America Lacks Financial Fitness

April 15, 2014
Laura Joszt

Americans-regardless of age, income, and education-have proven to be pretty awful at handling their personal finances. Given the choice between saving and spending a sudden windfall, they're more likely to spend the money.

Americans have proven to be pretty awful at handling their personal finances. Given the choice between saving and spending a sudden windfall, they’re more likely to spend it, whether paying down debt or on everyday expenses.

Frequently, we make the wrong choices when it comes to our finances. We sell when the market is low and buy when it’s high. We take money out of 401(k)s before retirement or cash out retirement savings plans rather than rolling them over when we start a new job. We often don’t realize the true costs of things, like owning a car.

Even high-income earners aren’t always wealthy because of too much debt, not enough savings, and trying to keep up with the Joneses. And on top of all that, Americans find it difficult to discuss finances: even more so than politics, sex, and religion.

In a recent column for Charles Schwab, Carrie Schwab-Pomerantz wrote:

“Most of us — young, old, men, women, college-educated or not — appear to be suffering from a severe lack of financial literacy. We’re the most highly educated population in history, gifted in science, technology, medicine and the arts — but when it comes to handling our money, we’re a pretty sorry lot.”

April is Financial Literacy Month. Those with the right discipline can find themselves, even without large salaries, to have achieved financial security or, even better, financial independence.

Setu Mazumdar, MD, CFP, constantly discusses why physicians should become financially independent in his weekly columns. If you’re unhappy with your job, tired of doing paperwork instead of seeing patients, tired of seeing too many patients instead of focusing on a smaller number, etc., then becoming financially independent is the only way to get out of an unhappy situation.

However, you’ll never achieve financial independence if you’re not managing your money. And many Americans do not make financial plans, set goals, or budget properly. Want to know how you’re doing? Take the Financial Fitness Quiz from Rutgers University. The quiz is old, but you’ll know if you need help or, at the very least, what goes in to becoming financially fit.

“Face it: We can be our own worst enemies,” Schwab-Pomerantz wrote. “When it comes to personal finance, many people just take a head-in-the-sand approach. There is a tendency to think everything will take care of itself, a blind trust that things will turn out all right.”