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5 Important Personal Finance Numbers You Must Know

The best financial plans require knowing how you stand today and where you'd like to see your finances tomorrow.

Your personal finance numbers are vitals that help you assess your financial health. Calculating these financial numbers offers insights into how well you’re doing and what areas may need improvement.

The following are the 5 important personal finance numbers to know.:

  • Net Worth
  • Cash Flow Number
  • Income Number
  • Credit Score
  • Debt-to-Income Ratio

1. Net Worth

Your net worth is by far the most important financial number. It measures your wealth. The net worth number considers what’s left after calculating what you own minus what you owe.

Calculate your net worth number by doing the following:

  1. List your assets (what you own), estimate their value, and add up the total. These may include money in savings accounts, investments, your car’s value, a home’s market value, retirement accounts, etc.
  2. List your liabilities (what you owe) and add up the total. These may include your loans, credit card balances, mortgages, etc.
  3. Subtract what you own with what you owe:

Net worth = Assets (what you own) – Liabilities (what you owe)

Below is an example of a simplified net worth statement:

ASSETSAMOUNT ($)LIABILITIESAMOUNT ($)
Cash and Cash Equivalents$10,000Mortgage$150,000
Savings Accounts$5,000Car Loan$20,000
Investments$50,000Student Loans$30,000
Retirement Accounts$100,000Credit Card Debt$5,000
Home Equity$200,000Personal Loans$10,000
Rental Property$150,000
Other Assets$20,000
Total Assets:$535,000Total Liabilities:$215,000
Net Worth:$320,000

2. Income Number

The income that comes into your life is a crucial financial number to know. However, many people only focus on income from a job. 

Your income number is the money you make through your salary at work, other jobs, or investment returns. We often focus only on income from wages, but it’s quite important to know your total annual income from all sources. Knowing this will help you create an income strategy and be less reliant on one single income stream.

Do the following to calculate your income number:

  1. List all your sources of income, such as primary jobs, side gigs, dividends, etc.
  2. List the income made from each source.
  3. Count how many income sources you have.

Here’s how to track and list various types of income.

SOURCE OF INCOMEDESCRIPTIONAMOUNT ($)
SalaryMonthly income from primary job4,000
Freelance EarningsIncome from freelance graphic design work500
Rental IncomeMonthly rent from investment property1,200
DividendsQuarterly dividends from stock portfolio150
Interest IncomeMonthly interest from savings account50
Side Hustle IncomeIncome from driving for a ride-sharing app300
Total Monthly Income6,200
Total Income Sources6

Did you know that most millionaires have more than one income source? On average, they have seven sources of income. Calculate this personal finance number and start planning your income strategy.

3. Cash Flow

Your cash flow number helps determine whether you can cover your expenses with the income you receive. It’s calculated monthly and can help you see whether you live within, below, or above your means. 

If your net cash flow is positive, you have extra money to put toward your financial goals. If your net cash flow is negative, it may be time to cut back on expenses and increase income. The following is the equation:

Total Monthly Net Income – Total Monthly Expenses = Net Cash Flow

  1. List monthly income from all sources (before taxes and deductions).
  2. List monthly expenses (rent/mortgage, utilities, subscriptions, loan payments, groceries, etc).
  3. Subtract the total monthly net income with the total monthly expenses to get your Net Cash Flow.
CategoryAmount ($) per Month
Income:
Salary$4,500
Wages$2,000
Bonuses$500
Side Hustle$300
Investments$200
Rental Income$700
Other Income Sources$150
Total Income$8,350
Expenses:
Rent/Mortgage$1,200
Utilities$200
Loan Payments$500
Groceries$400
Transportation$200
Entertainment$150
Dining Out$300
Shopping$250
Travel$100
Miscellaneous$150
Total Expenses$3,450
Cash Flow$4,900

To calculate the cash flow, subtract the total expenses from the total income:

Total Income – Total Expenses = Net Cash Flow

$8,350 (Total Income) – $3,450 (Total Expenses) = $4,900 (Cash Flow)

The following table illustrates the meaning of positive, negative, and neutral cash flow.

Cash FlowMeaning
PositiveExpenses exceed income, resulting in a deficit of funds. This indicates living below one’s means, potentially accumulating debt, or relying on savings to cover expenses.
NegativeExpenses exceed income, resulting in a deficit of funds. This indicates living below one’s means, potentially accumulating debt or relying on savings to cover expenses.
NeutralIncome equals expenses, resulting in a balance between inflows and outflows. This indicates living within one’s means, with no surplus or deficit.

Calculating your cash flow is part of budgeting. With a budget, you identify and allocate your money toward your expenses and goals. Your cash flow number determines if your monthly income is sufficient to cover your monthly expenses. 

4. Credit Score

Many people default to thinking credit scores when it comes to personal finance numbers. It’s an essential number but not the most important when assessing your wealth. Your credit score uses information found in a credit report, such as credit history, payments, and other factors.

Having good to excellent credit increases your chance of approval and getting better rates and loan terms.

The following table illustrates common credit score ranges.

Credit Score RangeCredit Rating
300 – 579Poor
580 – 669Fair
670 – 739Good
740 – 799Very Good
800 – 850Excellent

Credit reporting agencies and lenders commonly use these ranges to classify individuals’ creditworthiness based on their credit scores.

Get your free credit scores by the following methods:

  1. Ask your bank or credit union if they offer free credit scores.
  2. Ask your existing credit card company about accessing free credit scores.
  3. Use one of the many free credit score apps available.

5. Debt-to-Income

Your debt-to-income (DTI) ratio can show if you’re over-leveraged, meaning your income is heavily allocated towards loans. Lenders use the DTI ratio to determine whether or not you’re approved for loans like mortgages. But it’s also good to know your total debt load related to your income. 

Most importantly, a high DTI percentage can mean the inability to cover debt or loan obligations in the future. You want to monitor growing loan payment amounts and stagnant income growth. The following is the equation:

Total monthly debt payments / Total gross monthly income = Debt-to-Income Ratio

  1. List your total gross income (from all sources)
  2. List your monthly bills (mortgage payments; student, auto, or other fixed monthly payments; credit card minimum monthly payments; other debts)
  3. Divide the total of your monthly loan payments by your monthly gross income (income before taxes).
DESCRIPTIONAMOUNT ($)
Total Monthly Debt Payments$2,000
Gross Monthly Income$6,000
Debt-to-Income (DTI) Ratio33.33%

The lower your DTI, the less risky it is for lenders, indicating better financial standing. This can increase the odds of approval when refinancing credit card debt and student loan debt, which could result in a positive net change in cash flow and net worth.

The following is a sample table illustrating different debt-to-income (DTI) ratio ranges.

Debt-to-Income Ratio RangeInterpretation
Less than 20%Low debt burden, favorable
20% – 35%Moderate debt burden, manageable
36% – 49%High debt burden, potential risk
50% or higherVery high debt burden, high risk

Additional personal finance numbers

Now that you know the most important personal finance numbers, you can focus your attention on improving them. I believe the best financial plans require knowing how you stand today and where you’d like to see your finances tomorrow.

I want to note that there are many other financial numbers, such as your desired retirement age. These can help you plan your retirement income, which includes social security benefits, retirement contributions, and funds in taxable brokerage accounts.

And if you’re interested in achieving financial independence, it’s vital to calculate your FI number. Your financial independence number looks at your investment portfolio, savings rate, and projected income in retirement (or early retirement).

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of phroogal.com and thesmilelifestyle.com. His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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