The key to such a system is a simple and easily-understood way of measuring the financial health of families-one that brings together in a composite index a number of discrete, family-level indicators that together provide a picture of families’ financial health-the interrelationships and interactions between spending, saving, borrowing, and planning. The time has come to establish financial health as the clear North Star for economic and social policy and for the federal government to build an effective system to measure and report on the state of financial health for the country as a whole and for those communities that historically have been discriminated against, marginalized, or otherwise underserved. To measure financial health and make progress in improving it thus requires a more complex set of metrics that captures within individual families not just how much money a family receives over the course of a year but, at a minimum, how it spends, saves, borrows, and plans for the future. Rather, families’ financial health depends on the interaction of all parts of their financial lives. ![]() And while various statistical agencies have put a good deal of effort into measuring annual household or family income, the reality is that treating a family’s income as a measure of its financial health is no more valid than treating gross revenue as a measure of corporate health or gross tax receipts as a measure of a state’s fiscal health. Most of these metrics are, at best, only loosely related to how ordinary Americans are faring and obscure at least as much as they reveal about the state of families’ financial health, let alone the state of the financial health of those in historically marginalized communities. ![]() Today, most of what gets measured are macroeconomic indicators of national economic performance such as the gross domestic product (GDP), the consumer price index (CPI), the unemployment rate, or aggregate income, spending and savings levels. Despite all of the data the government collects and analyzes, the reality is that we do not have an accepted method of assessing financial health nor the right data to do so. It’s no wonder, then, that the federal government has been challenged to improve the financial health of American families. ![]() It is often said that what gets measured gets managed.
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