When thinking about your financial future and creating a financial plan, there are some numbers that you really need to know. What I have come to realize is that very few people (especially millennials) know the important financial numbers in their life.
So here is a list of the most important personal financial numbers you should know:
1. Net Worth
Total assets – Total Liabilities = Net Worth. This is arguably the most important financial metric to track as you go through life. Focus on increasing your net worth on a yearly basis.
2. Post Tax Income
This is what you take home after deductions, taxes, etc. It’s the dollar number that actually hits your bank account.
3. Average Monthly Variable Expenses
What is the average amount you spend monthly on variable costs like: utilities, groceries, going out, shopping, etc. It honestly doesn’t matter how much you spend on each on a monthly basis, it will vary. But the goal is to keep it similar. One month maybe you spend an extra $200 on shopping but spend $200 less on going out. That is totally fine, just try and keep the spending relatively close.
4. Monthly Fixed Expenses
What do you spend per month on fixed expenses like rent, mortgage, car payments, insurances, etc.
5. Monthly Surplus
Post tax income – fixed expenses – variable expenses = Surplus. This is the amount of extra dollars you have per month to use for planning (savings, investing, more towards debt). If this number seems smaller than you’d like, you either need to cut spending or increase income.
6. Balance Of Each Debt
Find the total balance left on each debt. Then organize them from smallest to largest.
7. Interest Rate On Each Debt
Find the interest rate on each debt and put them next to the balances. Typically, I recommend putting all the extra amount you have to pay towards debt on the debt with the lowest balance and highest interest. Pay that one off then roll that full payment to the next debt.
8. 401(K) Match
Many employers offer a match on your 401(k). Figure out that percentage, if it is 100% up to 5%, then try and contribute 5% to get the full match. This is basically free money and part of your compensation, you want to take advantage of it.
9. Emergency Fund Goal and Balance
Everyone needs to have an emergency fund to protect themselves against the what if’s in life. It could be for a loss of job, medical expenses, unexpected expenses like the furnace needing to be replaced, etc. For some, it can be 3 months of expenses, for others maybe it will be 12 months. Figure out what your goal is and get it set up. But make sure you don’t use it for other expenses like travel or housing projects. Create separate accounts for those.
10. Credit Score
Your credit score is a number between 300-850. It’s used to show how trustworthy you are as a lender. The higher your score is, the better you look as a borrower. Your credit score is based on your total debt owed, length of credit history, types of credit, number of accounts, repayment history, etc.
Having a low credit score can impact the rates you get on loans. It can also impact your ability to rent, ability to get credit cards, etc.
Try and check in on your credit score at least once a year to make sure there isn’t anything wrong on your credit report. You want to try and maintain good credit if possible.
11. Savings rates (% wise)
Savings rate = Monthly Savings / Monthly Take Home Pay. Knowing your savings rate is huge. I like to have my clients save and know their percentages, this way as income goes up, your savings will also go up if you save by percentages. If you don’t, lifestyle creep can take over.
12. Mortgage balance and interest rate
It is good to know how much you have left on your mortgage as well as the rate. Knowing the rate can help you be mindful of opportunities to refinance when interest rates drop.
Check out this article if you want to learn about when it makes sense to refinance (hint: it’s not as simple as you think. You don’t just refinance if the rate is lower.
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Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.