You're Asking the Wrong Financial Questions: Here's How to Fix That

Three of the most common personal finance questions financial advisers get all the time are not the right ones to ask. Here’s how to take those questions and reframe them to get the answers you need to build your wealth.

Someone pushes a red button that is labeled "No!"
(Image credit: Getty Images)

As a financial planner, it’s my job to answer financial questions. From clients to speaking engagements to educational workshops, people ask me a range of questions about personal finance and the best moves to make with their money every single day.

Even though everyone’s financial situation is unique, and people bring different goals, priorities and values to the table (which influences the context of the questions), I do find that there are a few queries that come up over and over. These questions are common across a broad range of people doing the asking … and, interestingly, they are almost always the wrong questions to ask.

Your Financial Questions Might Put the Focus in the Wrong Place

I do believe there’s no such thing as a stupid question and in my role as an educator, coach and guide for my clients’ finances, I want them to freely ask whatever is on their mind. I want to help them expand their knowledge, and sometimes that means asking what feels like a “dumb” question or speaking up about something they feel is obvious but don’t understand.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

What I mean by the “wrong” question is that the question’s focus is on the wrong part of the equation. When we pay attention to certain factors of the situation but ignore others, we risk missing the best solution for the problem.

Here are three very common questions I hear people ask over and over — and the reframes I suggest using to help you reach a better, deeper answer that can help you optimize your finances and find the best course of action for your life.

Instead of Asking ‘How Much House Can I Afford’...

Financial planning for a home is one of the most frequent scenarios we work with, because our clients are in their 30s and 40s. Buying a first home is a common milestone, and looking for their “forever” home when they begin growing their family is also a common transition.

If you want to buy a home, considering what you can afford seems to be a reasonable, thoughtful question to ask. But asking “How much house can I afford?” can lead you to an answer that represents the maximum your budget can handle — which is extremely unreasonable from a planning perspective.

What you can afford and what you should spend might be two very different figures. We want to avoid the top-end range of your budget, even if it represents something you can technically afford right now, for a number of reasons:

  • It reduces or eliminates your ability to build a margin of safety into your financial plan. If you max out a fixed cost, you will lose flexibility and adaptability should something unexpected happen (like a job change where you make less income) or you experience a change in the future that you didn’t plan for (which could be something as simple as seeing your goals evolve over time).
  • It may leave you financially stuck. If you push your budget to its limit to buy a home, you may find yourself with little to no cash flow power to handle other increased costs … like having a child, which is frequently a reason why couples want to buy a bigger (and more expensive) home in the first place. Growing your family is just one example of how a future, pending change could become difficult to execute if you already committed most of your available cash flow to a mortgage each month.

The better question to ask to improve the quality of your financial planning? "How much house can I afford in relation to all the other goals I have, including financial independence?" Asking this question allows you to consider the big picture, rather than just evaluating the homebuying decision in a vacuum. Your specific answer will depend on your unique financial situation, the health of your cash flow, the amount of assets you already have (or don't), potential pending transitions or changes in your life, and of course, any other goals and priorities you may have.

Instead of Asking ‘How Much Can I Spend’...

Having “enough” is a major concern for almost everyone, regardless of how financially savvy they are. But most people try to answer that question in a backward way. They ask, “How much can I spend without jeopardizing my future goals or retirement?”

We try to train clients to flip that question around and reframe their priorities. Instead of asking how much can you safely spend, the better question to ask is this: “How much do I need to save and invest each year?

Starting with savings and investment contributions means you take care of your biggest financial need first: the need to build your assets for the future, when you no longer want or need to work to earn an income to fund your lifestyle. Affording retirement (or being financially independent at any age) is likely the biggest financial goal you have. The order in which you earmark cash for use each month should reflect that.

That’s why we say savings first. We help our clients set their target annual savings rate first. We define “savings rate” as contributions made to long-term savings and investment accounts, which can include retirement plans, equity compensation programs, IRAs, HSAs and taxable brokerage accounts. Our baseline recommendation is to contribute 25% of gross household income into these long-term vehicles.

From there, we evaluate the need to keep cash on hand for shorter-term goals (which are often spending-related, such as buying a boat or sending kids to private school) and emergencies. If clients need to actively fund these needs, we’ll set a monthly target of money to set aside from cash flow to save up for what they want to spend on in the next one to five years.

Only then do we turn to the question of spending — and at this point, the answer to “how much can I spend” is “whatever is left over.” The beauty of this system is that clients are free to spend on whatever they want with the cash flow available after accounting for their need to save and invest. This does need to include fixed expenses and discretionary spending, but it provides a lot of freedom and autonomy in your spending decisions. It also frees you from feeling guilty about what you spend, as you already met your savings needs and you know you’re on track for the future.

Instead of Asking ‘Which Investment Will Grow My Wealth the Quickest’ ...

I’m not sure anyone would say “no” to the opportunity to earn more returns and grow their wealth faster than whatever strategy they currently use — even if that investment strategy is sound, reliable and producing appropriate risk-adjusted returns.

That might be why people find it so tempting to jump on the bandwagon of the latest market trends, seek out vehicles that promise better returns with little risk, or wonder if they are somehow missing out when they could be getting rich quick.

I understand the urge to believe if only you were privy to some secretive investment strategy that really wealthy people knew about, you too would be a millionaire many times over … but the truth is much more boring. There’s really no secret, and the best strategy is simply to consistently save large amounts of your income into a globally diversified portfolio allocated based on both your risk tolerance and capacity.

Like I said: It’s boring. But it works (without forcing you to take on outsized risks along the way). Instead of asking, essentially, how you can get rich quick, the better question to ask is this: “What is the appropriate investment strategy for me, given my goals and wants, limitations, and both tolerance and capacity to take risks?”

When you consider your investment strategy in the context of your entire financial life, the answer about the “best” investment is the one that provides you with enough of a return (not the maximum possible) to meet your needs and goals. It’s also one that does not take unnecessary risks, or put you in a position where if you place a bet and lose, you’ll be financially devastated.

I suggest focusing on the factors in your financial life that you exert total control over and significantly move the needle in terms of building assets. That looks like saving more, spending less, avoiding high-priced investments, and taking a long-term approach to investing while avoiding more speculative moves like concentrated positions and market timing.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser
Founder, Beyond Your Hammock

Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow.

Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.