How Comfortable Are You Financially? Let’s Assess Your Financial Wellness

Piggy bank with a stethoscope

Financial wellness. Is it a number? A state of mind? The size of your Thrift Savings Plan or 401(k) account? I'd say the answer more closely resembles a philosophy essay than a math problem. However, one word that merits consideration as part of the answer is "comfortable."

Last year in Schwab's 2020 version of its Modern Wealth Survey, respondents were asked at what net worth -- that's assets minus liabilities -- someone would be considered comfortable. Interestingly, the answer varied based on the age of the respondent and the timing of the response.

On the whole, Americans feel like a net worth of just under a million is enough to put you in that "comfortable zone." Curiously, the number shrunk to $634,000 for those who responded last summer during the pandemic.

Because I would place the answer to the question squarely in the camp of "it depends on your ability to ...," I thought I would delve into some of the key elements that finish out the thought with "do what." Here's what I came up with:

Keep a Tight Rein on Daily Cash Flow

Money is always called out as a top stressor for individuals and families. Clearly, being comfortable is at least, in part, about not having a lot of financial stress on a day-to-day basis. Living within a framework that allows you to spend less than you earn goes a long way toward reaching that benchmark. Sure, there are other elements, but the sense of calm that arises from knowing you aren't going to be squeezed each pay period or billing cycle is a definite indicator of how comfortable you feel.

Prepare for the Unexpected

It's coming. None of us has a crystal ball, but the only certainty is uncertainty. Are you prepared? An emergency fund equivalent to 3-6 months of your regular expenses and appropriate health, life and property insurance will help you weather a shock to the system.

Make a Rock-Solid Plan

"Comfortable" is a state of being -- in the eyes of the beholder. No one can tell you what is going to make you happy (or how much money you need to live that life). So take a step back from your daily finances to write down your personal goals and develop an action plan to achieve them. My watchword is flexibility. Do what it takes to create options, and your path to financial wellness may be varied and diverse.

I'll finish with an important question: Where did you learn about money? I'd venture to guess that the intentional and unintentional lessons your parents taught you planted seeds that made you -- the good, bad and the ugly -- who you are as it relates to financial wellness. Remember, you're modeling for your kids 24/7. Do it in a way that will serve them well.

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