How to measure financial success

Judge your money management with these 7 critical numbers

You probably know how much your monthly mortgage payment and cable bill are, but do you know your credit score and net worth?

Just as blood pressure and cholesterol are valuable measures of your physical well-being, these are the seven numbers you need to track the state of your financial health.

They measure everything from how quickly you're accumulating wealth to paying down debt and building the kind of reputation that makes borrowing money a breeze.

We'll show you not only where to find these numbers, or how to calculate them, but provide simple guidelines that will help you judge your progress.

Are you stashing more money in your retirement plans than most Americans? Or carrying bigger balances on your credit cards? Or building more equity in your home?

Once you're done, you'll have a much better understanding of how well you're managing your money – and what you need to do better.

Can you really afford to ignore this advice? Your financial security depends on getting these numbers right.

Measurement 1.

Emergency fund

Everyone should have some cash stashed in CDs or a savings account that can be quickly and easily reached to:

  • Pay routine bills if their income is disrupted by a layoff, illness or injury, or ...
  • Cope with a big unusual expense – a wrecked car or storm-damaged house, for example – that your regular income can't possibly cover.

How much do you need?

David Walters, a financial planner at Palisades Hudson Financial Group in Portland, Oregon, suggests setting aside enough to cover at least six months' worth of expenses.

Let's say you need $2,500 per month to pay the mortgage and put food on the table. Then you need an emergency fund of $15,000.

Having such a fund means that you have a better fall-back plan than your credit cards. It shows that you're no longer living paycheck-to-paycheck and that you've taken the first step down the road to financial security.

"Emergencies by their nature, are unexpected," Walters says, "so it provides a cushion to handle it."

Measurement 2.

Retirement savings balance

This is the total amount in your tax-deferred retirement plans – typically a 401(k) plan at work and one or two Individual Retirement Accounts.

"It gives you a sense of where you are today in comparison to where you want to be when you retire," says Kelly McRae, a vice president at Strategic and Financial Planning in Newport Beach, California.

Many Americans are falling woefully short in this measure. One in every 3 workers doesn't even have $1,000 in those accounts, and nearly 2 out of 3 have less than $25,000.

How can you tell if you're on track?

A good rule of thumb, according to McRae, is to have saved twice your annual income by the time you're 40, four times by the time you're 50 and eight times by the time you turn 67.

So if you're earning $40,000 per year at age 40, you should have about $80,000 in your 401(k) and IRAs.

Let our 10 secrets to successfully save for retirement boost your balance.

Measurement 3.

Retirement savings rate

The percentage of income you're setting aside for retirement can vary, but most financial experts say at the very least you should be putting away 10%.

If you're getting a late start on saving, or if you don't have a 401(k) with matching contributions at work, you might need to save more.

If you're not saving 10% right now, then start at a contribution level you can make and aim to increase that by 1% every six months. Hopefully, you'll be meeting your goal within a few years.

Our retirement planning calculator can help you figure out how much you need to save.

Once you've included Social Security (the calculator will allow you to do that), it may not be as much as you think.

Not sure what some of the parameters should be? Tell the calculator that you want to replace 70% of your pre-retirement income, that you want to plan for 30 years of retirement and that you expect a 7% rate of return while you're still working and 4% after you stop.

Measurement 4.

Credit card debt

When it comes to getting ahead in life, credit card debt is a terrible anchor.

Why? Because credit cards charge the highest interest rates – typically about 18% to 22% – and allow borrowers to string repayments out for so long that it greatly inflates the cost of everything they buy.

Way too much money that families should be saving and investing in themselves and their futures winds up in the pocket of credit card companies.

According to a recent Gallup survey, 29% of Americans don't own any credit cards and half of those who do use them (48%, to be exact) say they pay off the balance every month.

But Federal Reserve data show households that carry credit card debt owe, on average, a substantial $15,480.

If you have balances on your credit cards, you need to figure out exactly how much you owe and create a plan to pay them off.

Our credit card payoff calculators can help you come up with a plan to pay off a single card or a bunch of credit cards.

Measurement 5.

Credit score

The three major credit reporting agencies – Experian, TransUnion and Equifax – collect all sorts of data about your borrowing and bill-paying habits.

The information from those credit reports is then used in complex and secret formulas to generate your credit score, which is supposedly a measure of your creditworthiness.

The oldest and most widely used formula was created by Fair Isaac Inc. and results in what's known as the FICO credit score. FICO scores range from 620 to 850, with the current median score right at 723.

You can obtain free copies of your credit reports at You absolutely want to take advantage of this to check for mistakes – and errors are depressingly common.

But to get your FICO credit score, you must go to the FICO website and pay $20 for each score generated from each credit report.

A cheaper option is to use FICO's free credit score estimator.

Measurement 6.

Home equity

Home equity is a major source of wealth, and it's simple to calculate.

Just take the current market value of your home and subtract the outstanding balance on all mortgages.

Let's say your home is worth $200,000 and you owe $120,000 on it. You have $80,000 in equity, or about 40% of the total.

There are no mortgages on about one-third of all homes, so their owners hold 100% of the equity in those properties.

CoreLogic, a California-based research firm, estimates that homeowners hold about 39.2% of the equity in those properties that are mortgaged.

In the wake of the financial crisis and recession, almost 1 in 3 homeowners with mortgages were underwater during late 2011 and 2012 – which meant they owed more than their homes were worth.

In economic terms, they had negative equity in their property.

But a rebound in home values has reduced that to only 17%, according to the most recent estimate by Zillow, the real estate assessment website.

Measurement 7.

Net worth

We saved the best for last – the most complete measure of how rich you are.

In the simplest of terms, net worth is your assets minus your liabilities. It's what you would have left over if you sold everything you owned and paid your debts.

"You might have a lot saved up but it may be offset by a lot of debt," says Mari Adam, president of Adam Financial Associates in Boca Raton, Florida. "This tells you what really matters and what you've got when push comes to shove,"

Our new worth calculator can help you do the calculations – and make sure you don't forget anything.

So how much should you have to feel like your financial life is on track?

The Federal Reserve's most recent Survey of Consumer Finances found that the median family net worth was:

  • Age 45 to 54: $117,900
  • Age 55 to 64: $179,400
  • Age 65 to 74: $206,700

The Wealthometer: USA, created by an economics professor at Harvard University, shows where you stand financially with respect to other Americans.

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