Personal Finance Quiz

Are you a Sinner or a Saint?

Hellish words buzz in the collective ear of our nation’s libraries: budget shortfalls, downsizing, reduced hours, branch closings, pay and hiring freezes, layoffs and furloughs. All around us the financial crisis is striking closer and closer to home, forcing its way into our pockets and spreading fear and panic in its wake. How you survive this financial instability may depend largely upon your personal financial habits.

For many people, the topic of personal finance is a fairly narrow. You get paid, and the money all goes to bills. Others are overwhelmed by and fearful of the idea of planning their finances, caught in a state of perpetual financial paralysis. But, ready or not, personal finance is a reality in everyone’s life.

Whether you realize it or not, you do have financial principles that you are using to make decisions. For example, you may be in the habit of charging your groceries and gas on a credit card. That is a principle that you are applying, although whether it is healthy or not will be determined by how you handle your credit card debt. If you pay off your credit card balance every month, this could be a sound, beneficial practice. If you let the balance accumulate and only pay the minimum, this would be a principle of your personal finance that could be sending you to ruin.

Nearly every decision that you make affects your overall financial health, whether it is eating at a restaurant for lunch every day or deciding to have children. And the decisions you make now can have significant impact on the years to come.

Take the following quiz to determine if how you handle your personal finances is leading you to financial bliss or money misery:

  1. I consider my personal finances to be:
    1. Something I think about when I’m paying bills or balancing my checkbook.
    2. Umm… don’t you need money to think about personal finances? Yeah… I don’t have any.
    3. As important as my work responsibilities. I take my finances very seriously and have a well-thought out plan for my overall financial success.
  2. My personal budgeting style is:
    1. Non-existent: Hear no evil, see no evil, speak no evil.
    2. Old and moldy and needs to be weeded.
    3. Thought-out and orderly. My cataloging instructor would be proud!
  3. My spending style is:
    1. Impulsive and/or “Buy Now, Pay Later.” Gotta love credit cards!
    2. Frugal. I’m a librarian after all!
    3. I try to be good, but I probably spend more than I should.
  4. My savings consists of:
    1. A substantial emergency savings in additional to savings for retirement, education, vacations, medical expenses, etc.
    2. The jar of quarters on my bedroom dresser.
    3. I put a bit of money into my savings account every month.
  5. My retirement planning is:
    1. I pay close attention to the short and long term health of my retirement funds and I contribute significantly to my retirement. I have a plan, and I stick to it.
    2. I know I put money into a retirement plan every month, but don’t know much about it.
    3. I would have a nice retirement savings, but I had to borrow from it.
    4. I’m too young and/or broke to think about retirement.

So… are you a sinner or a saint?:

Question #1: “A” = Two (2) points. “B” = One (1) point. “C” =Three (3) points.

Question #2: “A” = One (1) point. “B” = Two (2) points. “C” =Three (3) points.

Question #3 “A” = One (1) point. “B” = Three (3) points. “C” =Two (2) points.

Question #4: “A” = Three (3) points. “B” = One (1) point. “C” =Two (2) points.

Question #5: “A” = Three (3) points. “B” = Two (2) points. “C” =One (1) point. “D” = Deduct One (-1) point…shame on you!

Results Graphic

Results Analyzed

Question #1: A well, thought-out personal finance plan is absolutely, 100 percent necessary to reach long-term goals. It doesn’t matter if you are broke or if you have millions in the bank. If you plan on being alive, you must have a financial game plan. You need to outline your goals and keep them in mind as you exercise your personal financial principles.

Perhaps you live paycheck-to-paycheck but want to take a vacation sometime in the next five years. Understanding how much you need to save can help you achieve this goal. With a hard goals and figures in mind, perhaps you’ll discover that you can save $15 a week by bringing your lunch to work rather than eating fast food. Over the year, those savings could equate to almost $800! Trust me, peanut butter sandwiches will be easier to stomach when you are daydreaming about playing on the beach with your family.

Question #2: Unless you have recently evaluated (hear: within the last year) your personal budget, it is time to sit down and evaluate it again. Yes, I know… “Budget” is a bad, bad, evil word. It hurts. It makes you eat peanut butter sandwiches instead of fast-food. It makes you confront how much you truly don’t make in a year.

But it is also a wonderful, beautiful thing. By creating a spending plan, you can free yourself from the worry of living beyond your means. You can take your spouse to dinner without worrying if you can afford it. Why? Because you planned for it! It’s in your budget. You know you are covered.

Question #3: In his book, “Stop Acting Rich: And Start Living Like a Real Millionaire,” Thomas J. Stanley describes a type of millionaire that does not outwardly appear to be very wealthy. Members of this group—many of whom have never had an annual income exceeding $100,000—are extremely frugal and live in modest housing, having acquired wealth through “fastidious saving and investing habits” (2009).

Many of us, however, try to emulate the wealthy by living high consumption lifestyles. We buy expensive houses and cars, wear name-brand clothes and frequently eat out at nice restaurants. In short, we try to live like the millionaires we see on television and therefore develop devastating spending habits. By spending beyond our means, we are sacrificing future security for immediate comfort and entertainment.

Ironically, the only way for most of us to attain significant wealth (or even just future security) is to live like the type of millionaire described above: frugal and investment-wise. We have a choice: either act rich or be rich. The choice is ours.

Question #4: Savings… ahhh… the thing we all want, we all know we should have and the very thing that eludes most of us. Believe it or not, Americans—who have been increasing their savings rate in recent months—are in tremendous danger as we look toward the end of the current economic recession. History has proven that the personal savings rate often falls following a recession (Bigda, 2009). As housing and stock markets begin to recover and unemployment rates drop, people start to feel financially secure. When people start to feel rich, they start to live rich (see previous section). As a result, good savings habits that we have begun to develop over the last several months may fall by the wayside faster than a New Year’s weight loss resolution.

One solution is to actually spend money! Treat yourself, within reason… Put some mad cash into your budget to spend on anything you want. Once you spend it, it is gone till the next month. That will give you a sense of indulgence while protecting you from overspending.

Question #5: Time creates money. Simple. For every year you wait to start a retirement savings, it costs you about $25,000 a year of future growth (Orman, 2006). By waiting twenty years, you lose about $480,000! Talk about big money!

In the grand scheme of things, it doesn’t matter if your employer offers a retirement plan or not. Not researching and investigating ways to build your retirement nest egg now, regardless of employer contribution, can be the equivalent of throwing a $500,000 check just when you need it most.

While the problem of not contributing to retirement savings plans is universal, it is significantly more prominent among minorities groups. Ultimately, for workers earning between $30,000 and $59,999, the average 401(k) balances are $21,224 for African Americans, $22,017 for Hispanics, $32,590 for Asians and $35,551 for whites (Hobson, 2009). Considering the pay disparity that minority groups already face, a lack of retirement savings puts them even farther behind in terms of end of life financial stability.

Many are scared to invest in their retirement funds due to recent significant declines in value of 401(k) plans. People are shocked when they see hundreds of dollars suddenly gone and become wary of further investment. You will, however, have to invest in your retirement in one way or another, and 401(k) investment is an excellent, time-tested method. Remember, this is a marathon and not a sprint. Over several years, you will end up the better for your retirement investments regardless of how they perform on any given year. Research your options, figure out how much risk you want to take and make the best decision that you can. The alternative of doing nothing at all should be unthinkable.

Works Cited

  • Bigda, Carolyn. 2009. Stick With Your Financial Diet. Money 38, no. 12 (December): 31-32.
  • Hobson, Mellody. 2009. How to Close the Savings Gap. Black Enterprise 40, no. 3 (October): 24.
  • Orman, Suze. 2006. The 9 steps to financial success: practical and spiritual steps so you can stop worrying. New York: Three Rivers.
  • Stanely, Thomas J. 2009. Stop Acting Rich: And Start Living Like a Real Millionaire. Wiley & Sons, Inc.: Hoboken, NJ.