Know Your Net Worth and Your HDL/LDL
Recently I watched a webcast put on by Fidelity Investments entitled “Health & Money: A Powerful Link.” Alexandra Taussig, Sr. VP Personal Investing at Fidelity Investments hosted the conversation with personal finance journalist Jean Chatzky and Dr. Michael F. Roizen, of the Cleveland Clinic. The discussion surrounded performing both a physical and financial wellness checkup on yourself and then creating action steps to achieve retirement goals.
While much of the information is not new, I wanted to share it to remind and reinforce the need for us all to check up on our physical and financial wellness at least annually. Remember, you can’t fix what you don’t know about.
After introductions, the group discussed how health and money are entwined, explaining physical health must exist for financial health to exist and vice versa. Being unhealthy may cause your finances to suffer from increased costs in health care coverage and medical expenses. Alternatively, if your finances are not in order, you will likely experience increased stress leading to poor health and further financial issues.
Half of the U.S. population has less than $1,000 in emergency savings, and one-third of the population is more than $100,000 in debt. Financial debt is a leading cause of stress, and those in debt are:
- 7 times more likely to experience anxiety
- 5 times more likely to suffer from depression
- 5 times more likely to incur frequent headaches/migraines
- 2 times more likely to endure a heart attack
Dr. Roizen further explained, “stress is a leading cause of disease and memory dysfunction.” Overeating, high blood pressure, fatigue, anxiety, and a shrinking memory center, can all be attributed to stress.
More Money, More Problems for Your Neighbors?
Most of us have heard lottery winners often end up bankrupt, but Ms. Chatzky referenced a study done on the neighbors of lottery winners (I found this article by Emily Badger, in the Washington Post) that claims the neighbors of lottery winners trying to ‘keep up with the Joneses’ may file bankruptcy too.
The article states, “A $1,000 increase (in Canadian dollars) in lottery prize money caused a 2.4 percent rise in bankruptcies among those immediate neighbors over the next two years. The balance sheets that bankruptcy filers must submit also show that people who lived near big lottery winners had larger holdings of visible assets like cars, motorcycles and houses, suggesting that their conspicuous consumption may have been what got them into trouble. The larger the lottery winnings, the higher the value of housing and vehicle assets for the bankrupt neighbors.”
More money does not necessarily alleviate stress for yourself – or your neighbors – but Chatzky claims, “more control of your finances and health does.”
Your Financial Wellness Checkup – Know What You Earn, Own, & Owe
Knowing where you are and where you are going is a must to begin your current financial wellness checkup. Evaluate your current status and plan for your future financial well-being. Know what you earn, what you pay in taxes, and what you take home after any automatic savings.
Look at your spending and make the gap between your net earnings and spending as wide as possible. Use the difference to eliminate debt and/or increase savings. Chatzky recommends a debt-to-income ratio of 36% or less. If your ratio is higher look at your expenses and see where you might be able to cut back.
Add up the value of what you own and subtract what you owe to learn your financial net worth. The value of your assets should increase, and a number of your liabilities need to trend down, thereby increasing your net worth. A smart goal is to eliminate debts as soon as possible but especially before entering retirement.
For an idea of how much to target in savings, Taussig says to use “The Power of 10x” to figure out if you are on track to meet future retirement income needs. A chart shared by Fidelity begins at age 30 and states a target of 1x your salary saved, by age 35 target is 2x, 3x at 40, 4x at 45, 6x at 50, 7x at 55, 8x at 60 and aiming for 10x your salary at age 67. Remember, these are just benchmarks, so you aren’t aiming in the dark, but they won’t work verbatim for everyone.
To help gauge your path towards a stable future financial wellness you need to understand your target retirement income needs as well. Will you need $35,000, $70,000 or $100,000 or more per year in retirement? What might you receive in Social Security income? How much will you need to bridge the gap? Spending time each year performing a financial wellness checkup and answering these questions will help get you and keep you on track. It’s important to save now, so you have something to spend later, thereby stressing less.
Checkup On Physical & Mental Wellness
Dr. Roizen shared a list – The 7 Normals – he says will help us understand our current level of health. Many of these tests will need to be conducted by your doctor, but there are a few you can perform at home, along with some quick and easy fitness tests. Dr. Roizen also mentioned visiting the site ‘RealAge’ for more assessments and health information.
The 7 Normals include measurements of:
- Blood Pressure – Target less than or equal to 125/85
- LDL Cholesterol – Target less than 130, or less than 100 if history of heart disease
- Fasting Blood Sugar or Hemoglobin – Less than 5.7
- Waist/Height Ratio – Your waist in inches should be less than half your height in inches
- Perceived Stress Level Test
- Cotinine Test (measures an alkaloid found in tobacco to assess level of exposure to cigarette smoke)
- TMAO or HSCRP Tests (measure inflammation levels)
Use chart below to gauge the status of your muscles and strength for your age
- Count number of push-ups you complete in one minute.
- Count number of sit-ups you complete in one minute.
- Assess ability to rise from a chair without using your hands.
Dr. Roizen and Ms. Chatzky also shared a checklist they incorporated with “AGE PROOF” making it easier for recalling how to reduce stress and improve health and financial wellness.
A – Automate good habits – Exercise, eat healthy breakfast, save, pay down debt, etc.
G – Get A Handle – Track your financial & health behaviors to keep a handle on them
E – Establish the right food relationship – You must love it & it must love you back
P – Pay yourself – Save a portion of every paycheck
R – Rally your team – Spouse/Partner, Accountant, Attorney, Dr., Friends, etc.
O – Offer to do the same for others – Assist family and friends where you can
O – Organize both your health and money Worlds – Create lists and keep files
F – Find your passion – Do more of what you enjoy and want to do
In summary, the webcast urges one to perform a current health and financial wellness checkup, plan for what you need in the future, and create the steps to achieve your goals for improved physical and fiscal wellness.