Financial Security Index: The states where money is a struggle

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

Managing Editor & Certified Financial Planner™

Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

Published April 10, 2019 | 2 min read

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Correction: Due to a sorting error, an earlier version of this story identified Florida as the most financial insecure state. After re-running our analysis, we found Arizona and Nevada tied for the least secure. We apologize for the error.

Americans struggle with building financial security. A study by the Institute for Women’s Policy Research found that one in three adults can’t afford basic expenses, such as housing, food and childcare. This could leave them unable to financially prepare for emergencies or for future money goals, like retirement.

Determining if you’re financially insecure may depend on where you live. We came up with the Policygenius Financial Insecurity Index to learn which states’ residents were the most (and least) financially secure.

What makes a state financially insecure?

The index doesn’t just measure how much money people have. It captures how successfully they can manage finances, build wealth and prepare for financial emergencies. It also factors in your ability to get medical treatment, find a job and afford a place to live.

About the index

The Policygenius Financial Insecurity Index is made up of five figures, combined and weighted equally. (Questions about the index? You can ask in the comments below.)

  • Total household debt: The total combined debt of every individual in a household.

  • Uninsured rate: The percentage of adults without health insurance.

  • Unemployment rate: The percentage of unemployed workers in a state out of the total labor force.

  • Median household income: The median combined income of every individual in a household.

  • Housing costs as a percent of income: The percentage of households putting 30% or more of their income to housing. (Personal finance experts generally suggest spending less.)

We combined these numbers to make the Policygenius Financial Insecurity Index. Each state is ranked out of 100, and a higher score means more financial security.

Arizona and Nevada ended up tied as the least financially secure state. Arizona has a high unemployment rate (5%) while Nevada has a high uninsured rate (14%). Their rankings were also depressed by middling median incomes and higher than average household debt levels.

Meanwhile, Iowa is ranked as the most financially secure state, thanks to its low uninsured rate (5.6%) and unemployment rate (2.4%).

How to build financial security

Becoming financially stable means eliminating your debts, building your savings and developing good financial habits. Here are some ways to get on the path to financial security.

  1. Set up a budget. Not having a plan in place can lead to financial unpreparedness and debt. Setting up a budget can help you to stick to your financial goals. You can download a budgeting app on your phone to track your spending (we have reviews here) or do it the old-school way and use a simple spreadsheet.

  2. Identify and eliminate debt. If you have credit card debt, student loans or a mortgage, you should have a long-term plan in place to pay it off. One popular way to tackle debt, the “snowball method,” focuses on the smallest debts first.

  3. Automate your savings. After paying your bills and debts, building an emergency savings account should be one of your main money goals. Consider opening a high-interest savings account to get the most out of your savings.

  4. Invest intelligently. Investing can help you reach your money goals and financially prepare for the future. Not sure where to start? Check out our beginner’s guide.

  5. Secure your family’s future. A big step in becoming financially secure is protecting your family against tragedy. If you haven’t already, consider purchasing life insurance. It can financially protect your family if the unexpected happens. You should also create a will, if you haven’t already.

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Data sources: U.S. Census Bureau for uninsured rate, housing costs and median household income. Federal Reserve Bank of New York for total household debt. Bureau of Labor Statistics for unemployment rate.

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