5 Simple Questions: Predict Who Gets Rich and Who Ends Up Poor

Fair or not, your financial future can be predicted by your current and past behaviors with money.
Did you save any money last year-

According to research released recently by the Federal Reserve Bank of St. Louis,

“five simple questions may predict personal financial health and wealth surprisingly well.”

Looking at data from 1992 – 2013, researchers William Emmons and Bryan Noeth, found  a strong correlation between how the 38,385 participants scored on these questions and their net worth.

1. Did you save any money last year?
Yes = 1     No = 0

2. Did you miss any payments on any obligations in the past year?
Yes = 0     No = 1

3. Did you have a balance on your credit card after the last payment was due?
Yes = 0     No (or don’t have any credit cards by choice) = 1

4. Including all of your assets, was more than 10% of the value in liquid assets?
Yes = 1     No = 0

5. Is your total debt service (principal and interest) less than 40% of your income?
Yes = 1     No = 0

*Source: Federal Reserve Board’s Survey of Consumer Finances

Add up your “financial health” score:

5 is the strongest, zero the weakest; the mean score was 3.01.

So what does your score mean?

“If you save regularly, make all of your payments on time, pay off your entire credit card balance when due, maintain a healthy stock of safe and liquid assets, and never take on debts that put a heavy strain on your monthly income, you are very likely to be financially healthy and able to accumulate significant wealth,”

-the study authors conclude. And,

“if you do none of those things, you are very likely to be financially unhealthy.”

The best news, IMO, you can change your behavior and change your financial future!

Live Long and Prosper, Leah, the MoneyDiva.com 

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