The Questis Method


“There are so many things I need to do with my money! How do I know where to start?”

Personal finance is daunting to approach because of its vast breadth, so we must prioritize. But since each person--and financial plan--is different, a universal checklist won’t do.

You can, however, determine what your next step is by applying a method that helps ensure you’re on the path to financial wellness without missing anything important. This suggested order, therefore, helps you get the very most out of every financial step forward.

Here’s WHY it matters, WHAT you can do and HOW to do it:

01 SPENDING:

WHY?

Regardless of how much you earn or own, the foremost indicator of a financial success story is a household with persistently positive cash flow.

WHAT?

Establish positive cash flow, by consistently and purposefully spending less than you make. It’s simple, but it’s not easy.

HOW?

  1. Track Spending: The first step is to know exactly what you’re spending. Utilize online banking to track past purchases, but consider the more deliberate step of physically reviewing your receipts in the future to increase awareness.

  2. Categorize Spending: Knowing how much we’ve spent is only helpful if we know what we’ve spent it on, so the next step is categorizing your spending. Begin with your fixed, recurring expenses, followed by your variable (but predictable) expenses and finally, your irregular expenses that tend to surprise you.

  3. Budget Income: Don’t stop here! Now that you know what you’ve spent and how you’ve spent it, you can plan for future spending with a budget. Budgeting is the process of planning your spending for the coming month, and then reviewing how close you are to your plan--and adjusting accordingly--on a weekly basis.

  4. Automate Savings: If every dollar of your income is budgeted to spend, you won’t be able to handle any surprises. Therefore, no cash flow process is complete without budgeting for savings, and automating your savings ensures that it will happen.

02 PROTECTION:

WHY?

The only constant in life is change. Although an untimely death, disabling injury or car accident may be unexpected, unfortunately these life transitions are not uncommon.

WHAT?

Plan for the unexpected as a risk manager by eliminating risks that offer little reward, reducing risks by employing common sense, assuming risks that you’re able to absorb and finally, transferring catastrophic risks that can’t otherwise be managed with insurance.

HOW?

  1. Establish Emergency Fund: Having a cash buffer in your checking or savings account is the first line of financial defense against the unexpected, allowing you to assume the risk of everyday surprises. Three months’ worth of living expenses is sufficient for most households, but just getting to one month’s worth of cash reserves is a big win because you’re not living paycheck-to-paycheck anymore.

  2. Complete Simple Estate Planning: Having a will, durable power of attorney and advance directives drafted reduces the risk of chaos in the wake of a household death or disabling injury. None of us wants to ruminate on loss of life or limb, but especially for anyone with minor children or meaningful assets, this is an urgent need.

  3. Examine Life, Health, Auto & Disability Income Insurance: Most of us can’t self-insure the financial risk of a household death, disabling injury, major health scare or auto accident. Therefore, we insure these catastrophic risks with appropriate levels of insurance.

  4. Address Identity Theft: Even if you don’t interact with the outside world and have never gone online, you still can’t eliminate the risk of identity theft! For the rest of us, it’s a very real risk that can nonetheless be reduced by virtual and physical measures.

03 DEBT:

WHY?

The financial and emotional damage caused by too much debt can be crippling. You’ve heard that there is “bad debt” and “good debt,” but if you’re the debtor, there’s just bad debt and better debt. It’s hard to take meaningful steps forward financially until you’ve stopped going backward.

WHAT?

Eliminate high interest debt as financial enemy number one and then work to eliminate student loans, auto loans and home mortgages, likely in that order. Plan to be completely debt-free by the time you retire.

HOW?

  1. Eliminate Credit Card Debt: Credit cards can be used effectively for building credit when paid off every month, but the typically high interest rates and perpetual nature of revolving credit card debt makes it your number one target for elimination.

  2. Pay Down Student Loan Debt: The scourge of a generation, student loan debt now exceeds $1.3 trillion, almost twice that which is owed on credit cards! If you’re among the many, examine your options for student loan forgiveness; otherwise, consolidate and eliminate.

  3. Address Auto Loans: Guess what? A car loan isn’t a prerequisite for owning a car. But having an auto loan is also not the worst financial mistake you can make, because unlike credit cards, there is a stated term. Use them in a pinch and shorten the loan duration to ensure you don’t end up upside-down, as your ride’s value often descends more quickly than the typical loan balance.

  4. Accelerate Mortgage Payoff: It’s hard to imagine buying a home without a mortgage in today’s America, but being “house poor” can suck the joy right out of life. A bank may qualify you to dedicate as much as 35% of your pre-tax income to a mortgage, but consider setting a goal of only 25% of post-tax income if you want to have room to breathe in your budget.

04 SAVING:

WHY?

This is the fun part! But it’s also the most complex and requires a concerted effort.

WHAT?

Invest for the future in the “buckets” that are best suited to your long-term goals.

HOW?

  1. Fund Retirement: Time is your friend--if you start early. It works against you if you start late. Take advantage of any “free money” matching contribution your company offers in your 401(k) or equivalent plan. Then take a look at the Roth IRA that enables you to build a tax-free nest egg for the future.

  2. Establish College Savings Vehicles: However noble saving for your children’s or grandchildren’s education might be, it can’t come at the expense of securing your financial future. But assuming you’ve checked off all the boxes thus far, you should get the most of your college savings in a no-commission 529 college savings plan.

  3. Maximize Health Savings Account: Assuming you have some choice in the type of health insurance you have, using a high deductible health plan enables you to also create and fund a Health Savings Account (HSA). You may receive a tax deduction for contributions to an HSA--and the proceeds may be distributed tax-free, as long as they’re spent on qualifying medical expenses. That’s the best tax break the IRS offers.

Consider Advanced Estate Planning: If you’ve accomplished everything on this list thus far, you’re well ahead of the financial curve--congratulations! Your income and net worth may also be such that you could benefit from advanced estate planning techniques, such as the utilization of various forms of trusts and the employment of permanent life insurance, among others.

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