How do your finances stack up?


(MoneyWatch) Do you stick to a budget that allows you to meet your long and short-term savings goals? If you do, you're in the minority. According to a new survey on America's savings habits, just 43 percent of Americans have a spending plan that allows them to save enough.

Only half of Americans know their net worth -- the value of their assets minus debts. And the most common way for Americans to figure out how much they need to retire remains consistent: They guess.

That, however, is the bad news. The good news is that roughly 56 percent of Baby Boomers and GenXers are on their way to saving enough to handle both their living and uninsured health expenses in retirement. That's a stark improvement over 2003, thanks largely to sweeping adoption of 401(k) plans in the workplace, according to the Employee Benefit Research Institute.

During America Saves Week, a host of industry, consumer and government groups are urging consumers to do better. Save more. Spend less.

The question is, do you need to listen or are you in good shape -- much better than the average American at handling your personal finances? Here are a few questions to figure that out.

1. Do you consistently spend less than you earn?

2. Do you have an economic plan that would allow you to handle a job loss of 6 months to a year?

3. Would that plan involve living with your parents or holding up a "will work for food" sign at a freeway exit?

4. Do you have an emergency fund that can pay for foreseeable economic upsets, such as necessary car repairs, uninsured medical costs and a short-term job loss (partly subsidized by unemployment insurance)?

5. Do you know your net worth (assets minus debts)?

6. Do your total debt payments, including mortgage (or rent) amount to less than 40 percent of your income?

7. Are you able to pay off all of your credit cards in full each month?

8. Will you be able to pay off your student loans before you start collecting Social Security?

9. Have you attempted to estimate, possibly with the help of an online calculator like this one at, whether your long-term savings will be adequate for retirement?

10. Does your current spending make you feel comfortable or constantly on the edge of a nervous breakdown?

Clearly, there's no need to score this one. If you're doing well, you feel comfortable with your life, spend less than you earn (less than 40 percent on debt payments), and wouldn't be devastated by a short-term job loss. (Let's be real, almost anyone who isn't retired would be devastated by a long-term job loss. ) If your financial plan involves begging, parents or social programs that appear constantly on the verge of insolvency, you need a better option.

In the latter group? Try this. Go through your credit card receipts and bank statements and jot down exactly where you're spending your money today. If you spend a reasonable amount of cash, take a notebook with you everywhere for a month and record every expense.

If you're earning a reasonable living, but living from paycheck-to-paycheck, there's a good chance that you've got some sort of money pit that's gobbling up more of your income than the expenses are actually worth to your well-being. Writing down where you are actually spending your money will help you find it.

Once you find that money pit and determine what it costs you each month, quickly replace it with an automatic savings plan that socks the same amount of money away for your future each week. The most common type of automatic savings plan is a 401(k). If your employer matches 401(k) contributions, it's also far and away the best way to boost your net worth. However, if you don't have access to a 401(k), you can set up an automatic investment plan with almost any mutual fund company or bank.

In exchange for this good behavior, think of a reasonable -- but attractive -- reward that you'll give yourself when you've saved enough to reach your first goal. (Of course, the reward shouldn't eliminate the savings, but spending 10 percent of your new-found wealth -- or one month's worth or contributions -- isn't exorbitant.) Once that goal is behind you, set out on a course to reach the second goal -- and the next reward.

Savings doesn't have to be a chore. It can be a game. Play with enthusiasm. The prize for winning this one is a happy life.