checked her statements. Now she is battling the gym who claims she had not cancelled the membership in the first place.

The total headache of this could have been avoided just by running her eyes over the statement each month. She would have picked it up right away, and if she did cancel it, she would have only had to fight for one month’s refund. Not the 8 years’ worth she now has to fight for. What grade would you give yourself for checking your statements?

Believe me; if you can achieve an A in all ten questions you are putting yourself in the best possible position to increase your home budgeting success. Some questions are very easy to achieve an A grade on right away; others you will have to work on. However the work is worth the reward.