Family Finances: How Is Your Financial Status?

October 8, 2009 by Silicon Valley Blogger

If you’re a regular here, you would be aware of my interest in fun interactive tools and web sites on the subject of personal finance and money management. I’ve already showcased quite a few interesting tools here.

But this time around, I thought to show you this CNN Money graphic that gauges your financial health. If you enter your age and income, it will let you know how your family finances are doing along several tracks, based on conventional financial principles and recommendations. After I answered the questions, I only got a grade of “B”. Well, let’s take a look at where I need some improvement — I’ll go through the various financial categories to discuss the results I got for each:

family finances
Click the image to try out the tool!

My Family Finances

Our Housing Payment: I’ve got to be careful here because my family spends too much on housing. So currently, we spend more than 28% of our gross income on housing related expenses and that’s a no-no. But we have a few good excuses for this: first, we live in an area where the cost of living and real estate costs are considered insane. Second, we have a 15 year fixed mortgage which will be paid off fairly soon. So the money we’re putting towards our home isn’t as bad as it seems since most of it is now going to principal. Third, we can try to do more to increase our income, which we believe we can do over time.

Our Debt Profile: Again, our debt picture looks cloudy on account of our mortgage, but only if you don’t see the big picture. However, our mortgage is the only real debt we carry and I’ve justified its existence. Good debt should be fine, right? Plus, this mortgage won’t be hanging around for too long.

Our Emergency Savings: We’ve got ample funds in high interest savings accounts and other safe, liquid investments, so we scored well here.

Our Asset Allocation: Apparently, we’re not aggressive enough. The “120 minus Your Age” rule was used to point out that we’ve been too conservative with our investment portfolio. According to this investment rule, we should have 80% of our portfolio in the stock market (120 – our average age). Eh, I’d say we should consider our risk profile here as well, and by taking that into account, we feel perfectly fine with our asset allocation at this time.

Our Company Stock: The tool suggests that we keep our company stock ownership to 10% at most. We’re way below that.

Our Life Insurance: The rule here is to have enough life insurance to replace at least 5 years of your salary (or up to 10 years if you’ve got dependents). If you have no dependents, life insurance is optional. We also scored well here.

Our Retirement Savings: The tool complained that we should beef up our retirement savings a bit more. A couple of things about this: perhaps we don’t plan to retire in the traditional sense — I see ourselves continuing to work on things (perhaps on income generating projects) that we enjoy, well into our golden years. The worst case scenario? Sell the house and move somewhere cheaper!

So how about you, care to try this out and tell us your score?

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Comments (1)

 

  1. uberVU - social comments says:
    October 23, 2009 at 8:44 am

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    This post was mentioned on Twitter by RCDLoan: Family Finances: How Is Your Financial Status? http://bte.tc/kPf #RTW…