What Is Personal Financial Well-Being?
Have you ever thought about your personal financial well-being? What does that mean to you? The Consumer Financial Protection Bureau conducted a survey of consumers across the country to determine just what personal financial well-being meant to them.Take a look at the four aspects of financial well-being that many consumers find important.
Feeling in control
People who have high levels of financial well-being feel in control of their day-to-day and month-to-month finances. Think of this as having financial security, in the present.
Capacity to absorb a financial shock
Whether they get in a car accident or are temporarily laid off from a job, these consumers have a safety net such as savings, insurance, or family to help stop a shock from turning into a longer-lasting setback. One way to describe this is feeling financial security, for the future.
On track to meet goals
Consumers with a higher sense of financial well-being tell us they are on track to meet their financial goals… Think of this as moving toward financial freedom, for the future.
Flexibility to make choices
These consumers have the financial freedom to make the choices that allow them to enjoy life, whatever that means to them.
You Can Score Your Personal Financial Well-Being
With an understanding of how consumers thought about financial well-being and what they saw as important, the Consumer Financial Protection Bureau created a tool for consumers to use to help them evaluate their own financial well-being. Here is an explanation of that tool. You can visit the CFBP here and use it score yourself!
With this definition, CFPB developed a ten-question test and a specialized scoring system to quantify financial well-being. The questions all have five answers to choose from, ranging from “completely” to “not at all” or from “always” to “never.” Respective examples include “Because of my money situation, I feel like I will never have the things I want in life” and “I have money left over at the end of the month.”
Responses are assigned values from zero to four. Because of the phrasing of the questions, with some having negative connotations, the values are not always the same throughout the category — for example, for some questions “completely” is assigned a value of four while for others it is zero.
Once the values are totaled, you can determine your financial well-being score through a table that relates the total response value to your score…
…What constitutes a good score? In general, a higher number indicates a greater sense of financial well-being but there is no established threshold for a good or bad score. The test serves as a useful benchmark to measure progress toward financial well-being, and it can also be used in context based on other financial information. In other words, do other elements of your financial situation bring the financial well-being results into question? – Money Tips
What do you think about your personal financial well-being?