Take The Simple Money Quiz Now!

Take the Money Quiz

Are you ready to take the simple money quiz now???

Take the simple money quiz now to see how well you handle your money!  The whole process takes less than three minutes, and it will help you assess how good you are at making, saving, and investing your money.  With your grade in hand, you can develop a plan for how to improve your financial picture!

Have you ever wondered how or why some famous millionaire celebrities have lost it all?  Maybe you’re wondering just how Warren Buffet got to be the richest man in the world?

Take the simple three question money quiz now to find out where you stand!

Let’s Jump Right into the Simple Money Quiz

Without further ado, here is the simple money quiz.  Give yourself three grades using the simple table below.  You will be evaluating yourself in each of the money criteria –  making, saving, and investing:

 

Making Money Saving Money Investing
Grade Annual Household Income  Savings Rate of Gross Income % Return ABOVE Inflation
A $165,000+ 40% + 8% +
B $120,000 – $165,000 20% – 40% 5% – 8%
C $95,000 – $120,000 10% – 20% 3% – 5%
D $80,000 – $95,000 5% – 10% 2% – 3%
F < $80,000 < 5% < 2%

 

 

How Did You Score?

So, how did you score on the simple money quiz?  For the average American, they fail in each of the three categories!  Hopefully the fact that you’re here reading this means you’re above average and you passed in at least one of the categories.  If not, that is still OK; we all have to start from somewhere!

Here’s how my household fares:

  • Money Making: our combined household income is > $165,000.  So we get an A there.
  • Money Saving: Our savings rate is above 40% of our gross income, so we get an A here as well.
  • Investing: We get a big huge F in investing.  Like so many others in 2008, I pulled my 401K out of the market when the DOW was around 8,500 and parked it into a “stable value fund” where it has sit ever since.  Along with other losses in our individual trading account, my overall 10-year return is still negative!  Ouch!!!  I’m embarrassed to even admit such horrible performance, but hopefully writing this blog will help force me to get better at disciplined long-term investing.

So, overall our combined simple money quiz score is somewhere around a C.  Good, but not great.  What saves us is that we score good grades in two out of the three categories.  Let’s look at some specific examples to better understand what the simple money quiz can tell you about your finances.

 

Why Is It Important to Do Well In At Least Two Categories?

One of the most famous of examples that many folks are familiar with is M. C. Hammer.  According to Forbes, at one point Hammer had a net worth of over $33 million!  Obviously, we’ll give him an A+ in Money Making.  Now the kicker, what did Hammer in was that he had a negative savings rate.  This means that he spent more than he was making and accumulated large amounts of debt.  So, for savings we’ll give him an F.  With poor spending choices, Hammer had little planned in the arena of investments.  I cannot find any record that he used any of his money for investments, so we’ll give him a F here as well.  So, if M. C. Hammer took the simple money quiz, he would get A+, F, and F.  It’s no wonder that Hammer had to eventually file for bankruptcy when he “found” himself more that $13 million in debt.

Now, take someone like me.  I’ll probably never make millions of dollars, but I earn a good wage and am good at saving.  Even though, so far in my life, I’ve pretty much written the book on what not to do when investing, we’ve still come out in very good shape financially.  Because we’ve done a good job in two out of the three categories on the simple money quiz, we may have the option to retire quite early if we so desire.

Now, what happens if you can get good at all three facets of money (making, saving, and investing)?  Almost like magic your wealth will begin to sky-rocket!  Let’s look at two different examples:

  • A great person that I’ve recently run across that has excelled at all three categories is Mr. Money Mustache.  Through hard work, he and his wife made $200,000+ per year and saved about 70% of their income each year over a number of years!  They were able to roll this into investments in market index funds.  So, if MMM took the money quiz he’d score A, A+, and B.  As a result, they are now financially independent after just seven years in the work force and are living a wonderful and fulfilling life with their young son!
  • Another cliche example is none other than the famous Warren Buffett.  Warren gets A+’s across the board on his simple money quiz.  He is good at making money, saving money, and investing for the long term.  I won’t go into details here as I’m sure everyone knows quite a bit about him.  As a result, he was once named the richest man in the world before pledging to give away 99% of his wealth to charity.

 

Next Steps?

OK Derek, this is all great.  But, what does all of this mean for me?  Well, by honestly answering the questions on the simple money quiz above, you’ve been able to get a picture of where you stand with your money.  There are two strategies you can employ to improve your money situation to help reach your financial dreams:

  1. Play to your strengths
  2. Improve on your weaknesses

I prefer method #2 because, as I’ve shown above, you can be an ace in just one of the three categories and you really cannot get anywhere over the long term.  If you are able to make the commitment to yourself and put in the hard work to achieve B’s (or higher) across the board, you’ll be well on your way to achieving your financial dreams in very short order!

For me, the money quiz shows me that my biggest weakness is investing.  I didn’t really have any formal investing training or a mentor to learn from.  As a result, I’ve dug a pretty deep hole for myself over the past 10 years by trying to time and trade the market rather than employ diligent investing.  To improve my financial picture, I need to make the commitment to myself to stop trying to time or outsmart the market and force myself to invest in market index funds on a routine basis.

 

What about you?  How did you score on the simple money quiz, and what are you planning to change to achieve your financial dreams?

Comments

  1. Tim Waters says

    Three things to add… It’s important to pay yourself FIRST. That means saving and investing. Second is that it’s not necessarily how much you make, but how much you keep. I would alter your first score to denote percentage that you keep, less critical expenses like mortgage, utilities, food and clothing. The rest you spend, ultimately is wasted money. Last point to add is that it is vitally important for you and the health of your family to TAKE VACATIONS! It’s ok to spend money on life experiences. That is why I budget for vacations like they are investments – since you are investing in your well being. Not to mention, vacations are fun, entertaining and educational – as long as you don’t indulge WHILE on vacation :)

    Tim

    • says

      Tim,

      I agree with you on point # 1.

      On point #2, maybe I am not understanding what you are saying, but the Saving Money Percentage seems to be what you are suggesting. I am saying that anything higher than 40% is an “A”. Certainly the more you make, the more you can save if you are able to avoid lifestyle inflation.

      Interesting point you make with #3. I had never really thought of vacations as a personal investment. Makes a lot of sense. If you go crazy from stress, then none of this really matters much! Great insight!!

  2. says

    Nice approach, this is definitely one of the clearest ways to illustrate the path to FI that I’ve seen. Interestingly I was a B or C for most of my career but still managed to do quite well. So the power is even greater than one might imagine by just glancing at the table!

    • says

      Nick, care to share the breakdown by area and how you improved over time?

      I can only imagine where I’d be today if I aced the investing side of things while maintaining our income and savings as A’s!

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