5 Financial Questions You’re Afraid to Ask—Answered by a Top Money Expert


When it comes to understanding your personal finances, there is genuinely no such thing as a “bad” or “dumb” question. Is buying a $7 latte every morning really that bad for your budget? Totally valid concern. Is a credit score just some obscure number invented to stress you out? Pretty sure we’ve all had that thought at one point or another.

But in all seriousness, navigating the world of personal finance can often feel like entering a never-ending maze. This can leave you hesitant to ask the necessary questions that can ultimately lead to financial empowerment. So, in an effort to demystify the world of finance, we’ve enlisted the help of Shannah Stephens, Community Banking Executive at Bank of America, who took the time to answer some of the most pressing questions you may be afraid to ask.

In the hopes of enhancing your financial knowledge and equipping you with the tools to make better-informed financial decisions in 2024 and beyond, we sourced real-life questions that are genuine inquiries people really contend with in their everyday lives. From living paycheck to paycheck to managing debt, here are five questions (and expert answers) that can help level up your finance game.

MEET THE EXPERT

Shannah Stephens

Community Banking Executive at Bank of America

Shannah Stephens is responsible for developing programs to help empower economic mobility for clients and small businesses from low- and moderate-income communities. Shannah joined Bank of America in 2000 and has held various positions in marketing, analytics, online sales and product management, and financial center sales process and performance. She actively gives her time to mentoring and participating in networking groups supporting the advancement of women to leadership roles at the bank. Shannah is also a member of the Katy Area Alumnae Chapter of Delta Sigma Theta Sorority, and she’s on the Board of Directors for Coalition for the Homeless of Houston.

1. How can I prioritize saving when there’s so much pressure in social outings to spend money?

In the face of pervasive FOMO, Stephens offers us a nuanced strategy for prioritizing savings amidst the temptation to overspend. “Just as you allocate money at the beginning of each month for expenses (rent, car payments, utilities, etc.), put aside money for your savings,” explains Stephens. “Treating savings as a ‘bill’ will help you grow your savings account and prevent you from accidentally spending it on those after-work happy hours.” She recommends allocating at least 20 percent of your monthly income towards savings, emphasizing the importance of developing disciplined habits to foster long-term financial success.

“At the end of the day, saving takes time, effort and discipline—and unfortunately sometimes involves difficult decisions like saying no to social outings,” says Stephens. “But developing these healthy habits and routines can help set you up for financial success—eventually making it easier and less stressful on your wallet to go out to those social events.”

2. How much debt is too much debt?

Pivoting into the realm of debt management, Stephens provides valuable insights on maintaining a healthy balance. “Having some debt is okay—between student loans, car payments, and more, a majority of Americans have some type of debt. However, it’s important to remember that keeping debt at a manageable level is one of the foundations for good financial health,” she says. She stresses the significance of understanding the debt-to-income ratio (DTI), which compares your monthly debt payments to your monthly gross income. According to Stephens, you don’t want your DTI to get above 36 percent, a key benchmark for assessing your financial stability. By being aware of this ratio, you can gauge your readiness for future financial endeavors, such as securing an auto loan or mortgage.

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Source: Karolina Grabowska

3. I live paycheck to paycheck—how can I make the most of my year-end bonus/tax return?

For those grappling with paycheck-to-paycheck living, Stephens offers a balanced approach to leveraging year-end windfalls. “At the end of the day, you’ve earned that extra money, so you deserve to treat yourself without feeling guilty! It’s perfectly normal to use a portion of that money to splurge a little on something nice for yourself,” she affirms. However, she also recommends you allocate a portion of your bonus or tax return to debt repayment in order to help alleviate the strain it could be causing to your long-term financial health. Alternatively, you can also try putting a portion of that income into a savings account to help with upcoming payments, rainy days, or larger purchases in the future.

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Source: John Diez

4. How can I go about combining finances with my partner?

Stephens’ insights on combining finances with a partner reflect a commitment to open communication and personally tailored approaches. “The decision of whether or not to combine finances with your partner is a big step and can definitely involve some awkward conversations,” she says. Combining finances can impact your ability to save money, plan for retirement, and capitalize on tax and insurance-related benefits, so it’s important to make sure your short- and long-term goals are aligned.

“But just like every couple’s relationship, every couple’s financial situation is unique, so there is no one ‘correct’ way to do it,” Stephens acknowledges. Stephens recommends initiating the process with a transparent discussion about all aspects of your finances—income, savings, and debts—and whether you’re opting for complete financial integration or maintaining financial independence in some areas. She advocates for a customized approach aligned with the specific dynamics of your individual relationship.

5. Should I be using a credit card or just stick to my debit card?

Overall, creating a positive credit history makes utilizing a credit card a smart decision, especially when you factor in the various perks it comes with like cash back and reward points. “Developing healthy credit card habits will serve you well in the long run, as your credit history can affect many areas of your financial life—the more positive your credit card history is, the better auto loan and even mortgage loan you will receive from your lender when you’re ready to purchase your car or dream home,” Stephens explains. However, she adds a crucial caveat, stating that the key is to always maintain healthy credit card habits, emphasizing paying off your balance in full and on time every month, responsible usage, and monitoring your FICO score. As long as you stay on top of using the card in a responsible and reasonable way, the long-term benefits can definitely be worth it.

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Source: Tim Douglas

Additional Resources

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This post is sponsored by Bank of America, but all of the opinions within are those of The Everygirl editorial board.

 



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