It's Your Money

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Stress test for your finances: some answers

Four questions for your Personal Finance Stress Test

Ask yourself:

Ignoring your mortgage for the moment, does more than 10 percent of your monthly take home pay go to debt payments – credit cards, home equity loans, student loans?

If it does, that’s high. Work to reduce it.

Now add you mortgage payment to that debt payment. Is the total more than 36 percent of your take-home pay?

That’s when the bells begin to go off. If you have stretched above that number a bit, because your income isn't all that great and home prices are high, your goal should be to get back down below that limit.

If you lost your job, how many months would you be able to live off your savings?

If you answer is, why didn’t you say weeks, this is an issue. Your goal should be to build up an emergency fund that would cover at least three months’ worth of expenses. Or more.

If your pay is cut by 10 percent or if you were forced to go on unpaid leave for a short time, would you still be able to cover your monthly bills?

If you answer is no, then it is clear you are not living on less than you make. And the people who win the savings game do. No matter what your income is, you should not be spending it all.

Do you have some questions of your own you think would fit on this list? Send them to me.

I'm writing a column about everyone doing a stress test on their own balance sheets. Should be interesting.

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1. Do you know how much you spend on restaurants, fast food, snacks, and other non-necessities?

2. If your home finances were opened up to your parents, would you be embarrassed? How about your children?

3. Are you saving 10% off the top for your retirement?

4. If a company was run the way your personal finances are being run, would the CEO be arrested for embezzlement?

5. How many other people are relying on your income? If you die, do you have a plan in place for those people?

That should be a start, don't you think?

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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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