Do You Know Your Financial Health Vital Signs? By Caroline Wetzel Y
ou know the drill. Every time you go to your doctor’s office for a consul- tation, there are certain vital signs
that are always measured: your weight, your blood pressure, and your tempera- ture. Whenever I am at the doctor’s office waiting my turn to be checked, I follow the same routine. I de-layer as much as pos- sible, breathe deeply, and imagine rocking gently in a hammock swaying in the coastal breeze. I hope that the readings will reflect all my efforts to be as healthy as possible.
I admit it. There are few things that I can do in that moment at the doctor’s office to really influence my vital signs. I take comfort as I await my results that the numbers aren’t static. When my appoint- ment ends, in coordination with my doctor’s advice, there are activities that I can initiate to continuously monitor, improve, and sus- tain those numbers. When those numbers are in good shape, so is my overall physical, mental and emotional health.
The same is true for your personal
finances. For all of us – no matter how wealthy we consider ourselves at this mo- ment – there are certain vital signs that we all must monitor regularly if we aspire to enjoy long term financial health.
Savings The first and most critical vital sign is
savings: what percentage of your income are you saving each month? How much you need to save and the type of financial account you need to deposit your sav- ings into varies according to your specific circumstance. Key factors to consider when calculating your minimal savings percent- age include:
• How much do you earn and when do you earn it?
• What are your fixed costs? What expenses are discretionary and can be decreased or eliminated?
• How much have you saved already and in what types of accounts are these savings?
• When might you need to access your savings? How much money will you need at that time?
A general savings percentage that many financial professionals suggest clients use is 15% of your gross salary, or what you earn before paying taxes. To make this easier and more fun, my family set up automatic sav- ings and makes it an ongoing game to set
– and continuously try to beat – our family’s monthly savings.
Emergency Fund The second most critical vital sign is
how big is your emergency fund? Think of this as money that is easily available to you should you need to access it quickly, like if you experience a health set back or job loss. While some people claim that they can just use credit cards for this, I am not a fan of this approach. Depending on your overall financial situation and the interest rates on your credit card, you could end up paying a lot more for your emergency.
The emergency savings account can be in the form of cash or money market funds so that you earn interest. Retain approxi- mately six months’ worth of fixed expenses in this account. When you need to tap into your emergency fund to pay for a true emergency, ensure you replenish the funds as quickly as possible after life stabilizes fol- lowing the emergency.
Retirement Lifestyle For those of you who dream of retiring
some day, the third most critical vital sign is how much income and savings you can
www.NaturalNutmeg.com 23
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44
