John Friedman Financial’s Statement of Fundamental Principals, Number One: Financial Health Defined

This is a long’ish piece — about 2,400 words.

It might take you twenty minutes or more to read it.

It might’ve taken me twenty years or more to think it. And it for-sure took me many, many hours to do my best to make it entertaining as well as smart.

I hope you find that I accomplished both goals, and that in it you find a very useful — in a nuts ‘n bolts’y, blocking ‘n tackling sort of way — methodology for thinking about how to improve your overall financial health with each and every passing day. That’d be great, yes?!

So here we go . . .

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Your overall financial health consists of two main components. The first is your numeric financial health and the second is your non-numeric financial health.

Numeric financial health is all about — you guessed it — the numbers populating your life. Are they big enough to do what you need/want them to do? Are they in scale with each other? Are there any nasty negative numbers hanging out in there, messing things up? Is there too much of one sort of number and not enough of others? Are the numbers predictable or do some of them bounce around willy nilly? And if there are some bouncers in there, are there any other numbers in there to help smooth things out some, to provide ballast?

By contrast, non-numeric financial health is all about how well your financial life coexists with all other aspects of your life. Is your financial life at odds with the other parts of your life? Or is everything living together in perfect harmony? Or is it somewhere in between, with your financial life coexisting with the rest of your life in a very nuanced and complex way and, if the latter, does your financial life mostly succumb or does it mostly steam roll?

The rest of this piece considers these separate but intertwined parts of your overall financial health in further detail, and ends with some comments about how to judge your overall financial health in terms of both numeric financial health and non-numeric financial health.

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Numeric financial health is what most people think about when they think about how well someone is doing financially. From a lay perspective, it has a lot to do with how big the numbers populating your financial life are, or, a bit more thoroughly, how big the good numbers and how small the bad numbers are.

You can also take that one step further: numeric financial health is all about the extent to which the various numbers populating your financial life are in scale, with the Numero Uno scalar being the relationship between money coming in and money going out. Going this extra step is important because it allows us to take into account the notion that some people with tons of money can have poor numeric financial health (because, e.g., they spend like there’s no tomorrow, so that they’re on an unsustainable trajectory in which they’re apt to run out of money and/or be required to change their lifestyle) as well as the notion that people without much money can have great financial health (because see below).

Regardless of how deep you go in this definition, though, one thing remains constant: it’s all about cold hard immutable numeric facts. The numbers is what the numbers is.

For me or any other financial planner to become expert on your numeric financial life, then, all we need is access to 100% of the numbers populating your financial life; you needn’t be present, you can leave the building, you can even be dead and gone. It’s about you, yes, but there’s little you can tell me about your numeric financial life that is not documented better somewhere else than what you, lowly wetware-bearer, can tell me (aside to FinWonks: yes, goodwill and other intangibles and other off-balance sheet sorts of goodies, as well as potential future gifts, might not show up on a document!).

So, human being animal, when it comes to your numeric financial health, do run along and play outside, and leave me to my work!

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Non-numeric financial health is something else entirely and is, in many ways, 180 degrees removed from the numeric side of things. It is all about the human being animal, and not a whit about numbers, except insofar as they influence the human being animal.

Here, human being animal, I most sincerely do need your help; please stay! Without you I am lost; I cannot know anything without you yourself filling me in. Won’t you let me in?!

Non-numeric financial health is all about how well your financial self is getting along with all your other selves — about the extent to which your financial self is a team player with your other selves, versus the extent to which it is an outcast among your other selves, raising a ruckus and causing internal stinks, making all your other selves pay too-high prices too often.

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Some examples of both strong and weak non-numeric financial health can help illuminate this concept. Let’s start with an easy, on-the-nose, sort of example. If your way of interfacing with the financial part of this loverly ol’ world of ours is making you so terrifically stressed out that it’s drilling a hole in your stomach (also known as a peptic ulcer), then you do not have strong non-numeric financial health; your financial self — here in the guise of a job that is overly stressful for you — is inflicting serious damage on your physical self.

Likewise, if your financial self requires you to work so many hours that you’re missing a major part of your kid’s childhood and/or you’re never able to get into a rhythm with your loved ones, then you lack strong non-numeric financial health because your financial self is wreaking havoc on your family self. Your life is all Nicolas-Cage-in-The-Family-Man before he sees the light and falls in love with the cute kids and loverly wife he has never seen before until one day he wakes up in a strange new suburban home.

And how about if your financial life requires you to be away so much that you are a stranger in your own home? Now your financial life is at odds with your geographical self; you are essentially homeless, and having a home is a big part of taking care of all your other selves. Your life is all George-Clooney-in-Up-in-the-Air.

Or it could be that in your financial life you work in a field which is inherently about risk-taking (oil wildcatting anyone?), but that in the other parts of your life you prefer to roll more sedately and more predictably. Or it could be the vice versa version. Either way, that’s some serious dissonance there, eh?

Or it could be that you are wicket smart and enjoy nothing more than monkey-braining your way through your day, thinking all the time and being creative, but that you work in a job that for all intents and purposes requires that you be 100% thought-free throughout your working days.

Or how about if your financial life involves you doing things that you think are just not right? There are lots of jobs — always have been, probably always will be — that involve knowingly putting something bad into the world, whether it’s asbestos or nicotine or partially hydrogenated oils or nutrition-free calorie-loaded food-like substances.

And there are also lots of jobs that require people to do unto others that which they would not want done unto themselves, whether it’s being part of a credit card company that uses the cheap-upfront-and-then-not-cheap-at-all methodology of drug pushers to seduce and then enslave, or whether it’s an investment company that uses the they-never-even-know-we’re-taking-their-money approach of con artists to pick your pocket (Fandango has been known to do this as well!), or whether it’s sales organizations that are about quick, once-only sales more so than lasting relationships, and which therefore instruct their salespeople to tell their prospective customers anything that gets them closer to the close, including lies and fibs and frauds (oh my!).

And then there’s the old standard, which requires strong language to adequately convey, and is usually known as working for an asshole and getting paid diddly for it. By my memory, as confirmed by the search bar to the left, that’s the first time I used that nasty word in here, but it seems like an appropriate place to use it, yes? Most of us have been there! The most nasty of swear words fail to do justice to what it’s like working for a jerk or a bunch of jerks and getting paid peanuts for putting up with his/her/their awful ways.

And the list goes on and on. We all do things to put bread on our tables that we would not otherwise do.

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Numeric and non-numeric financial health are both easily measured, which is good, because it’s an old cliché that it’s an old cliché that, that which is measured is controlled. And controlling your financial health has a lot to do with improving it, n’est ce pas?

So the question becomes: how might we measure these different sorts of financial health?

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Measuring numeric financial health is the focus, in one way or another, of many, many financial information pieces out there (though most of them do not use this particular language), so I won’t go into it in detail here. If you want a good starting place to think on it generally, just look up “financial rules of thumb,” and feast your eyes on a bunch of numbers-driven ways to judge how your financial life is doing. (Warning: rules of thumb are useful because they are overly simplistic and one-size-fits-all, so do take them with a grain of salt.)

That general information is mostly useless until you apply it to your specific situation. Do you know the numbers populating your financial life? My experience is that most people are mostly clueless about the numbers populating their financial lives, and that, duh hey, being clueless is nowhere near as good an approach to financial health as being clue-full.

It’s pretty simple for most folks to be clue-full when it comes to the numbers populating their financial life. By my reckoning, you can count the numbers as to which you need to be clued-in through the use of the digits on just one of your limbs. The numbers are (a) how much you usually spend each month, (b) how much you usually save or dissave each month, (c) the total value of all your wealth-storing assets combined, (d) the total negative value of all your liabilities combined, and, far and away the easiest number to know, (e) your age!

From there it can get a bit more complicated, but, hey, in the end it’s just math, folks! You can figure it out on your own, or you can use software, or you can get your financial life all smartened-up and buttoned-down by using your friendly neighborhood financial health advisor.

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Measuring non-numeric financial health is the focus of . . . pretty much no writing on the web (at least not using this particular language).

Not to fear, though, because this time of year you have available to yourself a quick and easy exercise that I find to be the Numero Uno most surefire way to assess the strength of your non-numeric financial health.

I speak, of course, of The First Week of January Test.

The First Week of January Test will take you but two minutes, tops. If it takes longer, you’re doing it wrong.

And what if it’s not the first week of January as you read this? Then role-play my friend, or think back to last January, or project yourself into next January, OK?

If you haven’t taken The Test recently, you can find the 2014 version here:

The First Week of January Test, 2014: How Does it Feel to Be Back After the Holidays?

Once you’ve taken The Test — remember, it takes just a minute or two — please do come back and enjoy the feast which is the grand crescendo of this piece, i.e., the final section, directly below.

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It’s smart to measure your financial health at least once a year. Early January is a great time of year to assess your financial health because, right there right then, you have a brand new, rarin’ to go, all shiny and new, ready-to-be-filled-up-better-than-last-time, new year full of promise and opportunity and wonderful things, and you also have all those end-of-year numbers that are perfect for tallying up.

If you prefer to be motivated by pain rather than hope, you can also wait until the last half of April to do your assessing. That post tax-deadline period is when many people feel most motivated to get their financial act together.

Or you can peg it to your birthday, or a loved one’s birthday, or the beginning of the school year, or any other time that strikes you as right, because, when all is said and done, any time is a right time to smarten up about your overall financial health, right?

Regardless of when you do your assessing, please be sure to assess both numeric and non-numeric financial health. On the non-numeric side of things, your assessment uses The First Week of January Test to help you get a better feel for how well you’ve designed your day-to-day life which, for most of us, is driven in large part by our need to make a living. How’s it working for ya? Is your making-a-living life making for a good-livin’ life? And on the numeric side of things, it’s a great idea to add up, at minimum, all the asset and liability numbers in your life at least once a year.

You put those two threads together — doing The First Week of January Test and thinking about how to make your answer to the test better with each passing year, plus once per year doing an update of all the important numbers in your life and assessing how things are going — can help you improve your financial health each and every day, every year from now on.


Doing so is easy, and is rewarding in all sorts of ways in addition to reaping the benefit of improved overall financial health (e.g., you will be proud of yourself, and it will feel like you’ve taken a big weight off your shoulders!)

Doing so takes about, say, three hours, tops. For a lot of folks it takes about thirty minutes.

Why, I bet you spend a lot more time than that on a lot less important things than your overall financial health, don’t’ch’ya? Like washing your car perhaps?


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