Let's Review Those Vitals: A Financial Health Checkup 


Written By Douglas Matus 

How a person measures financial wellness reveals much about their relationship to money. For some people, wellness simply means the ability to pay bills and satisfy the necessities of daily life. For others, wellness relates to the freedom to travel, satisfy one’s desires, and maintain a high standard of living.

Regardless of your income or social status, certain benchmarks exist to objectively measure your financial wellness. To see where you stand — and identify areas that need attention — perform a financial checkup through consideration of these five questions.

Are You Following a Budget?

Talk to most experts, and they’ll identify a single topic as indispensable to financial wellness: commitment to a budget.

“The first financial vital sign to me is the existence of a budget,” says David Bakke of MoneyCrashers.com. “Without one, you might find yourself on life support before you know it. If you don’t have one, create an Excel spreadsheet, or use an online resource like Mint.com.”

If you fail to keep tabs on your money, you’ll have no idea how much disposable income you have. Without this basic information, any financial plan you create will be hamstrung from the start.

Are You Prepared for Life?

We get annual check-ups with a physician to not only measure our health but to identify concerns and get prepared for the future. If you struggle with your weight, for example, awareness can help counteract the likelihood of problems such as diabetes and hypertension.

In much the same way, a financial check-up should reveal how well-prepared a person is for future inevitabilities. First, review your insurance; do you have adequate coverage for your vehicles, home and health? Secondly, how do you stand in regards to retirement? Most studies suggest that someone who works for 30 years and lives an additional 30 years post-retirement should save an average of 16% of their gross income.

Do You Have Access to Emergency Funds?

Here’s a simple thought experiment to measure your financial health: if necessary, could you come up with $1,000 cash in two days or less? Sometimes “life” occurs on its own timeline: whether it’s a medical bill or car repairs, situations inevitably arise that test a person’s preparedness.

The last thing you want to do is place emergency expenses on a credit card, or rely upon a payday lender. A financially healthy individual has an emergency fund for just these types of situations. In fact, an ideal emergency fund would cover all of your expenses for a period of six months.

“A financially healthy person has a savings account with enough money to pay their monthly bills for six months,” says Stephen Lesavich, an attorney and money expert. “Treat savings as just another monthly bill, and have it automatically transferred into a separate account.”

What is the State of Your Debt?

In order to sustain financial wellness, you have to trim the fat and rid yourself of excess debt. Jeff Jones, certified financial planner with Longview Financial Advisors, has a simple process to determine how much debt is too much:

“Add up all of your payments each month to service debt, including mortgage, auto loans, and credit cards, and multiply by 12. Divide the results by your annual net pay to determine what percentage goes toward debt payments. We recommend this ratio to be below 40 to 50 percent.”

If higher, you’ve assumed an unhealthy amount of debt. Dedicate yourself to reducing your balances, and you’ll have more money to spread around the rest of your budget.

How Much Do You Give?

Though it can get overlooked, the ability to support a charity or church reflects well on a person’s financial health. If you can donate 10% of your income without adversely affecting your lifestyle, chances are you’ve achieved financial wellness. In addition to serving as a useful yardstick for financial wellness, charitable giving promotes a non-attachment to money and renders psychological benefits impossible to measure in dollars and cents.

Now that you know what financial health looks like, it’s time to set yourself some new wellness goals. Put forth some vigorous effort, and your next financial check-up will showcase a clean bill of health.

Written on April 28, 2016

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