Thursday, June 29, 2017

What Financial Health Means to Me: NED

In this week's Money Latters Minute, I am sharing a post about Financial Health that I wrote for #FinHealthMatters Day on June 27: https://militaryfamilies.extension.org/2017/06/27/what-financial-health-means-to-me-ned/. There are many parallels between physical health and financial health, including having NED status. I hope that you enjoy it.


In 1999, I was diagnosed with breast cancer. After 10 months of treatment, my doctor described my physical health status as NED, which is doctor-speak for No Evidence of Disease. The same acronym can be applied to financial health: No Evidence of Distress. Financially healthy people with financial well-being are comfortable in the present (e.g., paying bills and freedom to make choices) and on track for a secure future (e.g.,  resilience to absorb “ shocks” and savings for retirement and other goals).


Financial health gives people options, opportunity, and the capacity to bounce back from life’s inevitable challenges. Like unemployment or disability or a car breakdown…or breast cancer.


Unlike physical health challenges, I’ve been fortunate to have good financial health throughout my adult life. By most metrics, I am doing very well. I count my blessings because 57% of Americans struggle financially and 43% have trouble paying bills and credit payments according research by the Center for Financial Services Innovation.


I’ve had several key advantages to build my financial health including higher education, health insurance, and steady employment. I’ve also worked hard (i.e., “leaned in”) and made frugal spending choices. I was the only person in my immediate family to earn a bachelor’s degree. My American Dream Score is 63. This means “the majority of factors [but not every factor] have been in my favor.”


How can Americans build financial health? By doing something- anything- that improves their finances. Any step forward is progress. Learning something new about personal finance every day, saving something in a 401(k), and building an emergency fund $1 at a time, if necessary. It all adds up.


Savings is a key factor in financial health. One of my favorite action strategies is completing a savings challenge. I’ve personally created five challenges, from $100 a month to $2,500 a year, and done them all. Challenges give you a template to follow and progress points to celebrate along the way.


Other things that build financial health:


Planning- Studies done by me and others have found an association between planning behavior (e.g., setting goals and making lists) and positive financial practices.


Prevention- Financially healthy people increase their resilience with low debt-to-income ratios and adequate insurance and emergency savings.


Progress- This means “moving the needle” forward every day with positive actions such as saving spare change and reducing expenses to “find” money to repay debt.


Persistence-It generally takes hard work, optimism, and discipline to become financially healthy. Perserverance during tough times and some pain (e.g., spending less to save more) is necessary.


Paychecks- Financial health requires income from an employer and/or self-employment. In later life, savings helps people create a “retirement paycheck.”


With financial health comes….


Peace- Knowing you are not a paycheck away from the financial “edge.” Unfortunately, 46% of Americans don’t have enough money to cover a $400 emergency.


I count my blessings that I am financially healthy and hope to remain so. Nothing is guaranteeed, however. The Poverty Risk Calculator says I have a 25% chance of being poor during my lifetime. Just being a woman is apparently a risk factor.


My passion is helping others achieve financial health through my writing and teaching. My greatest hope is that the financial health status of every American will become NED.

Thursday, June 22, 2017

Retirement Circa 2017 (Part 2: The New Retirementality)


Part of my work includes working on a team that provides personal finance professional development opportunities for financial educators and counselors, especially those employed by military installations around the world. On June 6-8, 2017, the team provided a three-day series of webinars about retirement planning. The webinars are available for free viewing at any time, along with downloadable copies of the webinar slides.

 

The second webinar was by Mitch Anthony, author of the book, The New Retirementality. His overall message was that retirement, as we know it, is an “artificial finish line” and does not fit 2017 lifestyles. When the concept of retirement was developed, people did not live very long afterwards. Today, people can live two or three decades after stepping away from a full-time career. The new “badge of honor” will be working in later life.


Mr. Anthony defined “work” as “an engagement that brings value to others and meaning to you.” It does not have to be for pay. He cited a study that found that “staying healthy” was the #1 reason given for continuing work. He also stressed that older adults bring valuable resources to jobs or volunteer activities: their “intellectual, relational, and experiential capital.” In other words, skills, knowledge, and contacts honed over their careers.

 

Saving money was mentioned as the means to an end rather than an end in and of itself. Mr. Anthony mentioned that saving money gives people freedom to do what they want with their time. Another key point was that “old” is an attitude- not an age. People decide themselves, by their thoughts and actions, if and when they are “old.”


Thursday, June 15, 2017

Retirement Circa 2017 (Part 1: Retirement Research)

 
Part of my work includes working on a team that provides personal finance professional development opportunities for financial educators and counselors, especially those employed by military installations around the world. On June 6-8, 2017, the team provided a three-day series of webinars about retirement planning. The webinars are available for free viewing at any time, along with downloadable copies of the webinar slides.

 

The first webinar, by Kimberly Blanton from the Center for Retirement Research at Boston College, focused on statistics and figures about retirement planning. The overall message was twofold: 1. Increasing numbers of American workers are at risk for falling short of the amount that they need to maintain their lifestyle in retirement and 2. There are effective action steps that people can take to better their financial security in later life.

 

Some specific actions mentioned by Ms. Blanton were working longer and using home equity as a retirement income resource by trading down to a smaller home with lower expenses (downsizing) and/or using a reverse mortgage. She also mentioned the concept of a work years to retirement years ratio (the higher, the better):

  • 1:1 if you work 30 years and have a 30 year retirement
  • 2:1 if you work 40 years and have a 20 year retirement
  • 3:1 if you work 45 years and have a 15 year retirement 


A key take-away for me was that women gain more than men, on average, by claiming Social Security at age 70 versus age 62. This is partly because women are more likely than men to have gaps in their earning history due to child-rearing and care of aged parents. Working longer replaces “0” and low earning years with higher numbers.




 

Friday, June 9, 2017

Personal Finance Milestone Ages


At the May 2017 conference of the Financial Planning Association on New Jersey, the concept of a “standard of care” for financial planning clients was discussed. In other words, similar to medical standards of care (e.g., having a colonoscopy starting at age 50 and regular blood pressure and bone density tests), certain age-based milestones tell people the key actions to take at different ages.

The following financial activities often take place at various decades of a person’s life:

20s and 30s- Debt repayment and household formation

40s and 50s- Peak earnings and wealth accumulation

60s- Preparation for retirement and retirement

70s and Above- Transitions and wealth distribution

 

Especially during later life, there are many age-related financial milestones. The table below lists those that take place from age 50 through age 70 ½. Like medical milestones, which are generally determined by research, financial milestones are grounded in facts, typically tax laws and other legislation.

 

Want to improve your personal finances? Search the words “Financial Milestones for Adults” online and find articles that describe the age-related financial milestones that apply to you.

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