Let’s Get Those Vitals: A Financial Checkup - Quicken Loans Zing Blog

Most of us (I hope) go to the doctor for a physical on a regular basis. Obviously, a health checkup is an absolute imperative. It’s great that we take our health this seriously. When was the last time you gave your finances a checkup?

It’s something we probably should take stock of every so often, but we often fail to. Our finances aren’t alone in this phenomenon.

Stephen J. Dubner and Steven D. Levitt detailed the case of surprisingly low hand-washing rates among doctors at Cedars-Sinai Medical Center in Los Angeles. The experimenters tried everything from observation to outright bribery in order to get compliance rates up, but it was still below the goals set by hospital administrators.

In a lunch meeting of top hospital staff, the hospital’s epidemiologist, Rekha Murthy, asked attendees if she could get a culture of their hands. The results? The hands of some of the best doctors in the hospital were filled with germs and bacteria. Murthy turned this gross and (for the patient) somewhat terrifying fact into a weapon she could use in the hand-washing war by using pictures of the cultures as hospital screensavers.

Shortly after this shock and awe campaign, hand-washing compliance went up to almost 100%.

How’s Our Financial Hygiene?

Sometimes we all need a little shock and awe to persuade us to take action. Professional services firm PwC released a survey in 2015 that included some illuminating financial statistics. The results were a little bit like those startling Petri dishes.

  • 26% of full-time employees have a hard time meeting the minimum payments on their credit card balances
  • 35% of millennial-aged employees find it difficult to meet household expenses every month
  • Only 16% of employees are contributing to health savings accounts.
  • 56% of women didn’t think they had enough emergency savings vs. 47% of men
  • 23% of women worry about not being able to meet monthly expenses vs. 15% of men
  • 47% of employees carry balances on their credit cards and 20% of people use their credit cards for things they couldn’t otherwise afford
  • Only 42% of employees would be able to meet their basic expenses if they were out of work for an extended period of time
  • Only 43% of employees are confident they’ll be able to retire when they want to; Only 55% of employees know how much income will need in retirement
  • 35% of employees think it’s likely they’ll need to withdraw from their retirement plans for non-retirement expenses

We really hope you were sitting down when you read that. Now that our own version of shock and awe is out of the way, there are two ways to handle our issues – we could sit in stunned silence and let the horror paralyze us. That’s probably not preferable.

We could also use the tools available to us to pull ourselves up by the bootstraps and climb out of the hole to put ourselves in better financial shape.

How do we solve this?

As with any financial planning, there’s really no substitute for prudent budgeting. However, each problem listed above really relies on having more money available in order to take care of the issues involved.

In order to free up some cash for whatever ails you, you might take a look at something we often forget. Your home is an investment that has value. While we often think of a cash-out refinance as a way to pay for a remodel, it’s also a way we can reinvest some of that built-up equity in ourselves and our future. Let’s take a look at a couple of ways to use the money.

Pay off Those Credit Cards

Current credit card interest rates are roughly between 12.5% – 15.9%, depending on the type of card you’re looking at. If you fall a little bit behind, it can be easy to rack up those interest charges very quickly.

Now compare this to mortgage interest rates, which are currently hovering just below 4%. This makes your mortgage an ideal platform on which to base a debt consolidation because you’re taking the money to pay off your credit card debt and paying it back on one bill at a much lower rate of interest.

Home Equity As an Investment

We’ve all seen articles that go over how much we should be saving for retirement or putting away in an emergency fund. All the strategy in the world is great, but if you know you are a bit behind in saving for these life events, how can you get caught up?

In this case, a cash-out refinance may give you the cash infusion you need to shore up that safety net that has a few holes in it. Once you’re back on track, you can regularly contribute to your retirement and emergency funds with the peace of mind that comes with knowing the money will be there when you’re ready to use it.

Of course, the equity in your house is just one tool you have in your financial toolbox. There may be other options that are right for you. Consult a financial adviser to come up with the best strategy for your situation.

Hopefully, you’ve picked up a little more information on how your home can be viewed as part of your investment portfolio. If you have any questions for us, leave them in the comments below.

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