10 Common Financial Questions & Answers
Top 10 Financial Questions—Answered Simply and Clearly
Max Vesper | June 2025
Have questions about financial topics that you need answered? Look through some of these common questions to see if we have the answers you’re looking for. If not, give us a call anytime - we are here to help!
- How do I create a budget that actually works?
A commonly used method for creating an effective budget is the 50/30/20 rule. This rule goes as follows:
- 50% of your income goes to needs (housing, food, bills, etc.)
- 30% of your income goes to wants (entertainment, hobbies, etc.)
- 20% of your income goes to repaying debt or savings
While this is a good rule of thumb, the ultimate goal is to be saving and investing 25% of your post tax income especially as you enter your peak earning years and get closer to retirement. Another great goal is to make sure your car expenses (loan + insurance + gas) is less than 10% of your take home pay.
There are some useful tools available for managing your budget. If you prefer, you can keep track with pen and paper or a spreadsheet. We made a simple one available here. Other great options include apps that link directly to your bank account that track spending automatically. Some options include Everydollar and Rocket Money. Both are free but have a subscription option for more insightful features.
- How do I build an emergency fund?
A common rule of thumb for emergency funds is to save 3-6 months' worth of expenses. Here are four steps to remember when setting up and maintaining a good emergency fund:
- Create a separate fund account
- Automate transfers to the fund
- Only use the fund for actual emergencies
- Make sure to replenish the fund after an emergency
- Keep in a high yield savings or money market to earn interest on the balance
For more information, read our Emergency Fund blog.
- How do I pay off debt quickly?
Acknowledging and managing debt is an important step in maintaining financial stability. Whether it’s student loans, credit cards, or something else, it is important to list out your debts and find the best way to handle them. Some common strategies, which we have gone over in previous blogs, include:
- Snowball Method: Paying off the smallest amount of debt first to build momentum. By doing so, you slowly build up the amount of debt you are paying off until you reach your largest debt.
- Avalanche Method: Paying off debt with the highest interest rates first and then moving on to the next highest interest payments. By doing so, you are prioritizing the debt that costs you the most interest, getting the biggest problems out of the way.
- High Credit Utilization: Paying off the debt with the highest credit utilization. Since credit utilization is the amount of your credit line that is being used, paying it off will help raise your credit score.
For more information on this topic, check out our blog.
- How much should I keep in my checking account?
You want enough in your checking to cover monthly bills, everyday purchases, and a buffer for any unexpected costs. A good rule of thumb is to keep about 1-2 months of expenses in your account. Having extra cash in your accounts can be especially important if you have a lot of automatically withdrawn payments. However, keeping too much in your checking account isn’t ideal either, because checking accounts tend to earn little to no interest and are only FDIC insured up to $250,000.
To track your spending and determine how much you need to keep in your account, you can use resources like Rocket Money.
- How much should I have in savings at my age?
Good milestones to reach by different ages include (according to Fidelity):
- Age 30 → 1x your salary saved
- Age 35 → 2x your salary saved
- Age 40 → 3x your salary saved
- Age 45 → 4x your salary saved
- Age 50 → 6x your salary saved
- Age 55 → 7x your salary saved
- Age 60 → 8x your salary saved
- Age 67 → 10x your salary saved
We typically recommend saving 20x your desired retirement income, which is typically 85% of your pre-retirement income. This allows for a sustainable 5% withdrawal in retirement, plus social security will give a large margin of safety to ensure you won't deplete your savings. Pushing back retirement will have a large impact on the amount you should save. The longer you postpone retirement, the lower your savings will need to be. Everyone’s timeline is different, but having targets along your savings journey will help set you up for a comfortable retirement.
- Is investing risky?
It depends. While investing may carry a risk, one thing is for sure, not investing can be just as risky. If your money is just sitting in a checking account, then it is losing around 2-3% of its value annually due to inflation. By investing logically, you can beat inflation and watch your investments grow exponentially. When we talk about investing risk, we’re usually not talking about “losing all of your money” like you might with gambling. Instead, investing risk usually refers to the chance that the value of your investment will fluctuate. In general, the more an asset’s value moves up and down (more volatile), the riskier it is considered. Diversifying into many different asset classes minimizes the risk that any one investment will have significant impacts on your financial well-being. Risk varies depending on what you are investing in. Investing in equity (stocks) typically comes with more risk than fixed income securities like bonds, but the extra risk is compensated by extra return. Since 1982, the US stock market has returned an average of 10.51%, while the bond market has returned 5.05%. During that time however, stocks experienced multiple 50% drawdowns and many more 20% drawdowns, but over the long run you would have experienced a 10.51% return. This shows why it’s important to understand your risk tolerance and time horizon. Over the long run, stocks have historically provided higher returns, but they can be much more volatile in the short term. Bonds, while offering lower returns, tend to be more stable, making them a useful tool for balancing a portfolio and protecting against big swings during uncertain times like we are currently in.
Not all investments are suitable for all people. You should carefully consider all risks and fees before making an investment.
- How much do I need to retire comfortably?
We recommend entering retirement with around 15-20x your annual income. This is because in retirement, it is probable that you will need 70-80% of your pre-retirement income annually. This is because your expenses are typically lower in retirement if you have a paid off house, car(s), etc. So, if your average income was around $100,000, you should aim to enter retirement with $1.4-$1.6 million and withdraw $70,000-$80,000 on an annual basis. This withdrawal, in addition to social security, sets a baseline for a comfortable retirement. If you want to continue your current standard of living, or include things like travel or vacation homes, this will increase the amount you would need to save.
- When should I start saving for retirement?
Now. The earlier that you can start saving for retirement, the better off you will be. This is due to compounding interest, which occurs when the interest on your investments produce interest, and then that interest produces interest, and so on. A single $1,000 investment into the stock market 43 years ago would turn into $46,000 today. This is why time is your greatest asset when investing. Aside from compound interest, you should consider taking full advantage of your employer’s 401(k) match program. It can be an amazing opportunity since it's an immediate 100% return on your contribution.
- How often should I review my finances?
It is recommended that individuals check their finances on a monthly or quarterly basis. While reviewing finances:
- Make sure that you are staying on track with your budget
- Check your savings progress and debt payments
- Look ahead for any big upcoming expenses
For investments, checking quarterly is enough. Fixating on short-term changes can cause unnecessary stress. For example, on March 28, 2025, Netflix (NFLX) stock dropped over $40. If you were looking at the stock for just the day, you would have a reason to be concerned. But looking over the past 12-months, the Netflix stock has risen over $500.
If you have questions or need help managing your investments, don't be afraid to seek the help of a trusted advisor.
- How do I improve my credit score?
Improving credit focuses on 4 key areas:
- Pay bills on time
- Keep credit utilization low
- Keep old accounts open
- Don’t apply for too many cards at once
A good credit score makes it easier to get loans, credit cards, and better interest rates.
Have questions, need help, or want to take action? Feel free to contact us at 419.496.0770 or ncrosby@crosbyadvisory.com for a risk-free consultation.
Crosby Advisory Group, LLC is a registered investment advisor providing financial planning, insurance and business growth strategies. This blog is for information purposes and does not represent individual investment advice. Not all investments are suitable for all people. You should carefully consider all risks and fees before making an investment.
