Financial Fitness Study Shows Strengths, Weaknesses
It is not uncommon for people to want to measure their accomplishments in relation to others or to an objective standard. In a study of Cooperative Extension program participants, 11% of those surveyed indicated that the most important financial question they needed an answer to relate to an assessment of their financial progress. Respondents wanted to know "how they were doing" based on individual factors, such as their income and age, or in relation to other people with similar demographic characteristics.
Rutgers Cooperative Extension launched two interactive Web-based tools in January 2001. This article describes the results of the online Financial Fitness Quiz during its first six months of use.
The Financial Fitness Quiz consists of 20 statements where respondents are asked to select a response that best describes their current financial management practices. Of these questions, 19 are answered with the following responses: 5= always, 4= very often, 3= usually, 2= seldom, and 1= never. For the remaining question, "I have a current will," respondents write 5 for "yes" and 1 for "no."
At the end of the quiz, the following explanation is given of respondents' scores:
0 to 20 points--You need lots of help, but don't despair. It's never too late to take action to improve your finances.
21 to 40 points--You are headed for financial difficulty. Now is the time to reverse the trend.
41 to 60 points- You are doing a fair job of managing your finances and have taken some steps in the right direction
61 to 80 points--You are doing a good job and are above average in managing your finances.
81 to 100 points--You are in excellent shape. Keep up the good work!
Results were obtained online from 173 respondents. The average quiz score for the sample was 67.34 and the modal (most frequently occurring) range was a score between 71 to 80. Responses to each question were also analyzed to determine the strengths and weaknesses of respondents' financial behaviors. The average scores for each of the 20 statements ranged from a low of 2.11 to a high of 4.72.
Three basic practices that financial professionals routinely advise, preparing a written budget or spending plan (score of 2.59), calculating net worth annually (score of 2.68), and writing down financial goals (score of 2.24) were among those with the lowest average scores. Many respondents indicated that they did not perform these activities on a regular basis.
In addition, the lowest-scoring financial practice, preparation of a will (score of 2.11), mirrors reported statistics that indicate that about 70% of Americans die without a will. Of the 173 survey respondents, only 48 (27.7%) had a current will; the other 72.3% of the sample did not. Whether it is because they don't want to face their own mortality, don't think they are "affluent enough" to need a will, or are unsure about who to name to key positions, such as executor or guardian, more than two-thirds of the sample (and Americans in general) are on track to die intestate and have the state settle their affairs.
On the other hand, there were also several strengths in the financial practices reported by respondents, including the use of bank or credit union accounts, the ability to pay household expenses, and adequate insurance. Many also reported comparison shopping, organizing financial records, and funding a personal retirement investment account, usually or very often.
Are you looking for some suggestions to improve your finances? If so, take the financial fitness quiz online at www.rce.rutgers.edu/money/ffquiz. Printed copies are also available by sending a self-addressed, stamped envelope to Rutgers Cooperative Extension, 3 High Street, First Floor, Newton, NJ 07860. Forms to calculate your net worth, develop a spending plan, and set specific written financial goals are also available online at www.rce.rutgers.edu/money2000.