This is a neat little tool produced by CNNMoney to check your ‘financial health’ … it asks a few simple questions and gives you a diagnosis, highlighting problem areas in the red ‘bubbles’ (the blue ones are all OK).
The one shown here has been done for somebody who certainly seems to have some financial problems, having scored only a C+; this person is:
1. Paying too much for housing
2. Not diversified enough
3. Has too much of their stock portfolio in company stock
4. Has no life insurance
The problem is, this person is me 😉
CNNMoney thinks that a multimillionaire scores a C+ on their finances, but somebody who can’t rub two sticks together scores an A+ as long as they:
– Are diversified,
– Have life insurance,
– Pay too much for their house
[AJC: CNNMoney recommends no more than 38% of your gross income; we would say no more than 25% of net income]
… and, so on.
A common-wisdom tool with a common-wisdom result for a common-wisdom (work for 40 years, retire on minimum wage at 65) outcome. At least you won’t be broke.
BTW: Why did I [almost] fail?
a) We are renting a house ($35k a year) while renovations on our new one are underway, and we have not yet sold our US home, so land taxes ($30k a year) still have to be paid; both temporary costs
b) We fail diversification because it doesn’t ask about real-estate and we have too much in cash at the moment; the way I look at it, we pass on the ’emergency fund’ bit because we have at least 20 years living expenses on hand right now 🙂
c) We failed on company stock because we had a few mill. in bonus shares [AJC: now worth two-tenths-of-f**k-all as they say in Aus] and are waiting for some semblance of a ‘rebound’ before we sell … could be a loooonnnngggg wait
d) Life insurance? see b) 😛
Try the tool and let me know what you think ….