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Your Financial Scorecard

1/29/2018 8:31:49 PM by Morgan Wendlandt Edited for Chuck Price Leave a Comment
We all like to be successful. Whether it’s with exercise goals, winning at a card game, or getting a promotion a work. We like to be able to see proof that we are doing well.

That makes financial planning difficult for many people. Success in financial planning is such a long-term view, it can be hard to see, and hard to understand when and if you are doing well. But despite the focus being on a holistic big picture, there are a few individual, more specific benchmarks that you can look at to see how your financial scorecard stacks up.

Your Credit Score

Having a higher credit score is important. Checking yours and determining what you can do to improve it is a way to make your finances better. People with higher credit scores get lower interest rates and other perks that can make a difference.

Your Debt-to-Income Ratio

How much debt you have in correlation with how much money you make matters. The less debt you have, the higher your credit rating will be and the better borrowing power you will have. Additionally, a strong debt-to-income ratio means you are taking care of your financial health.

An Emergency Fund

Emergency funds are important for a rainy day, and they can help keep you safe and protected financially when something unexpected goes wrong. Whether that's a leaking roof or a faulty refrigerator, having a fund can help.

The Inflation Rate

The rate of inflation is important, and checking to see if your investments are keeping up with it matters. You want your rate of return to be high enough to counter the inflation rate, or at least keep pace with it.

Your Expense Ratios

Expense ratios are what you pay when it comes to your mutual funds. If they are not performing well, you could be paying too much just to have them. Naturally that is something you want to avoid, so take a careful look at them and see whether some changes need to be made.

Retirement Savings

Your retirement savings is a vital part of making sure you can have a secure future. If you do not save enough, you could end up struggling when you are older. Make sure your retirement savings is offering you the money you need.
Your Net Worth

Net worth is how much you have once all your debts are paid. If you have a very low net worth, it may be time to focus on paying down debt and improving your income. Either one or both of those strategies are good ways to raise your net worth so you have a stronger financial picture.

Investment Returns

The returns on your investments should be keeping pace with inflation, and should also be focused on building wealth for the future. If you have a lot of underperforming investments, you will want to make sure you adjust them to work for you. Some investments will naturally grow more slowly than others, but the trend should be a positive one.

Your Savings Ratio

How much you are saving can be easily calculated. If you have a goal set, it is important to check and see if you are meeting it consistently. That way you can feel good about your savings, and make sure you are building more money up for the future. Savings can protect you in the event of a financial problem, and can also help your money work for you.

Progress Toward Goals

No matter what financial goals you have, you want to work toward them. These could be goals that relate to your savings, your investments, paying down debt, or something else. But they all add up to making sure you are solvent and you have money coming in. With that in mind, though, you will want to focus on the progress you are making, and check frequently to see if you are hitting milestones that matter to you and advance your financial future.

None of these individual aspects tell your entire financial story as a whole, but they can give a good indication of how you are doing, where you can improve, and where you are finding success. Make sure you schedule your annual appointment (if not more often) with your financial planner for a full-view update on whether your financial plan is on track.

This content created by Chuck Price in conjunction with Fusion Capital Management.

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