How Does Your Financial Capability Compare?

A recent nationwide study revealed some disturbing information about the state of people's finances.The 2012 National Financial Capability Study, sponsored by the FINRA Investor Education Foundation, provides some humbling results that should make you feel a whole lot better about your personal finances. But it should also make us all a lot more worried about the state of our country.

"The 2012 National Financial Capability Study found that 19% of respondents spend more than they make." [Tweet This]

What the Survey Says In summary, of the respondents to the survey:

  • 19% spend more than they make
  • 36% break even
  • 41% spend less than they make, thus actually saving money for the future
  • 26% have medical debt, with people between 18 and 34 having the most medical debt
  • 40% have a rainy day fund to buffer against unexpected financial shocks
  • 30% have engaged in non-bank borrowing within the last five years, such as through an auto title loan, tax refund loan, pawn shop or rent-to-own store
  • 49% pay their credit cards in full every month
  • 34% only pay credit card minimum balance due
  • 14% have an underwater mortgage, which means their house is worth less than the mortgage balance
  • Among 18-to-34-year-olds with a mortgage, 25% are underwater

Overall, only 39% got four or more questions right on a very basic financial literacy quiz.

You can take the quiz yourself at

The Need for Financial Literacy Clearly, the survey results are reflective of the national economy over the past five years and the dramatic effect of unemployment and underemployment.

The study also demonstrates the need for basic financial literacy in our country.

As with many issues, the best and easiest place to start may be at home. Our "call to action" should be sure to spend some time with our children and grandchildren talking about basic finances, daily money management and the importance of saving for the future. What a great summer project!

About Bruce J. Berno, CFP® Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit