Out and About: Measuring your financial health

When measuring financial health, it is more useful to take an in-depth look at a consumer’s overall financial state than a one-dimensional approach that looks solely at a credit score, account balance, insurance policy, etc. In April, the Center for Financial Services Innovation (CFSI) hosted a webinar entitled Measuring Financial Health: Eight Key Metrics, in which they presented their research on the eight ways to measure financial health in a holistic way. The Center also taught attendees, many of whom advise clients on financial and marketplace issues, how to begin collecting data in order to assess a client’s movement along the financial health spectrum over time. Consumer Action’s Audrey Perrott attended and reported on the webinar.

CFSI director Sarah Parker kicked off the webinar by revealing that 57 percent of the country (138 million people) is not financially healthy. She said that the eight indicators of financial health are housed within the four main day-to-day components of spending, saving, borrowing and planning. Parker explained that a consumer is considered financially healthy when he or she meets all of the eight indicators:

• Spending less than his or her income;
• Paying bills on time and in full;
• Accumulating sufficient liquid savings;
• Possessing sufficient long-term savings and assets;
• Carrying a sustainable debt load;
• Earning a prime credit score;
• Enrolling in appropriate insurance; and
• Planning ahead financially.

Parker then invited several guests to present at the webinar. The first guest was Michael Collins, the director of the Center for Financial Security at the University of Wisconsin-Madison. Collins provided an academic and service provider prospective and again urged attendees to look at several measurements over time, including how clients are balancing finances and credit; how they are prioritizing finances and what they are spending; how much they are saving; and what types of credit choices they are making. He emphasized the need to measure multiple factors since not every client is at the same place in their lives at the same time.

The next presenter, Rick Love of the MetLife Foundation, which offers grants to financial inclusion programs helping low-income populations, offered his perspective from the insurance and funder angle. He stressed that his foundation values financial health and wellbeing as a desired outcome in financial inclusion and that they are interested in bundled programs that serve the low- to moderate-income community. He mentioned a program that he believes operates as a model in serving this community: the Working Families Success Network. The comprehensive national program combines three services: financial education and coaching, employment and improved access to public benefits.

Brett King, the founder and CEO of the digital money management service Moven, wrapped up the webinar from a fintech perspective. King developed the Moven app, which has three core elements to help consumers track their finances: spending, saving and living smart. Moven does this by providing real-time receipts for purchases and gauging user spending throughout the month. According to King, Moven’s developers learned that consumers’ spending decisions are largely unconscious and that within two to three months of using the app (and becoming more conscious about day-to-day spending) users can reduce spending and save more by allocating resources in a more strategic and purposeful manner.

Learn more and access CFSI’s study on the eight ways to measure financial health here.