Assessing Your Financial Health: The Concept of Money BMI

Every year, millions of Americans step on a scale to assess their health by checking their weight, blood pressure, and cholesterol. Many even wear smartwatches to track heartbeats and steps. But how many consider their financial health?

The United States lacks a simple way to measure financial wellness. People are familiar with their credit scores and bank balances, and some know their 401(k) values. However, these numbers do not fully answer the critical question: Are you financially fit?

Years ago, a Money BMI concept was introduced, aimed at providing Americans with a financial version of the Body Mass Index. This tool would help identify whether individuals are on the right track financially before minor problems escalate.

Our health care system measures risk factors early, well before issues like heart attacks occur. Our financial system should adopt a similar approach. Many Americans realize their financial problems only after a crisis, such as a job loss, divorce, market downturn, or unexpected medical expense, makes resolution harder.

Instead of only asking, “How much money do you have?” we need to ask better questions:

• Do you have an emergency fund?
• Are you saving at least 15% of your income?
• Could your family manage financially if something happened to you?
• Is your estate plan current?
• Are you paying unnecessary taxes?
• Will your retirement savings be sufficient?

These questions provide a clearer picture of financial health than a brokerage statement.

Imagine if every American had a simple annual Financial Fitness Score, akin to a doctor’s office weigh-in. This wouldn’t involve a new government program or complicated regulation. It’s about identifying financial risks before they escalate into emergencies.

Here’s a straightforward way to check your Money BMI:

• I have at least six months of emergency savings.
• I save at least 10% of my income toward retirement.
• I have little or no high-interest credit card debt.
• My investments align with my goals and risk tolerance.
• My insurance coverage is up to date.
• My beneficiaries, will, and estate documents have been reviewed within the last five years.

If you tick five or six boxes, your financial health is likely strong. Three or four means progress but with room for improvement. Two or fewer suggest your financial health needs immediate attention, akin to being financially obese.

Good news: Financial fitness isn’t just for the wealthy. Like physical fitness, it improves with consistent habits. Small savings increases, debt reduction, insurance reviews, estate document updates, and automating good financial decisions, all contribute. Over time, these habits lead to lasting financial security.

America has long encouraged wealth-building but has overlooked tracking progress. As great leaders say, “Expect what you inspect.” Why not have a mandatory inspection system for your Money BMI?

Understanding your Money BMI won’t instantly make you wealthier, but it could be the pivotal wake-up call to change your financial future before it’s too late.