The Federal Reserve Bank of St. Louis recently concluded a 20-year study involving 38,385 families. (Click here to view.) They discovered that the answers to five simple questions determined whether those families were able to improve their financial status and grow their wealth over time. As you consider your own finances, it may be useful to focus on these five questions:

1. Did you save any money last year?
2. Did you miss any payments on any obligations in the past year?
3. Did you have a balance on your credit card after the last payment was due?
4. Including all of your assets, was more than 10 percent of the value in liquid assets?
5. Is your total debt service (principal and interest) less than 40 percent of your income?

If you answered yes to 1, 4 and 5, and no to 2 and 3, you received a perfect score! You're on the right track… keep doing what your doing. But if you answered no to 1, 4 or 5, or yes to 2 or 3, you've just identified the area(s) of your financial health that need improvement!

Please contact me and let me know if I can help in any way as you seek to improve any of these areas.

When it comes down to saving money, I've found three rules to be useful:

Rule #1: Involve your emotion, not just your logic

It's not about accumulating more money… it's about what accumulating more money will mean for your life. You'll get motivated real quick (and stay motivated) if you tie your savings goal to something real and tangible in your life such as:

• The ability to fund a college education for your children or grandchildren (which will give them a higher quality of life); and/or,
• The ability to care for elderly parents as they age; and/or,
• The ability to experience financial freedom during retirement years, which will result in a higher quality of life

Rule #2: The problem is usually very simple to identify
A lot of times we overcomplicate things… and we overlook the most simple things in life. The reason why we aren't saving enough right now really boils down to one of two things. Either:

• We aren't making enough money. Or,
• We are spending too much money.

It's that simple! Of course, it's often possible to find ways of making more money... such as adding another job or advancing in our career path. But those ideas can often result in a negative impact on our lifestyle. That's where Rule #3 comes into play:

Rule #3: Evaluate every spending decision in the context of the overall financial plan.
A lot of times we take on debt (car loan, credit cards) to finance a short-term financial need. The problem is that this debt ends up eating into our cash flow and preventing us from saving toward our longer-term financial goals. Sometimes, it's not just the debt that pressures our cash flow, it's the unexpected or un-budgeted expenses. To remedy the situation, I've found it useful to create a budget that I reference and re-evaluate from time to time.

Let me know if you'd like for me to pass along my budgeting template and I'd be happy to forward it to you!