Why do I really need an emergency fund? Is life insurance really a necessity? Ask A Stupid Question Day is the perfect time to learn the answers to a few questions you've been too afraid to ask.

I love the spirit of Ask A Stupid Question Day because when it comes to money, there is no such thing as a stupid question. 

We all have them and money is just, well, hard sometimes.

Honestly, you could save yourself thousands of dollars (and lots of heartache) by asking the money questions you have instead of guessing and hoping that your gamble works out for the best. 

What is net worth and how do I figure out my own?

Ask A Stupid Question Day: There Are No Stupid Questions When It Comes To Money - What is net worth?

You’ve likely heard the term net worth, but what is it?

Essentially, your net worth is the sum of your assets minus any liabilities you have on the books.

It is a good idea to monitor your net worth regularly. In general, your net worth is a great indicator of your overall financial health. If you have a positive net worth, you are doing something right. If you have a negative net worth, you may need to adjust your personal finance habits.

Importantly, your net worth is not about your income. Instead, your net worth is a reflection of the assets you’ve been able to amass or the debt you’ve managed to accrue over time. 

For example: take a look at Kim Kardashian’s net worth, which, as of April 2021, is $1 billion. A few of her assets include her companies, Skims and KKW Beauty, her properties, and a portfolio of stocks.

As far as we know, Kardashian doesn’t have any outstanding liabilities.

The sum of her assets, minus her lack of outstanding liabilities, leads to a net worth of $1 billion 

How much money can I afford to splurge?

We’ve all been there – a special item catches your eye, or the allure of a fancy meal is calling your name.

Is it a good idea to splurge

You probably shouldn’t splurge on every impulse item you encounter. But if you set up a budget, you might find that there is plenty of room to splurge a little bit here and there.

A good budgeting rule to follow, especially if you are new to budgeting, is the 50-30-20 budget

The 50-30-20 budget shakes out to:

  • 50% of your income is spent on necessities.
  • 20% of your income is saved.
  • 30% of your income is available to be spent on fun things – like a splurge here and there. 

Of course, the 50-30-20 budget is just a starting point. If you have a large debt burden or ambitious financial goals, then you may decide to splurge less and save more. 

What is an emergency fund and why is it so important?

Ask A Stupid Question Day: There Are No Stupid Questions When It Comes To Money - What is an emergency fund and why are they so important?

An emergency fund is a critical piece of any healthy financial picture. 

Essentially, an emergency fund is a savings account that acts as a safety net for anything life throws your way. If you have a big unexpected car repair to fund or a dip in your income due to a job loss, an emergency fund will be there to cover the costs. When you are going through life with this financial security net in place, you’ll likely encounter less financial stress along the way. 

However, emergency funds are not one size fits all. Instead, most financial experts recommend that your emergency fund should be able to cover between three to six months’ worth of expenses. 

With that, the size of your emergency fund will vary based on your monthly spending.

For example: if you spend $2,500 per month then your emergency fund should be around $7,500. 

But why is it important to have these funds on hand?

Life is great at throwing unexpected expenses your way at the most inconvenient time. When you have an emergency fund, you can simply pay for what you need and move forward. 

How should I deal with my debt? 

Debt of any kind can quickly become a financial burden that prevents you from living and spending in the way you want to. After all, hefty minimum monthly payments can take a bite out of a budget quickly. 

If you are serious about creating a bright financial future, then you’ll have to pay off your bad debts at some point. ‘

Bad’ debt often has high interest rates that are holding you back from getting ahead. For example, credit cards are notorious for having double-digit interest rates that can make it difficult to get out of debt. 

Take some time to tally up all of the outstanding debts you have. When you have all of the figures written down, consider the options in front of you. In some cases, you may decide that you are comfortable with the amount and type of debt you are carrying. For example, you might have a low-interest mortgage with a reasonable monthly payment that you are fine with keeping for now. 

How can I improve my credit score?

Ask A Stupid Question Day: There Are No Stupid Questions When It Comes To Money - How can I improve my credit score?

A credit score is a three-digit number that can have a big impact on your financial future. With a good credit score, you can gain access to better loan terms for big-ticket items. Even slightly better terms could save you thousands over the course of your loan. 

With that, it is understandable to wonder if it is possible to boost your credit score. The good news is that it is absolutely possible!

Here are two of the best ways to improve your score:

  • Start making on-time monthly payments. As you make on-time payments, your creditors will report your reliability to the credit bureaus, which in turn will increase your score. After all, your credit score is basically just a measure of your reliability when it comes to repaying your obligations. 
  • Pay down your debt. As you pay down existing debt, you lower your debt-to-income ratio. A low debt-to-income ratio indicates to lenders that you are responsibly managing your credit. If you are able to lower your debt-to-income ratio, this should lead to an increase in your score over time.

What is compound interest?

If you’ve spent any time in the personal finance community, you’ve likely heard the term compound interest.

But what is it?

Compound interest is the interest on a principal balance that is based on both the initial principal and the accumulated interest. This means that it rewards those who start saving and investing early. 

For example: let’s say you deposit $100 into an account that pays 10% in annual interest. In year one, you would earn $10 in interest. In year two, your interest payment would be based on $110 instead of $100.With that, you would earn $11 in interest in year two. Over time, the amount you earn in interest will continue to grow.

This concept will help you build your investments as long as you have a long enough time horizon

Should I have life insurance?

Ask A Stupid Question Day: There Are No Stupid Questions When It Comes To Money - Should I have life insurance?

Life insurance can be another expense that you are not excited to add to your budget. However, life insurance might be key for your family’s financial stability.

In most cases, you should absolutely consider life insurance if you have dependents. The exception to this general rule is if you have already built all of the financial assets you would want to leave behind for your family in the worst-case scenario. 

Of course, no one likes to think about the possibility of dying, but taking the time to think about what might happen to those you leave behind without adequate financial resources can be an even more painful thought. With that, it is a good idea to figure out how much life insurance you want to leave for your family and shop around for the right policy.

If you don’t have any dependents, then you probably don’t need life insurance at all.

If you are a person without a spouse or child relying on your income, life insurance is likely unnecessary. But you should absolutely reevaluate your life insurance needs if your situation changes. 

Are credit card rewards really worth it?

Have you ever looked at a credit card offer and thought – wow, that looks like a great deal, but what’s the catch? After all, why on earth would a credit card company offer you hundreds of dollars in rewards just to sign up and spend on their card.

Well, the credit card company is hoping that you won’t always pay off your entire balance each month and pay them interest along the way.

However, you should always make on-time payments in full each month. This will deprive the credit card company of any interest payments, but you’ll still get your promised rewards!

As long as you make those on-time monthly payments, credit card rewards are absolutely worth it.

Is it really possible to retire early?

Ask A Stupid Question Day: There Are No Stupid Questions When It Comes To Money - Is it really possible to retire early?

You’ve likely seen a headline that goes something along the lines of:

“30 year old retires from a job they hate and rides off into the sunset.”

If you are anything like me, a headline like that may have you scratching your head. 

At my first encounter with the FIRE – Financial Independence Retire Early – movement, I was skeptical. I had never met someone that retired early, so I didn’t think that it could really happen.

But after some research, I discovered that many people choose to work towards financial independence and walk away from their jobs for good. 

With that, yes, it is truly possible to retire early. However, you’ll have to start saving VERY early to achieve such a big goal.


The base of your financial future will hinge on asking the right questions about your personal finances.

Personally, I don’t think there are any silly questions when it comes to money. It is much better to ask about it now than regret making decisions based on a guess later. 

So, as you build your financial foundation, never be afraid to ask questions, no matter how big or small.

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About the author

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Sarah Sharkey is a personal finance writer covering retirement, investing, debt, savings, credit cards, mortgages, and student loans. Additionally, she is the founder of Adventurous Adulting, a personal finance blog dedicated to helping readers tackle their money and take control of the adventure of life. You can connect with her on LinkedIn or Twitter.