In late 2016, the Consumer Financial Protection Bureau established what it called the financial well-being survey and scale. The idea is that “well-being” goes beyond financial literacy (what you know you should be doing) to what you actually are doing.
This concept caught my attention recently when I was doing some related research.
The approach is a bit of a surprise. Since the survey attempts to assess where you stand with your finances, you might expect it to be filled with questions about retirement plan numbers, credit card balances and the like. Instead, it consists of 10 core statements that the survey taker agrees with on a sliding scale from “completely” to “not at all.”
I thought it might be instructive to dig into a few of the survey’s statements:
• I could handle a major unexpected expense. I see where they are going here: the emergency fund. Very regularly we see stats showing how Americans are ill-prepared for even a bite-size emergency. In April, I saw a Federal Reserve study that indicated 58 percent of Americans didn’t even have $500 set aside to respond to the unexpected.
• I am securing my financial future. This statement screams “save and invest.” Lotto tickets and rich relatives are not going to be the engines that drive most of our financial futures. However, systematically saving and investing may get the job done.
• I have money left over at the end of the month. This one is all about budgeting. When I’m on the road talking with servicemembers and their families, I like to turn the table on the audience and, instead of focusing on budgeting, focus on the “why” behind budgeting. It’s not about the budget; it’s about accomplishing what you want to accomplish. If you focus on the projected and expected outcomes, budgeting can turn from a grind into a liberating experience.
• I am concerned that the money I have or will save won’t last. This is an interesting question. At first, I think about individuals on the brink of retirement who are concerned their nest eggs aren’t big enough. That’s an understandable concern. Vanguard provides 401(k) accounts for more than 4 million Americans, and a recent release pegged the median 401(k) balance of their plan participants 65 and older at less than $60,000. That indicates a potential issue for most folks. No matter where you are on the spectrum of life, it’s not too late to start adding to your personal nest egg.
• My finances control my life. Control is a strong word, but no matter how you feel about money, it does influence every aspect of your life. Think about Maslow’s hierarchy of needs. Whether you’re at the bottom and looking at food, clothing or shelter, or at the top and considering lofty charitable and self-actualization goals, money is either a roadblock or a facilitator. If you’re feeling money stress, my best advice is: don’t go it alone. Whether you seek out the assistance of an attorney, a credit counselor or a financial planner, they can help you map out a plan to get to a better place.
Take the whole survey online at cfpb.gov/consumer-tools/financial-well-being. It doesn’t provide nearly enough information to develop a comprehensive financial plan; however, there’s plenty of info to alert you whether you need to shift to a healthier financial lifestyle.
J.J. Montanaro is a certified financial planner with USAA, The American Legion’s preferred provider of financial services. Submit questions for him online.