Today I’m honored to be participating in the Financial Literacy Awareness Carnival hosted by the lovely Shannon Ryan at the Heavy Purse. I have shared my story of getting financially real in the past, and I can’t say enough about how financial literacy provides the keys to becoming debt free, building wealth, and financial independence. As a way to promote this most important topic, I’ve made up a bit of a quiz to test your financial literacy. While it’s meant to be all in good fun, hopefully if you get an F, you’ll read some of the other posts in the carnival today and start taking steps to get yourself financially real.
What is Your Debt to Income Ratio?
A) Under 35%
B) Over 35%, but I’m working hard to lower it and have paid off loads of debt over the past few months.
C) I just make my payment and don’t pay attention to stuff like that.
It’s the 25th of the month. Which best describes you?
A) The 25th is no different than any other day. I keep track of my expenses and know how much money I have left to spend before the end of the month.
B) I’ve spent too much, but I can dip into savings if I have to. I’ll do better next month.
C) I’ll have to use my credit card so I don’t overdraft. I have to take my friend, Esmeralda, out for her birthday and my black shoes are worn out, so I have to get a new pair before we hit that new sushi bar. I bet we’ll at least get a free dessert because of Esmeralda’s birthday!
What Percentage of Your Income Are You Currently Saving?
A) I have evaluated my current income and expenses to determine the amount I can comfortably save, then I bumped it up a few percentage points. I want my savings rate to sting just a little bit so I don’t spend money on stupid things, and it helps me remember how important saving for the future is.
B) Whatever my employer signed me up for when I enrolled in my 401(k).
C) I can’t afford to save right now. I am going to start saving after I pay off my car/get my tax refund/buy my kid a new pair of soccer cleats, etc.
How Much Do You Spend On Groceries Every Month?
A) My budget allows for $400, but I am OK up to $500 if I need to stock up on non-perishables.
B) I spend about $600 a month on food, but it’s because I’m a gourmet cook and I like to treat myself.
C) I really don’t have time to sit and count it up, but probably not that much.
To Be Debt Free, I’m Willing to……..
A) Take a side job and get up an hour or two early to work on extra income
B) Not buy clothes this season
C) I don’t think I’ll ever be debt free. Isn’t it normal to always have a car, house, and credit card payment?
When You Hear the Word Budget, What Do You Think Of?
A) My financial road map that helps plan my future.
B) A tab at the top of the Mint.com homepage.
C) I think my Grandpa had one of those.
Which Sounds More Exciting?
A) I am still driving the car I had in college and it has 280,000 miles on the odometer.
B) I just bought a two year old car with very low interest payments.
C) I just traded my 2010 SUV for a great deal on a brand new hybrid. My payment is almost the same as it was on the SUV, and I’m going to save a ton on gas!
Where Do You See Yourself in 10 Years?
A) I’m living the dream because I have enough options and streams of income that I’m not forced to work in a job I hate. I work because I enjoy it and not to make payments.
B) I hope I get a couple of promotions or maybe a better paying job.
C) I want to enjoy the moment because you only live once. It’s depressing to think about being 10 years older.
How Did You Score?
You are financially real. You have plans and goals and are working hard to make them happen. Even if you have a slip up or run into some bad financial luck, it’s not a big deal because you know that there are tons of ways to produce income. Heck, you already have several streams of income and an emergency fund, so there isn’t much that’s going to stand in your way.
You are like many of us in that you try to make good financial decisions and stay financially real but don’t really take tons of time to consider if you’re making the very best financial choices for your future. If you did a little more work on your finances, I bet you could be in the A category in no time. You probably plan on working until traditional retirement age, and there is absolutely nothing wrong with that if it’s a conscious choice.
While I’m never one to tell people how to spend their money, I would guess that you probably are living in a bit of denial and could be in for some rough times if an emergency hit and you weren’t able to bring home a paycheck. I used to live in this world myself, so I know how easy it is to think you’ll get started tomorrow. I would strongly recommend C category persons to at least start working on an emergency fund and some simple ways to start getting out of debt. Once you start getting financially real, the rest kind of falls into place.
How financially real are you? Do you think all people have to eventually face financially reality or is it possible to always keep your head buried in the sand?