“Take the Financial Health Test”
The average American savings rate has declined to below 0%—compared to the 10% savings rates of the early 1980s. This trend will spell trouble for our economy in the years ahead if something isn’t done soon.
What has caused this shift? Much of the shift can be attributed to easier credit policies by financial institutions. Lenders pitch so many credit card, retail store card and mortgage loan offers that everyone has access to additional sources of funding for consumer purchases. Perhaps most insidious are the new mortgage lending policies. Mortgage lenders now offer no closing costs, interest only, Equity Line of Credit (ELOC) loans on 80% to 100% of the value of your home (less your first mortgage). Today, many people view their mortgage as another source of funding for every kind of consumer purchase from cars to appliances to vacations. Consequently, people are saving far too little for retirement and other long-term objectives.
So how are you doing? If your answer is “I don’t know”, you need to take my Financial Health Check-up test. The first step is to determine your current net worth by completing a financial net worth statement. To do this, take a sheet of paper and on the top half list all of your assets at their current market value and add them all up. Next on the bottom half of the page, list everything that you owe and total them as well to determine your total liabilities. Now, subtract your total assets from your total liabilities and the result is your financial net worth. For a financial net worth statement form, go to the
For many of you, this will be an eye-opening exercise that will show just how far behind you are. If that is the case, don’t throw in the towel. Instead, do something positive. Anything! Increase your contributions to your employer’s 401k plan; reduce your expenses and start an automatic investment program; get a second job. One of your best choices is to seek the advice of a qualified professional advisor, preferably a Certified Financial Planner™ practitioner. To find one near you go to www.fpanet.org. Be sure to ask how they are compensated. A ‘fee-only’ planner never receives commissions from any clients.