How healthy are your finances?
A fabulous reader sent me this financial assessment tool from CNN Money. It runs you through a few basic questions, then gives you a financial “grade” based on how you answer as it relates to your age and income.
I took the test and was given a B+ with questionable (red) areas in diversification and life insurance.
Diversification: the report said I didn’t have enough of my portfolio invested in the stock market. The magic formula is supposed to be 120 minus your age. This means, nearly 90% of my portfolio should be invested in the stock market. Uh, I don’t think so! Even if the market was booming, I’d never expose myself that much. Maybe I’m conservative, but I hover between 40-60% max.
Life Insurance: the report also said I didn’t have enough life insurance. Yet another magic formula is supposed to be 5 times your annual gross income. And again, I think this is ridiculous! Why do I need over a 1/2 million dollars in life insurance? Many of you may disagree, but I don’t think the purpose of life insurance is to leave an inheritance. In my opinion, it should cover burial expenses, outstanding debt, and a temporary replacement of income. Therefore, my current life insurance is enough to pay for the things I think are important in the event of my untimely death.
Despite the results, I don’t plan to adjust my diversification OR my life insurance coverage. I guess, according to CNN Money, I’ll never be an “A” student in financial management. *shrug*
How about you? Take the test and tell us what you think.
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Have you read the Fabulous Financials comment policy lately?
I got an A. (looking at myself like “ME????”) there’s NO way i deserve an A. I’d give myself a C. I have more debt than I think I should, with high interest rates and unnecessary fees and i have NO savings (yes i know, very very sad). While I do have a low car payment and I contribute a significant amount to my retirement fund, which is healthy even with the lousy market, I am still learning how to live within a budget, hence the credit card debt. So I really think CNN needs to put down the pipe because I know that if SM got a B+ there’s no way in H-E-L-L I should get an A!
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I as a B+ too.
LOL!!!!!!!!!!!
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I got an A. Changes nothing. What I didn’t like is that it told me that I was not saving enough for retirement/didn’t have enough saved. Excuse me, but my retirement savings are down 30% at least. I don’t need a quiz to rub it in! Ha!
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I got a B. Not enough life insurance – I disagree, I have enough to pay off my debt, bury me, and even have a little left over for my parents. Not enough retirement savings – well, there I agree, but I still think they require too much. Even if I had as much as I think I should, it wouldn’t be enough to pass their test. And not enough in the stock market. My savings is suffering right now because I’m not working, but if I were working, I’d probably have gotten a B+.
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B+!!
I’m not saving enough for retirement, which I already knew.
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I got a B+ with very similar results.
For some reason, the folks at money.com expect me to diversify more. In this current economy? I don’t think so. I also lack adequate life insurance, but I’m working on sorting that out soon.
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A?- Out of college 1 year so of course we have insufficient retirement 12 months later. I’m suprised that it thinks 3 months is a sufficient emergency fund.
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I got a B. I’m no longer saving for retirement, don’t have life insurance, and spend too much on housing ($625). Considering I’m a grad student, I think I’m doing really well with a B! :)
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I got a B+. They got me on the insurance thing too. Since I don’t have any dependents, why would I need life insurance outside of my basic work provided plan?
I don’t think insurance is for an inheritance. It is for protection of your dependents so if their life is upended by your untimely death at least they don’t have to worry about money for a specific period of time. For example, my parents have a policy that will cover their house payments until my youngest brother goes to college so he doesn’t have to move and change schools after the death of his parents. It’s all about what your priorities for your dependents are though so everyone is different.
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Hey Single Ma…I tried to take the test and it won’t let me using my real age of 24…appears the magic age for taking the test starts from 25 years old. Sheesh…some of us under 25 are working hard on our finances too.
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I got a C+. The tool told me I don’t have enough life insurance. I have $200K, can’t get any more life insurance because I am now “uninsurable” due to health problems. I am just happy I got the insurance I got.
I am debt free, except the house, also a single mom, and have $26K in my savings. I am saving $1K per month for retirement (between Roth and 401(k)), and paying $1K a month extra on my only debt – my mortgage.
I make $111K per year.
I guess that isn’t good enough.
I was told I don’t have enough in retirement. Oh, well, I guess the recent stock market decline got me on that one, but there’s little I can about that.
The calculator also told me that my house payment is a little high. Oh, well, if I got one where my PITI was 25% of my income, I’d be down in the burroughs in a 2 bedroom rambler with burglar bars on my windows…housing in not cheap where I live.
So be it.
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Too simplistic. I got an A. It took off points it shouldn’t have for not enough life insurance (I have no dependents). It didn’t take off when it should have for not having enough retirement money (I want to retire at age 52). It didn’t take off when it should have for not having enough in my emergency fund (it looks like I have a lot, but none of it is slated for unemployment–it’s all for my next car, car repairs, vacations, house repairs, etc.). I expected it to take off for having too much money in stocks (because most of my money is in my house and pension, so most of the rest being in stocks makes sense for me), but it didn’t.
Weird.
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I am now COMPLETELY doubting the value of that survey. I’m not proud of this grade: I have a 130K mortgage and 17K debt and hardly ANY retirement savings at age 35 and only a 1 month emergency fund and I’m a B+? That’s seriously out of whack – considering Single Ma’s impressive portfolio! The algorithm must really overweight the diversification/insurance answers (I am very heavy in stocks and I am ‘overinsured’ compared to SM’s answers). BUT the survey didn’t ask age of children in household and whether the survey-responder is the primary wage-earner – both of which factor heavily into the insurance equation.
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I got a big ole C+. I thought I could have at least squeaked by with a B.
I guess I need to take a look at my life insurance and save more for retirement.
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My husband and I just increased our life insurance policies to cover liabilities, death expenses, and approximately a year’s salary. I felt really good about all of this until I watched an episode of Suze Orman this weekend in which she told a caller that she needed to have a million dollar policy. She explained that this is considered a safe amount of life insurance in a worst-case scenario situation. Example, my husband and I are in a car accident. One of us dies, the other is left severely disabled. The million dollar policy would be enough to cover expenses and to invest the remainder in order to generate income yearly for the disabled partner.
I’m interested to hear your thoughts on this. Her opinion did not change our plans for life insurance, but just when we thought we were doing what we could to protect each other I was thrown for a loop with her advice. When is enough protection enough?
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I got a B, low score for diversification (I had to cut back on those stock investments), life insurance (although I disagree, it’s just me and I have enough to pay off the mortgage and bury me) and savings (just socked almost $30K into my house downpayment).
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I’m going to take the test now! I would look into your life insurance coverage though — you have a child. It should cover all the things you mention, but what about the costs she will have to take on with no help? College, food, shelter, etc.
Not to say she should “inherit” a large chunk outright, but God forbid something were to happen, there will be other things for her to worry about that cost $$.
Just a thought, you may have a will that covers all of this…
I’m a married mother of two (under age 6), you’ve blog is fantastic!
~TellaLuca
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I got an A, but dinged for not having any life insurance. I don’t need it. I have no debt, no dependents. I always joke with my mom (but I’m really not joking) that if I die before her to nudge me into the lake. Quick and free. If that doesn’t work, throw my body in a cheap-azz box and cremate me the cheapest way possible. I’ll be dead at that point, what do I care what happens with my body? I’d rather she take the money saved and go get her groove on (but not get married…learn from terry) while taking a cruise or something.
But anyway, yeah. This was pretty weak.
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I read your blog everyday, but have only commented a couple of times. I decided to pop my head out today! LOL. Ok, I took the test, and got a score of C+. Im as confused as all of you!! Im fresh out of college (but hey…whats with the min age being 25…I’m 23…and Im trying to get my stuff together!) I got points taken off my retirement savings, emergency savings and diversification. (which are all currently at $0…but I will explain) I also got taken off for only having $100,000 worth of life insurance. I just got married about a month ago, and I have no children–I would think that’s enough!! OK..I digress….so there WAS a time when I had an IRA (the yearly max–since I was 18 until 21), when I had stocks, and an emergency savings–there was also a time when I had perfect credit–for my age, with a score of 720. All that changed about 1.5 years ago, when a disgruntled ex—signed up for all kinds of credit cards in my name (about 4 within a mth–we’re talking about a $4000 limit with citicard, $500 with capitol one, orchard bank and 1st premier bank $400 each [i dont even know what those last two are...smh])–maxed all of those out, maxed out some of the ones I currently had (I have Amex–with no preset limit–by the time he was done–there was over $8000 on there…and I had my own Capitol One card with $2000 limit–yea…now I have 2 COne…how that was able to happen—who knows, and a student Discover card with $1500 limit), overdrew accounts, and finally–but not least–took out several pay-day loans in my name. *exhale* At the time, I was about to graduate (from the real HU…and no–not Hampton Institute *smile*), was ready to embark out on the world—until all of this…scrrrreeeetched it to a halt. OH…I think I forgot to mention, that not even a full month prior to me starting to find out about this mess he got me in, we had signed a lease on a house (suburbs of MD)(my mom told me not to give the cow away–shouldve listened! lol)–a lease that I couldnt get out of–no matter that I had lived in the house less than a month–I thank JESUS–that that house situation is over now! (some of you may wonder that after all of this, at such a young age—how in the WORLD did I just get married–answer–I re-found the love of my life (HS sweetheart)–love doesnt wait for life—cause it’s definitely not promised!) So…just to get my head above water–I cashed out my IRA, my stocks and took out my savings–to pay off some of the debts–it still didnt cover all of them–and I’m still getting phone calls about crap—my credit score sucks now–and I am just downright broke right now! But it is looking up! The debt is dwindling—slowing but surely! My husband (still not used to that word…lol) has been very supportive the entire time and has even offered to help pay the remainer off–to which I always reply a resounding “NO”….my (HUGE) mistake—I’ll take the responsibility myself. And is understanding to my not wanting to combine any finances any time soon (*smile*…I’m in love…but I’m not stupid…LMAO) However, I have recently made a desicion to start saving again–I need some kind of back-up, and once all this is done…NO CREDIT CARDS…they have put such a bad taste in my mouth. Ok…I think I’ve typed my head off enough now…back under my rock I go!! Till Next Time!! *peace & happiness*
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DW: You do not have to pay for the debts your ex signed you up for and used your name. A friend of mine had this happen to him recently. He filed a police report, and mailed a copy of it to the CC agency fraud department. They did an investigation and found out his disgruntled ex had signed him up, and he either didn’t sign for it, or she signed his name.
Eventually, the CC wrote a letter to him, saying to send a copy of that letter to call 3 credit reporting agency’s. He did and they badness was removed from his credit reports.
Oh, of course, the CC agency tried to get him to pay….he told them he was a victim of identify theft, and no, he’s not going to pay someone else’s debt! It worked.
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