3 Things That May Impact Your Money Without You Knowing It

Arif Ali/AFP/Getty Images

Arif Ali/AFP/Getty Images

What qualifies a person as one who is “financially healthy?” Good credit and six months of emergency savings maybe? A financially healthy person probably earns enough of a salary to easily cover all of his or her bills and expenses, and also has enough left over for discretionary expenses. But what about retirement savings, auto loans, and home equity?

With so many elements that go into an individual’s personal finances, determining the degree to which a person is “financially healthy” can be a difficult task. Investopedia defines financial health as “a term used to describe the state of one’s personal financial situation.” The financial site goes on to explain “there are many dimensions to financial health, including the amount of savings you have, how much you are setting away for retirement, and how much of your income you are spending on fixed or non-discretionary expenses.”

At the end of the day, your financial health is primarily determined by you. How comfortable are you with meeting your financial obligations? How confident are you in your savings, retirement savings, and your financial future overall?

Bankrate just released its August Financial Security Index Charts. Each month, Bankrate takes a monthly survey to determine how Americans feel about their personal finances when compared to 12 months ago. The results of the survey show consumers in certain demographic categories seem to have more indicators of good financial health, like a retirement savings plan and also higher levels of comfort with their financial situations. Consumers with signs of poor financial health also appear to have some common characteristics. Is there a possible correlation between some of these demographic factors — many of which are out of our control — and financial health?

Source: iStock

Source: iStock

Your Age

Did you (or do you) have financial trouble in your 20s? Research shows that your age can have an impact on your ability to make sound financial decisions. A 2009 study published on the Social Science Research Network found that during our 20s and 30s, our financial decision-making improves. Then, during our 50s, we reach a peak, where at age 53, we’re making our best financial decisions. After that, our decision making declines in our 70s and 80s — like an inverted U-curve.

The recent Bankrate study also found that nearly 70 percent of those between the ages of 18 and 29 have not saved anything for retirement. However, in spite of their missing retirement savings, millennials are twice as likely to feel financially secure than seniors (ages 65 and older).

When people are in their 20s, and then again when they reach senior status, they often attribute many of their financial troubles to their limited income. However, with your age impacting your financial decision-making abilities, and also your level of life experience and even work experience, your age may provide an inherent advantage or disadvantage before any other factors are even considered.

Source: Thinkstock

Source: Thinkstock

Your Gender and Whether or Not You Have Kids

Parents face financial challenges that non-parents do not necessarily have to deal with. In addition to childcare concerns that may limit work opportunities, parents have to care for children physically, emotionally, and financially. When Bankrate asked parents about how comfortable they were with their level of debt, about one-third of them (31 percent) said they felt less comfortable than they did one year ago. However, when Bankrate asked non-parents, only around one-fifth (21 percent) felt a lower level of comfort.

Your gender may also have somewhat of an impact your finances, and you may not even know it. As many already know, women (on average) earn about 84 percent less money than men, as of 2012. Additionally, according to Pew Research, “men make up a larger share of the U.S. labor force than women (53 percent to 47 percent). But among those who earn the minimum wage or less, 62 percent are women and 38 percent are men.”

These stats make sense in conjunction with the Bankrate survey results, which indicate 30 percent of men report a higher net worth than 12 months ago. However, only 21 percent of women report having a higher net worth. 

Source: Thinkstock

Source: Thinkstock

Where You Live

Most people know that different geographic areas come with different living costs. In an area like Manhattan, New York, you’re going to pay much more for housing and other expenses than in an area like rural Tennessee. Like the U.S. economy as a whole, state and local economies also go through ups and downs that can directly or indirectly impact your financial well-being.

When Bankrate asked respondents about their net worth and comfort with their overall financial health, around one-fourth of those living in rural areas (24 percent) reported a lower net worth than last year. However, only around 15 percent of those living in urban city areas reported a lower net worth. Additionally, more southerners (25 percent) report having a worse off financial situation than last year than do westerners (only 17 percent).

Lastly, 29 percent of respondents from the Midwest reported a higher net worth than last year, compared to only 19 percent of Northeastern respondents who say they have a higher net worth than last year.

People seldom consider how demographic factors can affect their finances. Some of these factors are completely out of our control, and even if the impact is only small factors like age and gender, it can absolutely make a difference when you compare the financial health between two people. While we are all in control of our own destinies, it’s also wise to keep in mind any and all factors working against us, and also, those working in our favor.

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