My family and I play board and card games at breakfast. Yes, maybe a little strange, but it’s the one meal we can count on having as a family.
Win or lose, I love playing games, especially ones that involve risks and rewards. They create twists, turns and surprising outcomes that make me laugh.
Little did I know, these games would hold valuable lessons about personal finance. They have reminded me that all choices involve risk. I think failing to acknowledge risk is the cause of most personal finance problems.
Just by living we take financial risks. Cars break down and need to be repaired. Houses need maintenance. Household items and technology break and need to be replaced. Money is borrowed and needs to be repaid.
Financial risks add up. The more risks we take, the more likely things are to go wrong, and the more we need to spend to get ourselves back to where we started. All of this spending can leave your bank account depleted if you haven’t built up a cushion to weather the setbacks.
How much risk are you taking? Let’s find out. Give yourself one point for each of the following:
Each credit card you have. Each car you own. Each home you own. Each boat, motorcycle and ATV you own. Each television, cellphone, tablet and computer you own. Give yourself two points for each of these:
Each personal loan and credit card balance. Each mortgage and home equity loan. Each auto, boat, motorcycle and ATV loan. Each job you have. Each child you have. Subtract one point for each:
A written monthly budget that you follow and regularly revise. Money accumulated for purchases made less than monthly. Medical insurance, short-term disability insurance, long-term disability insurance and life insurance. An emergency fund equal to at least three months of living expenses. Spending less than 35 percent of your take-home pay on housing (rent, mortgage, property taxes, homeowners’ association fees). Investing 15 percent of your take-home pay. Add up your point total to see where you rank. If your risk level is higher than you’d like, you’ll know where you can make changes to reduce that risk.
20 or more points: Your financial risk is very high. It’s time to take action to reduce that risk and reset your course.16-19 points: Your financial risk level is moderate to high. With a series of changes, financial security can be yours.10-15 points: Your financial risk level is moderate to low. Just a few changes will give you financial security.0-9 points: Your financial risk level is very low. Congratulations, you have true financial security.Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance. www.personalfinancecoaching.com.