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5 Questions to Ask Yourself When Starting to Evaluate Your Finances

Can I be honest with myself?

This one seems pretty obvious – if you cannot be honest with yourself, all ways of attempting to get your finances under control will be futile and short-lived. It may sound simple enough, but this is one of the foundational steps that is often overlooked, and can have the greatest impact on your journey to financial freedom. Speaking from experience, it is incredibly easy to lie to yourself, your spouse, and your friends about whether or not you are in financial trouble. It’s entirely too common for someone like you or me to settle into a life filled with false realities which lead us to believe our debt isn’t drowning us, impulse buys are sometimes deserved, and the credit card bill is fine because the next paycheck is always guaranteed. Of course none of these things are true, but if you can’t be honest with yourself, keeping up with the Jones’ will continue to be a temptation and the dollars you work so hard for will continue to disappear quicker than they can be earned.

What do I really need?

Understanding what you really need is important. Shelter, food, electricity, and running water are considered the bare essentials, and should always be prioritized when evaluating what needs to be paid for during any given month. These are the bills that get paid first and should never be neglected. That being said, there are other things we would classify as needs, which are also very important for maintaining a quality of life that’s conducive for being able to tackle your finances and maintain the ability to succeed financially moving forward. A means of transportation to and from work falls under this category because earning an income is the primary factor in having financial security. Having health insurance is another one of these needs we believe everyone should prioritize because of the guard against a tidal wave of expenses it can protect against in case of an emergency. The point is this: we all understand there is a difference between needs and wants, and declaring this difference between all of our monthly expenses is a primary step in grasping our financial situation.

What do I really want?

Similar to thinking through our needs on a month-to-month basis, sifting through all the wants you have is critical. Going out to eat, getting clothes you really don’t need, or impulse buys after convincing yourself you were only going to get a couple of things at Target all fall into this category. It’s easy to muddle the line between a need and want, so clearly separating and listing every expense into one of these two categories helps define what that line is. This helps bring accountability to your decision to be honest with yourself and maintain a sense of priority to every dollar you spend.

How much debt do I have?

This is the question no one wants to ask themselves, but needs to. Sitting down and listing out every debt you have can be an absolutely terrifying experience, but it is arguably the most important step in evaluating your finances (trust us, we know from experience). This can be doubly terrifying if you’re married and the pile of debt is multiplied by two. So open a bottle of wine, sit down with a pen and paper, and write out all of the debt. It will be an enormous weight off your shoulders and will allow you to be instantly more honest with yourself.

What are my financial goals?

What is the reason you’re reading this to begin with? Is it because you’ve realized your income can barely cover your monthly expenses? Are you sick and tired of feeling trapped in a job you hate to maintain your current quality of life? Do you fear what the impact of your bad financial decisions will be on your family? There’s a variety of different reasons for wanting to deconstruct debt, and along with your individual reason, you have a financial goal too. Whether you know it or not, there is a goal you’d like to achieve with your money that can only be met by first wiping the debt slate clear. Whether that goal is to one day be a stay-at-home parent, retire to a certain part of the country, or simply be able to give extravagantly, firmly acknowledging your financial goals will establish the endpoints for why you begin this process.

David Evans