Questions and your decisions as they relate to money

Do you know the real reason why you ask certain questions relating to money and why you make the decisions you do based on the information you receive after asking those questions?

Most people are experiencing financial challenges whether they earn a low income or a relatively high income.  One of the big reason for this is because the important questions as it relates to money are never asked.  And if they are asked, the responses to those questions do not inspire the right decisions.

Money plays a pivotal role in our lives, influencing our choices, opportunities, and overall well-being. Decisions related to money are not to be taken lightly, as they can have far-reaching consequences. To make informed financial choices, it is important to ask the right questions, consider various aspects, and prioritize financial goals.

I have been fortunate that though I was born in a family where money was a challenge, at a young age, I developed very good discipline on matters relating to money.  This meant that I focused on needs instead of wants.  My money management ability therefore help me to use my money wisely as I started working and receiving higher income.  As a result, I was able to purchase my first home at the age of 25 years old.

Though my money management ability was good, I still ended up in debt.  In 2001, I made a committed decision to eradicate this and become financially secure.  This required elevating my financial intelligence beyond great money management ability.  It meant that I had to question everything about money and find answers to these questions over the years.

Let us explore the importance of the right questions in shaping your financial decisions

1. What are my financial goals?

Defining clear financial goals is the first step towards sound money management. Whether it’s buying a home, saving for retirement, or starting a business, having concrete objectives helps you stay focused and make decisions aligned with your aspirations.  Since I was 13 years old, I always have set goals that I am aiming to achieve.

2. What is my current financial situation?

Understanding your current financial standing is essential. You need to assess your income, expenses, debts, and savings. This knowledge provides a foundation for planning and making informed decisions about budgeting and investments.  You might not be as vigilant as I am in this respect.  I look at my finances to the finest detail almost daily.  This way, I am able to see exactly where my money is going, what is serving me well, what expenses need to cut, and so on.

3. What is my risk tolerance?

Risk tolerance varies from person to person. Some are comfortable with high-risk investments, while others prefer a more conservative approach. Knowing your risk tolerance helps you choose investment options that match your comfort level.  I also incorporate time horizon into my decisions on investments.  Trying to do investments at the bank, they were only concerned about my risk tolerance.  This made it difficult for me to make proper informed decisions but fortunately, I was able to obtain the help of a real financial professional.

4. How can I minimize debt?

Debt can be a significant financial burden. Ask yourself how you can reduce it, whether through budgeting, consolidation, or refinancing. Prioritizing debt reduction can free up resources for other financial goals.  I also learnt about good debt and bad debt, and how to use debt to my advantage.

5. Am I adequately insured?

Insurance is a crucial aspect of financial security. Evaluate your health, life, home, and auto insurance to ensure you are adequately protected in case of unexpected events.  Just like most Canadians, I was not adequately insured but was open-minded to listen to a professional who educated me on the amount and type of insurances I needed, which I promptly implemented.

6. What are my investment options?

Understanding the various investment options available, such as stocks, bonds, real estate, and mutual funds, helps you make informed decisions on how to grow your wealth over time.  The type of investment vehicle you choose must be right for you.  It will depend on several factors so it is important for all of these to be assessed by a professional.  Using the wrong investment option could have a significant negative impact on your financial security.  I use a few but ensure I fully understand the level of risk I am taking, and I do not gamble.

7. How can I increase my income?

Exploring opportunities to boost your income, whether through career advancement, side hustles, or investments, can significantly impact your financial stability and future goals.  In this process, an important principle to guard against is Parkinson’s law where your expenses rises to meet your income.  You should also be conscious about the type of income as you could also experience higher tax for the extra income.

8. Am I saving for retirement?

Retirement planning is crucial, regardless of your age. Determine how much you need for retirement and consider options like TFSA, RRSP, and other retirement accounts.  Be certain to work with an independent financial security advisor, as these accounts are not all the same across financial institutions.

9. How can I give back?

Money isn’t just about personal wealth; it can also be a tool for making a positive impact. Consider how you can use your financial resources to support causes or organizations you care about.  Though I support charities, my main approach to giving back is my time through free financial education, coaching and mentoring.

10. Do I need professional advice?

Sometimes, it’s wise to seek the guidance of financial advisors or experts, especially for complex decisions like estate planning or tax optimization.  Having chosen to work with one and receiving the benefits, I recognize that people need this help, so I decided to also become a financial security advisor.

In conclusion, questions are the compass that guides your financial decisions. By asking the right questions and continuously evaluating your financial choices, you can work towards a more secure and prosperous future. Money decisions are not one-size-fits-all, but with thoughtful consideration, you can navigate the financial landscape with confidence and purpose.

So what questions are you asking yourself and what are your decisions as it relates to money?