How Do You Measure Up?
I frequently get requests from people who want to try and figure out how well they are doing financially, but don’t know where to go to find benchmarks against which to measure themselves. There are figures available from places like Stat Canada, but they are very general. It’s okay to use them when we’re talking about what we spend on average or when we’re comparing what we spend on what category to another, but I’d never use them to measure an individual’s “progress.”
CR wrote:
I love your book, A Woman of Independent Means, –so full of commonsense, practical advice. I first found it in the library, and then went on quite a hunt to track down a copy for my own collection. You are pretty nearly the only financial writer who engages the renting-versus-buying a home in a fair and equal-handed way! And I thoroughly enjoy the compassionate but realistic way you advise people on “Till Debt Do Us Part”. Kudos!
My question is this. How can one go about benchmarking how well or badly one is doing? I’m an aggressive saver with a tidy portfolio, no debt (except monthly rent/utilities and a credit card I pay off in full every month), but have no idea whether I’m doing well enough, and have never been able to find any standard against which to gauge my progress. (Obviously, by not providing figures, I’m tying your hands about evaluating my own situation, but I suspect that there are quite a few others out there, all in widely differing situations, who are asking similar questions.)
CR, you’re absolutely correct. I get this question often. And I often don’t answer because the answer is “It depends,” which most people find very unsatisfying. It depends on what you want from your life. It depends on how much you make. It depends on where you live (some places are more expensive than others.) And it depends on how greedy you are.
Let’s do Question 1 first: What do you want? If you want a simple life full of shared activities, the amount you’ll need is very different than the family who wants to travel every year and drive a new car every two years. (Hey, as long as you have the money and you’re not whining, I don’t care how you spend your money.)
So, are you happy doing what you’re doing, or are there other things you need or want to do, and would more money make those things possible?
On to Question 2: How much do you make? The person who makes $100,000 a year can’t compare herself with the person who makes $50,000 a year in terms of lifestyle or accumulation of assets. Nor should she. In fact, the very problem I have with benchmarks is that there ‘s no way to compare apples to apples realistically. And what makes one person feels like soaring success will make another feel like a pathetic failure. So it’s not really about comparisons; it about following the rules. Are you doing the detail, keeping a budget, saving enough to make sure your future is comfortable, covered by the right kind of insurance, paying your bills on time, and all the rest? If you are, then by any standard you should be fine.
Question 3: Where do you live? If you’re in a big city, your costs will be different from another person living in a rural community. More importantly, where will you live when you plan to start using your stash of cash. If you’re going to remain in the same location, will you have enough to continue meeting your needs? Or will you move so that your money will go further? If you plan to move for family or lifestyle reasons, are you familiar with the costs in your new community?
Finally, Question 4: How greedy are you? Or put another way, How Much is ENOUGH? I’ve watched people sacrifice their Present to make sure they were “comfortable” in their Future. They sometimes made it hard for themselves. They sometimes made it hard for others around them. Saving for the future is a good thing, but not when it means that you have no joy in the present. I’m not talking about Shopping Joy here – so all you shop-a-holics reading this shouldn’t go off half cocked saying, “Gail says if shopping makes me happy I should shop!” What I’m trying to say is that the accumulation of assets as the only goal in life leaves one with a lot of money and not much in the way of anything else.
I will tell you that in the corporate world there’s a thing called “financial forecasting”, which is what advisors try to do when they ask people to think about what they want from their futures and how they’ll pay for it. But it’s really an individual exercise.
It’s a matter of figuring out what your personal balance sheet looks like today – is your budget balanced, how much debt do you have, and how much do you have accumulated in assets. It’s also taking a look at how much income you’ll need later, when you retire, and you’ll be counting on those assets to provide your with grocery money.
Some people who have had a bad experience with a financial adviser don’t believe they can add value to your life. But those who have a GREAT adviser know the benefits of having some else looking over a plan, listening to dreams and desires, and help you figure out priorities.
Why not check around with family and friends, bosses and co-workers, to see if you know anyone with a GREAT advisor you can chat with. Don’t settle for less than GREAT.
May 22nd, 2008 at 3:10 pm
There was an interesting “calculator” linked to the Money Sense magazine website not too long ago. It let you fill in your assets and debts etc. and compared you with others your age. Were you average, below average etc. I have the link at home but I would imagine it would not be hard to find. The best thing about it was that it was Canadian.
May 23rd, 2008 at 8:59 am
This is a very interesting blog Gail - because we are always wondering if we are doing well at our age, we are in our 40’s.
About 13 years ago, we lost everything, and I mean everything - we were left with 2 suitcases each and a 4 year old in tow. No home, no car, no money, due to bad financial advice from family, who then turned on us, laughing and making mean remarks and all - basically we became the family joke. Thank God for good friends, who helped us out in setting up home again.
Today, thank the Lord, I think we are doing well, we have a comfortable home, a car, food on the table, able to buy the neccessaties of life, have investments, some savings, etc.
BUT we are so scard, soooo scard of being left on the street again, that every opportunity we get to invest for the future we are - which is making it a little difficult to live in the present.
So this blog has set me thinking and I am going to make some changes - cause we need to live in the present too. We hardly ever go out to eat or movies or anything - we go for walks and things, but not where, once in a while we may say - oh let’s go out to a really nice sit down dinner or let’s go the movies, instead of always waiting for the movie to come on TV. It’s time to change the plan a little.
Thanks Gail - you are the best!
May 23rd, 2008 at 10:11 am
NKM, that is absolutely terrible that family would do that to you!!! Family is supposed to be there in good times and in really bad times, not to kick you when you are down!
From the sounds of things you have bounced back fantastically and for that you owe yourself a night out on the town! Celebrate yourself because you deserve it. I applaude your sucess and wish you all the best!
May 23rd, 2008 at 11:57 am
NKM, thanks for sharing your story. It really does help others when we share with each other.
Hopefully you will be able to adjust your budget to allow for some fun each month. It’s so important to plan for the future, but we do only get to live this life once. Don’t have regrets!
As someone who was bankrupt several years ago, I do find that I get myself “worked up” occassionally worrying that we are not doing enough to be financially sound, but then I have to remind myself that I am a lot wiser now, and aware of where my money is going.
It is very scary when suddenly you have no where to go and no time to get there. As much as I hate the fact that I was bankrupt, it was a good life lesson. I am in a much better place financially & mentally now.
My bankruptcy resulted from having a partner who was a closet drug addict. When the bank came calling - it was the perfect wake up call to get out of that relationship. Thankfully, I didn’t have children with that man.
May 23rd, 2008 at 11:59 am
Kathryn - thanks a million!
Unfortunately, one cannot choose family, you get what you get, and you learn to move on and be very very careful when dealing with family. We moved across the ocean from all family after this happened, they are in UK, we moved to Canada and are much happier. haha love the idea of a night out of town - we are going to do it Kathryn. It’s time to live a little!
Thanks for your support and kind words.
May 23rd, 2008 at 12:10 pm
Melaniesd - Thank you for sharing your life lesson. Thank goodness you got out of that relationship and with no children too - bravo, for having the courage to walk away - it takes a lot to recognise a situation like this and do something about it. Once you experiece something like this - it frightens the hell out of you and you always vision the worst case senerios for the future. I wish you the very best for the future Melaniesd, looks like you are doing fantastic, just keep plugging away and it will pay off - if we can do it, you can do it! Thanks a million!
May 23rd, 2008 at 1:21 pm
Thank you NKM!
Things have changed a lot in 10 years for me. I now have a wonderful husband who is careful with money and frugal. We have a nice home and a child. I have a good job. I can’t complain. : )
I work for a bank and it’s been a blessing to me to be able to help people with their money. I’m always looking for opportunities to help my customers be better off financially. But it also scares the pants off me when I see customers who owe 50, 60, 70 thousand dollars on top of their cars, homes etc - and they don’t care!
May 23rd, 2008 at 2:17 pm
Melaniesd - I hear you, we had no debt, carry no debt - I was taught, if you can’t pay for something up front, you don’t buy it. I don’t know how people sleep at night knowning they owe that much. I guess, It’s a different world now. I’m really happy to hear about your present life - a good partner makes life so much easier. Way to go! Thanks!
May 23rd, 2008 at 5:04 pm
Hi Gail,
My husband and I have been living on a tiny income for the past year. I just recently started watching your show and can’t tell you how happy it’s made me about our situation. We’ve managed to live within our means for the past year on about 1500.00 a month (We have about 10 dollars left when everything’s said and done) while others have super debt on 7000.00 a month.
Recently, however, my husband pointed out that I guard our money like a dragon guards their horde so that we can do well for the future (we’re moving to a town far away and don’t have jobs there yet although he has an offer). After reading this blog I feel now that I do need to be careful, but not so careful that we aren’t living WHILE we’re living… and spending a little money on books or a movie isn’t so bad. Thank you!
July 31st, 2008 at 6:01 am
Hi there, I just started reading your blog after watching your show. Do you have any advice for single women in their 50’s, or do you think is is to late to get the their retirement in order. I am 53, and have quite a few friends that are my age that are really struggling and just getting by. I know that you just council couples. It is going to be interesting to see how us single baby boomer women are going to make out in the next 10 years or so. Myself I could be doing worse, but I am sure I could do much better. I wish that I had of found someone like you to give really good advice on money when I was younger. The biggest mistake I know that I have made is getting caught up in this consumerism, and the need to buy things to make me happy, which I now know was a big mistake on happiness. Anyway I really enjoy your show and your advice. Thank you so much