Need a road map to better financial health?

Money management tools will help you find your way.

Per the Financial Industry Regulatory Authority (FINRA) Investor Education, 2015 National Financial Capability Study, 18 percent of U.S. respondents reported spending more than they earned and 38 percent reported breaking even (i.e. not saving).

These statics suggest that many consumers struggle with managing their household budgets, which can affect the following:

  • achieving financial goals such as homeownership and paying off debt
  • being prepared for an unexpected financial emergency (50 percent reported not having a “rainy day fund”)
  • saving for retirement.

To create a personal roadmap to better financial health, try the following:

First, assess your Net Worth annually. This process includes listing and adding all of your assets, which are things that you own (cash, real estate, investments and personal property). The next step is listing and adding all of your liabilities, which are things that you owe (debts, mortgages, and loans). The last step is to calculate your Net Worth. To do this, subtract your total liabilities from your total assets. Performing this annually will allow you to monitor your progress and compare the results with your financial goals. What might this tool show you? When completed annually you can see if your home’s estimated value has gone up or down, if your retirement plans/investments have changed, and if your savings have increased or decreased.

Next, prepare a cash flow statement. This process includes listing all income and expenses during a specific period of time (i.e. one-month or one-year). This financial “snap shot” will allow you to see if you are spending more than you earn, breaking even or spending less than you earn. This information will help you identify areas where you can make changes, to make it easier to work towards your financial goals.

 Lastly, start using a spending plan on a monthly basis. This process includes listing all income (including assistance), all expenses (fixed, variable and occasional/non-monthly expenses) and any amount that you allocate to savings. This money management tool will help you balance income and expenses on a monthly basis, and will help keep you on track.

For additional money management resources visit Michigan State University Extension. Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, please visit either the MSU Extension events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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