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What financial health means to me.

What(1)Physical health is more than merely the absence of symptoms. Ditto financial health.

Just being not-sick doesn’t mean you’re actually well. Ever know someone who seemed fine until the heart attack? It’s likely he had underlying issues such as poor nutrition and a sedentary lifestyle.

Now: Ever know someone who seemed fine until the bankruptcy? Chances are he had issues, too, such as compulsive spending or champagne tastes and a tap-water budget.

He’s not alone: According to the Center for Financial Services Innovation, 57 percent of U.S. adults struggle financially.

We get annual physicals because catching a problem early beats trying to cure an entrenched ailment. Our finances need checkups, too.

 

However, this fiduciary scrutiny should happen more than once a year. Plan on a quarterly or even monthly “money date” to keep tabs on your treasury.

 

The examination

Give your budget a thorough going-over. Are you overspending in any category?

If so, brainstorm solutions: cutting back in other areas, cooking more, getting a roommate, seeking a side hustle.

Don’t have a budget? Use sites like Mint.com or the “Managing Your Money” page at Consumer.gov.

 

Monitoring vital signs

Just making book isn’t enough. Without a plan you’ll never get ahead; in fact,  you’re likely to slip backward.

A healthy budget includes categories like “emergency fund” and “irregular expenses” (e.g., insurance or holidays).

Saving may feel impossible but it probably isn’t. Start with $5 a week, then challenge yourself to find more.

 

Getting tested

Your GP probably runs a metabolic panel each year. Similarly, you should screen your finances for issues like:

Overpayment — a better deal on phone, Internet or insurance could be just a few clicks away.

Life changes, such as insuring a new purchase or dropping collision coverage.

Retirement progress, especially if you haven’t looked at the plan since your 2014 automatic enrollment.

 

Prescribing change

If your cholesterol looks dicey a doctor will prescribe alterations in diet and exercise. Based on the results of your financial checkup, stipulate some money modifications.

Start with short-term objectives such as paying off consumer debt or building that EF. Meeting these goals will give you the confidence to aim at long-range targets like homeownership, entrepreneurism or early retirement.

 

Make financial health a priority

Financial health doesn’t mean you can’t ever spend money. It means living the best life you can within (or slightly below) your means, and with an eye toward your future well-being. It means freedom from worry now and freedom from want later on.

Changing your money habits can feel daunting. But you don’t have to fix everything immediately.

In fact, you probably can’t. If a doctor recommended dropping 20 pounds you couldn’t do that overnight, either. Instead, you’d come up with a sustainable plan.

When it comes to fiscal fitness, each step you take – or don’t take – ultimately makes a difference. The biggest mistake you can make is doing nothing at all because you feel like you can’t do enough.

(Note: This post is part of the #FinHealthMatters competition, sponsored by the Financial Blogger Conference and CFSI.)


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21 Comments

  1. Beverley

    Wonderful article, as always. It gives me another way to look at my finances. Thank you.

  2. Awesome post Donna! I like the “examination” part but wonder why most folks won’t go and get a “check up” with someone who can help them with finances. I think people are embarrassed or don’t want to spend the money (ironically)… Similar to when they have an embarrassing medical problem and don’t choose not to deal with it. I hope what you wrote will help folks take even one step forward – it will make a difference.

    • Donna Freedman

      I think you’re right about being embarrassed to ask for help. Or maybe they’re in denial, as so many people are when they choose not to deal with a medical issue.

      Someone I know had a friend whose husband had symptoms of diabetes but refused to get tested. Yes, I know how silly that sounds. She asked for my input and I said something like, “Tell him that untreated diabetes can cause impotence.”

      I believe that someone went and got himself some treatment after hearing that.

      Sure, the idea of DYING would have been a good reason to get medical care, just as the idea of being older and without funds would have been a good reason to seek help with one’s finances. Often we just can’t (don’t want to) picture such things. Being told that your willy might not work if you don’t see the doctor? Easier to picture, and to fear.

      Maybe we should tell people, “Think your kids will want you moving in with them when you’re in your 60s? Think you want to move in with them when you’re in your 60s?” Or for the child-free, stuff like “If you don’t start making plans, you will have to live in a rented room/survive on beans and government cheese/give up your cherished pets because you can’t afford them.”

    • Morgen

      I do think people are embarrassed by their lack of planning or preparation, similar to someone who is planning on going to the gym… once they have lost some weight.

      However, I think a large part is the cost associated with seeing a planner. Those who most need to make the best choices, those with very little funds, see the cost of a planner as using up a larger percentage of their savings. It’s hard to justify emotionally.

      I see it all the time in construction projects. A couple is willing to invest a quarter of a million dollars in their home but don’t want to pay even one percent to PLAN… which, in my opinion, is foolish.

  3. Mary Kane

    Always a great read. My favorite financial blogger!

  4. Cathy in NJ

    I agreed with the looking ahead to life changes. Not getting into a mess is better than working to dig yourself out of debt.

    My daughter will be in college in 2 years. The cover article of Consumer Reports this issue is about college debt and wow is college debt super different from other debt. There is no way out.

    I do not want student loan debt in my name or my daughters name. I am going to have to find a way to navigate around it. I am looking at lower cost schools and my daughter living home and commuting.

    I have been chastised by my peers for not wanting my daughter to have the campus experience. Are these people rich? The campus living experience could cost $40K alone. That is one expensive vacation and you haven’t begun to pay for the education. Yikes.

    • Cathy we had our kids go to community college for their first 2 years, then they went to the local state college, lived at home, and worked part-time. It worked out well for us. I recommend this route to everyone. When it comes to money, remember: Your friends don’t pay your bills.

    • Lisa O

      Don’t listen to others…..do what your gut is telling you. The loan payments these kids come out of school with is a car/house payment for the next 10/15 years just to have an experience of living on campus….not worth it! I have 2 kids both with student debt (and yes I co-signed) oldest has CPA/Masters with a monthly payment upward of $500 and the youngest went to community college lived at home has and Associates Degree in Humanities & Social Services and short 1 class for a Computer Program Degree has a monthly payment of $50. Both took their own path that they wanted…

      • Donna Freedman

        “Both took their own path that they wanted.”

        This is another aspect of student loans that some people don’t consider: Opportunity cost. That’s true of both the money they must spend to pay back the loans (what could that $40k do for you later?), but also the fact that you are owned by your loans. You have fewer options and less freedom because you have to get a job right away to start making payments.

        Thanks for sharing your family’s story.

    • Donna Freedman

      Do not let your peers decide the course of your life (and your daughter’s). The “campus experience” in some cases is a lot like the high school experience: hanging out with friends, watching movies, complaining about coursework.

      But I think you already knew that.

      For extra credit, here’s the latest from NerdWallet:
      https://www.nerdwallet.com/blog/loans/student-loans/victory-lap/

    • jestjack

      I am “thriftier” than most…however both DD’s attended 4 year schools and lived there. They received good educations and IMHO the “campus experience” was worth every penny. I have never regretted making this “investment”….

  5. Nice article Donna. Thank you.

  6. Cathy R

    This really hits home for me. My retirement savings are automated and in decent good health so I don’t really think about them. However my regular savings just don’t seem to grow very much because I don’t have any specific goals. Without specific goals, it is hard to get motivated to save.

    Need to get back on track, though, just like I need to tighten up on my physical health. I just bought a fitbit (got it on sale and with a gift card so didn’t spend too much) to motivate my activity.

    If only there were a “dollarbit” or something along those lines to provide the same motivation for my savings…

    • Donna Freedman

      I don’t use Mint.com or PowerWallet, but it’s my understanding that you can set goals and watch the progress. The sites also offer stuff like pie charts and graphs that show you how much progress you’ve made.

      Or set goals with a like-minded friend, then check in regularly to keep each other honest. Or throw in a little wager: “The person who saves the most in six months gets the other person to buy lunch.”

  7. JoAn V.

    I loved those suggestions. Thanks to you and your tips over the years I am pretty “financially” healthy now. But it always pays to take another look quarterly.

  8. Isitaneedorawant

    Thanks Donna.
    Your future self will thank your present self for all the effort at financial fitness. Maybe one way of accountability is to “talk” to your future self. Write them a note, possibly to be written on special occasions, day you retire, day first/last child finish university, day child get’s married. These are just examples of potential future milestones that some of us know are coming.

  9. Great article! Any way that one can do without or reduce the amount of the student loans is a good thing.

  10. becky

    Donna, agree so much about loans for education. Didn’t allow my daughter to get them. She hasn’t been able to get a job in her field. BUT she has had the freedom to start two new businesses with two different partners. It’s too early to say if they’re going to succeed, but its very exciting. Not having a loan gave her these options. Also, I might call my insurance agent on Monday.

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