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Financial Health
Personal Financial Consultants
If you are under financial stress and your financial health is lacking, you are not alone. The good news
is that you can gain control over your financial life. It is time to give yourself a break, dust yourself off
and take steps now to improve your financial health.
The first key to financial health is to take an honest financial inventory. This can be challenging for
many because financial stress can motivate us to deny our financial reality and avoid thinking about
our relationship with money. Financial stress is associated with depression, marital dissatisfaction,
occupational impairment and health problems. While offering a quick fix in anxiety reduction, such
avoidance just adds to our financial mess and serves to keep us stuck.
In contrast, financial health is an important aspect of physical health, emotional health, relationship
satisfaction and life satisfaction. Lets start with a test of your financial health using the Financial
Health Scale (FHS). This test was developed by Dr. Brad Klontz, Psy.D., CFP , in his work at Kansas
State Universitys Personal Financial Planning Department.
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Strongly disagree
Disagree
Agree
Strongly agree
Score
11. The way I manage money is consistent with my values, goals and dreams.
12. I obsess about financial matters.
1
1
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2
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5
Printed by permission.
*Klontz, B.T., Bivens, A., Klontz, P.T., Wada, J. & Kahler, R. (2008). The treatment of disordered money behavior: Results of an open clinical trial.
Psychological Services, 5(3), 295-308.
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Scoring Instructions
1. Circle items 9, 10, 12, 15, 16, 18 and 19.
2. The items you have circled need to be reverse scored. For example, if you circled a 5 for question #9,
you would give it a value of 1 as illustrated in the following formula:
a. 1 = 5b. 2 = 4c. 3 = 3d. 4 = 2e. 5 = 1
3. After you have reverse scored items 9, 10, 12, 15, 16, 18 and 19, transfer the score to the scoring column.
4. For the remaining items, just transfer the number you circled to the Score column.
5. Add up the numbers in the Score column. This is your financial health score.
6. Use the table below to see what it means.
2059
6079
80100
While you have some positive aspects in your relationship with money, you are
not realizing your full financial potential. While not causing you overwhelming
distress, your financial behaviors may not be entirely consistent with your values
and goals. Further financial education, financial planning assistance, and possible
help in exploring your relationship with money may help you reach your financial
goals, strengthen your relationships and improve your financial health.
It is likely that you have a relatively healthy relationship with money. You have
clear financial goals, are taking steps to achieve your goals, and are effectively
executing a savings and spending plan. It is likely that you are open and honest
with those close to you regarding financial issues and have found ways to
successfully negotiate financial issues in your relationships. If you dont already
employ the services of a financial planner, it may be time to consider securing
expert assistance in helping you maximize your financial potential.
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While the FHS doesnt measure all aspects of financial health, it is a useful tool to give you a rough estimate.
A comprehensive financial plan created by an independent financial planner is recommended for a detailed
analysis of ones financial health. A well-constructed financial plan makes use of a comprehensive datagathering process and powerful statistical tests to determine the probability of successfully funding
retirement and other goals based on current assets and a variety of other variables, including historic and
projected investment returns, rates of inflation and the possibility of big market declines. A strong financial
plan either confirms a good financial course or provides specific recommendations for getting on track.
Personal Financial Consultants offers this service to our current and prospective clients.
Regardless of your current level of financial health, the great news is that you have the power to take charge
of it. If your current financial health is poor, you can improve it. If you have great financial health, you can
make it even better. The remaining keys are designed to help you do just that.
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he would have $2.1 million by the time he reached age 67. Time is the biggest factor in growing money as it
allows the principle of compound interest to take effect. If this same individual waited until age 40 to begin
saving, he would have only $427,000 by the time he was 67 years old.
The later you start, the more you need to save each year to reach that goal. If you havent started saving yet,
you may need to set aside a larger sum of money or plan on delaying retirement or moving to part-time
employment when you are ready. Whatever you do, dont let a late start stop you. It is never too late to begin
saving. Start now.
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Investors also have a tendency to follow the latest in vogue assets and scorn asset classes that are
depressed, which works against their best interests. Investors are also predisposed to make buy,
sell and hold decisions for emotional reasons. These biases occur for many psychological reasons,
increase an individuals risk of financial loss and have a negative impact on diversification.
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While the actual percentage of money that should be allocated to a particular area depends on an
individuals risk tolerance, needs and goals, a well-diversified portfolio can include all of the following in
various percentages:
Domestic (U.S.) Equities (Growth or Value)
Developed Countries
Emerging Markets
Foreign Stocks
Treasury Bonds
Treasury Inflation-Protected Securities (TIPS)
Mortgage-Backed Securities
High-Yield (Junk) Corporate Bonds
Medium-Quality Corporate Bonds
High-Quality Corporate Bonds
Municipal Bonds
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Conclusion
There is nothing better than the feeling one gets from a sense of financial security. To review, the 7 Keys to
Financial Health are:
1) Get a Financial Health Checkup: If you dont take an honest look at where you are, you will never be
able to get to where you want to be.
2) Take Responsibility for Your Retirement Planning: The rules have changed. Pensions are no longer
an option for most, Social Security is not secure and no one is going to take care of your financial
needs in your old age. You need to take responsibility for yourself.
3) Start Saving Now: Time is the biggest factor in securing financial freedom. Regardless of your age or
how far behind you are, start saving today.
4) Cover Your Assets: Dont let an adverse event wipe you out. Diversify your risk by buying appropriate
insurance policies.
5) Diversify Your Investments: As the wise farmer says, Dont put all of your eggs in one basket.
Appropriate diversification is a primary factor in decreasing your portfolios volatility and insuring an
adequate long-term rate of return.
6) Plan Your Legacy: Dont sentence your loved ones to a state of financial and emotional turmoil. Take
the time to think about what kind of financial legacy you want to leave.
7) Seek Professional Help: Consider employing the services of a CPA during tax season, seek the
advice of an experienced financial planner when it comes to managing your investments, find a
financial therapist if you are engaging in financial self-destruction and dont engage in at-home
amateur dentistry.
Odds are you are one of the 75% of Americans who year after year, in good times and bad, identify money
as the number one source of stress in their lives. Let your financial stress motivate you to take action today.
Financial health is a critical aspect of mental health, marital happiness, family security and life satisfaction.
If you want to create a financial plan or talk about our investment advising services, please dont hesitate to
contact us at Personal Financial Consultants.
Wishing you excellent financial health!
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, Certified Financial Planner and federally registered CFP
(with flame design) in the U.S., which it awards to individuals who successfully complete CFP Boards initial and ongoing certification requirements.
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