here we go..
- You contribute enough to your 401k to get the full company matching contribution.
- You fully fund your 401k each year.
- You know the difference between Traditional and Roth 401k.
- You know the difference between stocks and bonds.
- You know the difference between mutual funds and exchange-traded funds.
- You know the difference between Roth IRA and Traditional IRA.
- You contribute to your IRA each year.
- You contribute the maximum amount to IRA each year.
- You know the difference between a discount broker and a full service broker.
- You know how to calculate return on investment.
- You have an asset allocation plan for your investments.
- You automatically add money to your savings and investments on a regular basis.
- You know how compounded interest works.
- You know that taxes and expenses drag down investment performance.
- You know the differences between taxable and tax-sheltered investments.
- You review your portfolio annually to identify tax loss harvesting opportunities.
- You understand the wash sale rule.
- You have an investing exit strategy.
Credit and Debt
- You know who Dave Ramsey is.
- You can explain the concept of Debt Snowball to your friends (+1 bonus if you know Snowflaking).
- You always pay your credit card balances in full.
- You understand how credit card arbitrage works.
- You know that you can get one free credit report per year from Equifax, Experian, and TransUnion.
- You know your credit score.
- You review your credit report every 4 months by stacking your credit report requests.
- You regularly take advantage of credit card reward programs and pay with a credit card when you can.
- You know how to protect yourself against identity theft.
- You understand the concept of financial leverage.
- You know what a price book is.
- You actually have and use a price book.
- You read reviews before making your bigger purchases.
- You use PriceProtectr to set up price protection for online purchases
- You use eBates or Upromise to get discounts and rebates for your online purchases
- You use online coupons and coupon codes for your purchases.
- When possible, you buy used.
- You know about and use Craigslist.
- You know about and use Freecycle.org.
- You understand the cost of instant gratification — i.e., you save money for your major expenses instead of taking out a loan or putting it on your credit card.
- You checked for better insurance rates in the past two years.
- You use online services like InsureMe to get the best quotes.
- You know that an independent agent who works with several insurance companies may be able to get you the best deal.
- You know the difference between whole life insurance and term life insurance.
- You know how to calculate your life insurance coverage amount.
- You know that a higher deductible will lower your insurance premium.
- You use the same insurer for home and auto insurance to take advantage of multiple policy discount.
- You understand that most insurance miscellaneous “options” are not worth the money.
- You always analyze the benefits against the opportunity cost represented by the premium.
- You know that price is not the only factor. For example, you should consider the financial stability and soundness of the insurance company in your decision making process.
- You know that too much tax withholding is the same as giving the governments interest-free loans.
- You increased you tax withholding to reduce your yearly tax refund amount.
- You take advantage of the tax-deductible Flexible Spending Account (FSA) for your medical expenses.
- You know how to do your own taxes (even if you hire a tax professional or use tax software).
- You know how itemized deduction works.
- You know the difference between tax deductions versus tax credits.
- You know your tax bracket and effective tax rate.
- You know that one of the best ways to donate is with your appreciated assets — this provides you with a tax deduction and helps you avoid capital gains taxes.
- You know that one of the best sources for tax tips is the IRS.
- You always consider tax implications before making financial moves.
- You have SMART financial goals written down.
- You have a financial plan with well-defined milestones.
- You have an estate plan in place.
- You know how much you’d need to retire.
- You review your financial and estate plan annually.
- You review your financial and estate plan with your family.
- You consult with a financial professional on key decisions.
Saving Money and Expense Control
- You save before you spend.
- You use payroll deduction to make savings automatic.
- You know about the various college saving programs, such as 529 Plan and Coverdell ESA.
- You practice living frugally.
- You don’t spend money on status.
- You use what you buy until they are worn out.
- You keep track of your expenses.
- You leverage free online budgeting tools, such as Mint or BudgetPulse.
- You shopped around for the best cable, internet, and phone package deal within the last two years
- You pack lunch to work to save money.
- You always ask your doctor about alternative medicine and medical procedure to control costs.
- You understand how the Health Saving Account works.
- You understand depreciation, and why it’s better to buy used car.
- You know the difference between active income versus passive income.
- You know about alternative income streams.
- You are actively building your alternative income streams.
- You keep track of your net worth.
- You pay your bills online and/or automatically.
- You have analyzed the advantages and disadvantages of mortgage prepayment.
- You have analyzed the advantages and disadvantages of renting versus buying a home.
- You understand the time value of money.
- You spend less than you earn or earn more than you spend — up to you.
- You have an emergency fund.
Tally Up!Now it’s time to tally up and rate yourself.
- 88+ = Wow…how about sending me some guest posts.
Note: There is one bonus question, and you get 1 point for each new item that you can add to the list.
- 75-88 = You’re financially savvy. Congratulation.
- 60-74 = Not bad…now you know what to work on.
- 40-59 = Middle of the road with room for improvement.
- below 39 = Please read my blog daily and check out PFBuzz.com for great personal finance articles.
Reviewed and updated March 12, 2011.