Feature Articles: Miscellaneous
Measuring your financial well-being
Cynthia Crawford, Ed.S., Ph.D., Extension Professional focusing on Retirement Planning Education, Personal Financial Planning, University of Missouri Extension
After just making new year’s goals and during tax preparation season, this is the perfect time to do a self-assessment of your financial well-being.
The Consumer Financial Protection Bureau (CFPB) released a financial well-being questionnaire in December 2015 that helps individuals and families accurately and consistently measure their financial well-being. Well-being includes:
- Having control over one’s finances and being able to pay bills on time, not having unmanageable debt and being able to balance income and expenses.
- Having a financial cushion for unexpected expenses and emergencies. Having savings, health insurance, access to quality credit and ability to get occasional help from friends and family for financial assistance were factors that increase consumers’ capacity to absorb a financial shock.
- Having financial goals. Goals may range from paying off student loans to being financially prepared for retirement. Well-being is about being on track to meeting financial goals that are important to you.
- Being able to make choices that allow one to enjoy life. Whether it is taking a vacation, enjoying a meal out now and then, going back to school or working less to spend more time with family, being able to enjoy life is an essential component of financial well-being.
Financial well-being is a balance between financial security and financial freedom today and in the future.
How well do these statements describe you or your situation? For these first six questions, please select from the following responses: Completely, Very well, Somewhat, Very little, or Not at all.
- I could handle a major unexpected expense.
- I am securing my financial future.
- Because of my money situation, I feel like I will never have the things I want in life.
- I can enjoy life because of the way I’m managing my money.
- I am just getting by financially.
- I am concerned that the money I have or will save won’t last.
How often do these statements apply to you? For these final four questions, please select from these responses: Always, Often, Sometimes, Rarely, or Never.
- Giving a gift for a wedding, birthday or another occasion would put a strain on my finances for the month.
- I have money left over at the end of the month.
- I am behind with my finances.
- My finances control my life.
These questions were carefully vetted by the CFPB and were tested to be valid and reliable measures.
As you think about your responses to the ten questions, which of your responses indicate that you have already built some financial strengths? What do you need to do in the coming year to be able to respond with even stronger responses?
For details about this project and to find out more specifics about scoring these ten questions, please see: http://www.consumerfinance.gov/reports/financial-well-being-scale/
Building on your financial well-being can help you become even more financially secure and have more financial freedom the remainder of this year and for many years to come.
Last update: Tuesday, February 16, 2016