By Jay Glatz, State Bank of Speer
There are a number of ways to determine a person’s financial health. Many people will look at their net worth and use what they own to determine their financial health. Other people will look at their income, and if they bring in enough money to maintain their lifestyle they will consider themselves financially healthy. There are also a group of people who look at ways they can help others, and they determine their financial health by being generous. Warren Buffet has promised to give away a majority of his wealth to various not-for-profit organizations. In fact, Mr. Buffet has challenged other wealthy billionaires to join his Giving Pledge. Those who pledge must promise to donate at least half of their wealth to charitable organizations. I suppose we could say these people are financially healthy.
All of the financial health measures are acceptable depending on your financial philosophy. We also need to look at how a bank determines financial health. Many people apply for loans at one time or another, and when they do, banks will ask for financial information. Banks will look at the person’s income tax information over a two or three year period. Current wage statements, a personal financial statement, and bank statements for checking and savings accounts will be reviewed. Banks will also check a person’s credit report when deciding on a loan application. The bank will look at how much a person owes and how much income they have. The bank determines a debt to income ratio — what monthly payments a person has for their home, car, boat, and credit card payments versus how much income they bring in to service their debt. All of this information is analyzed to determine a person’s financial health. A bank does not want to make a loan to a person if they can see that the person truly cannot afford to make the payments on the loan. Banks that made these high-risk loans for houses helped cause the financial disaster we saw in 2008 and 2009. Banks, insurance, and automobile companies had to be helped by the federal government because of bad lending practices.
A bank customer who is financially healthy may be able to afford to borrow money and pay it back over a reasonable period of time.
Yes, there are a variety of ways to look at your financial health. We hope you can determine the best way to stay financially healthy. Good financial health will also help you stay physically healthy, and this is always our goal!
Needing to do a check on your financial help? State Bank of Speer can assist with your personal and business needs. For more information, please contact the Peoria branch at 309-691-9345 or visit us online at speerbank.com to learn all our banking services to serve you.
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