There’s a new report out that says very few Americans are financially healthy. Working with researchers at the University of Southern California, the Center for Financial Services Innovation (CFSI) developed an eight-question survey that was taken by a representative sample of U.S. adults, leading to what it calls the U.S. Financial Health Pulse. Its results were not encouraging.
According to CFSI’s analysis, just 28% of Americans are “financially healthy,” 55% are “financially coping,” and 17% are “financially vulnerable.”
Survey questions asked how people’s spending compares to their income, whether they pay their bills on time, how long they could live off their savings, how manageable their debt is, and more. For the most part, they were good questions, but the survey seemed somewhat incomplete.
If I were to develop a survey to assess people’s financial condition, I’d include the following 10 topics. As you read each description, rate yourself on a 5-point scale, with 5 being the most positive score.
Biblical financial worldview. How well do you know what the Bible teaches about money and to what degree have you put biblical financial principles into practice?
Income. While there’s no such thing as guaranteed employment, evaluate your employability. Are your skills up to date and in demand? Are you taking steps each year to hone your skills? How’s your network? Unless you’re independently wealthy, your ability to earn income is the foundation of your financial life.
Planning. Do you use a budget to proactively manage your household’s cash flow? Some people say they have a budget, but really what they have is a big picture idea in their head of how much they can spend. What I mean by a budget is a written plan that allocates your income toward giving, saving, investing, and spending.
Giving. Are you giving at least 10% of your monthly gross income to Christ-centered causes? I know some people get uneasy with specific generosity guidelines, but I believe 10% is the biblical starting point.
Saving. Would you be able to live off your savings for three to six months if you lost your job tomorrow? If you’re single and rent an apartment, you’re probably fine with three months’ worth of savings. If you’re married with kids and a house, you have what I call more breakable moving parts and should have at least six months’ worth of essential living expenses in savings. This emergency fund should be in a dedicated savings account, not mingled with your checking account money.
Also, do you save for periodic expenses, such as an annual life insurance premium, Christmas gifts, or other expenses that aren’t paid every month but will need to be paid at some point in the year? And do you save for the replacement of big-ticket items, such as your car?
Debt. Are you debt-free, with the possible exception of a reasonable mortgage—one that requires no more than 25% of monthly gross income for the combination of your mortgage, property taxes, and homeowner’s insurance, and preferably no more than 20%?
Investing. Do you know how much you should be investing to build a nest egg for your later years and are you investing that much? If you have kids, are you investing to help pay at least a portion of their college costs? And are you investing knowledgeably?
Protecting. Do you have adequate insurance—health, vehicle, homeowner’s, life, and possibly disability insurance?
Spending. Are you proactive about controlling your spending, being intentional about managing to the numbers in your budget?
Temperament. Especially if you’re married, knowing your temperament and your spouse’s temperament can be really helpful in managing money as a team. Even if you’re single, understanding how God has wired you up, and the financial tendencies that are associated with your temperament, can help you learn to play to your strengths. So, do you know your temperament and its financial implications?
Since there are 10 topics, there are 50 possible points. How did you score? While this is certainly subjective, I’d say if you got 45 points or higher, you’re in “very good” shape financially, 40-44 points means you’re in “good” shape, 35-39 points means you’re in “fair” shape, 30-34 means money is probably somewhat of a struggle for you, and anything less than 30 means you’ve got some work to do.
I know this list may feel overwhelming, but use it as a diagnostic tool that can help you develop goals for the next 6-12 months. Start with the topics where you gave yourself the lowest scores. Then search for articles about those topics on my site for guidance. Or if you’re part of a church with a stewardship ministry, see what classes are being offered and sign up.
Money is one of those things we never get fully right. We all have room for improvement. Hopefully by honestly assessing where you’re at with the 10 topics above you’ll be able to focus your financial improvement efforts in the right places.