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Financial Well-Being Check-Up

What is Financial Well-Being?

Well-being has been defined as feeling happy, healthy, having meaningful relationships and a sense of purpose. Financial well-being has been defined, through research conducted by the Consumer Financial Protection Bureau, as a state of being where four central elements are present:

  • Having control over day-to-day, month-to-month finances;
  • Having the capacity to absorb a financial shock;
  • Being on track to meet financial goals; and
  • Having the financial freedom to make the choices that allow you to enjoy life.

Financial well-being is different for each individual and is tied to your values and the choices you make with your money. The opposite of financial well-being is financial stress which can have a negative impact on your health and your relationships.

How can I assess my Financial Well-Being or Personal Financial Fitness?

You can start by taking this short quiz:

  1. I am happy with my ability to meet my financial obligations                                                                     Yes         No
  2. I am happy with my spending habits                                                                                                        Yes         No
  3. I am happy with the level of debt I carry                                                                                                   Yes         No
  4. I can cover expenses for more than a month if I had a large, unexpected expense or lost my job          Yes         No
  5. I save and invest for my future on a regular basis                                                                                    Yes         No
  6. I have an investment plan                                                                                                                         Yes         No
  7. I have adequate insurance coverage (life, disability, liability, home)                                                         Yes         No
  8. I have estate planning documents (Will, Power of Attorney, Health Care Directive)                                 Yes         No
  9. I have the freedom to make choices that allow me to enjoy life                                                                Yes         No
  10. I can have productive money conversations in the relationships that are important to me                       Yes         No

The more “Yes” answers you have, the easier it will be to achieve a higher level of personal financial fitness.

Next you can gather some facts to better understand your situation. It is similar to assessing your physical fitness before starting a fitness program by checking your weight, heart rate after moderate exercise or how long it takes to walk a mile. There are four numbers that will give you a good initial overview of your financial situation.

  • Your net worth (what you own and what you owe)
  • Your credit score
  • Your short-term emergency savings
  • Your investments and long-term savings

Look for future posts where we will walk you through how you can determine your own four-numbers.