Giving Meaning to Money® Devotional
EDITOR — JON C. WIEBE
WRITER — MATT BELL
Matt Bell is Sound Mind Investing's Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets. To read his blog and learn more about his work, visit www.soundmindinvesting.com.
Are You Financially Healthy? Rate Yourself Using These 9 Qualifications
June 1, 2018
A study published in Mayo Clinic Proceedings quantified how many Americans have a healthy lifestyle. Can you guess what number it came up with? Less than three percent!
In order to qualify, a person had to meet four criteria: Moderate to vigorous exercise for at least 150 minutes per week, a diet score in the top 40 percent on the Healthy Eating Index, body fat of under 20 percent for men and 30 percent for women, and not smoking.
It made me wonder what percentage has a financially healthy lifestyle. Of course, that would require some criteria that define “financially healthy.” I gave it some thought and came up with the nine qualifications below.
Go through the list and see if you can say “yes” to each one. Some questions will be easier to answer than others. For the more subjective ones, just do your best and go with your initial response.
1 – Do you understand and follow what your faith teaches about money? Do you know what the Bible teaches about money and do you consciously strive to use money in a way that’s in synch with that teaching?
2 – Do you use a plan to proactively manage money? Yes, I’m talking about a budget. Not a general sense in your head as to how much you can spend on this or that. An actual written plan, either on paper or a computer, that shows your income allocated across the various categories of giving, saving, investing, and spending on everything from groceries to clothing to vacations and all the rest. Along with a method of tracking the actual inflow and outgo of money in your life, and regular reviews of how your actual use of money is lining up with your plan.
3 – Do you give generously? For most, I’d define this as giving at least 10 percent of your gross income. For some people, this may feel legalistic. But 10 percent is where God started his Old Testament followers, so it seems like a good starting point for us as well. I realize that some people reading this are in significant financial difficulty. If that’s you, feel free to define “generously” differently.
4 – Do you have adequate savings? Having three months’ worth of essential living expenses in a separate savings account would get you a “yes” here. Having six months’ worth gives you the right to use an exclamation point.
5 – If you have a mortgage, is it “reasonable?” In other words, does it cost no more than 25 percent of your monthly gross income to cover the combination of your mortgage, property taxes, and homeowner’s insurance? All the better if it takes less than 20 percent. Housing is most people’s largest expense, and I’ve found that 20-25 percent is the max most people can spend in this category while still living generously, saving and investing adequately, and living with financial margin.
6 – Are you debt-free (the only exception is a reasonable mortgage)? That means no vehicle debt, no student loan debt, no credit card balances carried over from month to month—no debt other than reasonable housing debt.
7 – Are you investing knowledgeably for your later years? That means you’ve run some numbers to determine how much you may need to have saved by the time you’re ready to retire, and how much you should invest each month right now to get there. It also means you’re making those investments (for most, that means investing at least 10 percent of monthly gross income), and are using a trustworthy process for choosing specific investments in an informed way.
8 – Are you adequately covered by insurance? If you’re married, and especially if you have kids, you need life insurance. You also need adequate homeowner’s or renter’s insurance, vehicle insurance, health insurance, and possibly disability insurance (although, depending on how long you’ve been paying into Social Security, you may qualify for disability coverage that way).
9 – If you’re married, is there financial transparency in your relationship? That means both spouses have a good sense as to what’s going on financially in the household, or at least have easy access to all of the financial information.
I realize that answering these questions may be discouraging. That isn’t my intent. Instead, I hope this process helps you identify areas to work on. Which questions do you disagree with? What other ones would you add?