While you might still have your Social Security number, childhood phone number, and savings account number memorized, the days of memorizing long strings of numbers are mostly over.
However, that doesn’t mean numbers aren’t just as important now as they’ve ever been. Whether you know it or not, there are many numbers that can determine your financial future and quality of life.
Staying on top of these crucial data points can help you avoid money stress and build a strong financial future.
Your net worth
Your net worth is the difference between the assets you own and the debts you owe. Any money in your checking and savings accounts, long-term investment holdings, and cash in hand are considered assets.
Your personal property, including any land or possessions you own outright, also contributes toward your total asset amount.
In contrast, debts (aka liabilities) include any consumer credit card debt, student loan payments, and principal remaining on your mortgage. Your goal is to have a positive net worth, meaning more assets than liabilities.
A financial advisor can help you calculate your net worth, or you can tally it up yourself by hand. Either way, you’ll want to check your net worth often and adjust your spending and saving accordingly if it isn’t.
Your credit score
Trying to get a loan so you can buy a house or car? Your lender will use your credit score (among other numbers) to decide if you’re a trustworthy candidate for a loan.
If the lender thinks you’re likely to pay back your debt, your credit score will impact how good — or bad — your interest rate is.
You can check your credit score once every 12 months at no cost and with no impact on your credit score. Even if you aren’t planning on taking out a loan soon, you should still check your score once a year to catch and report any errors before they become problems.
Your ChexSystems score
Unlike a credit report, a ChexSystems report evaluates your banking history and assigns you a score that tells banks if you’re a good candidate for a new account.
Fortunately, you don’t need to worry about checking your ChexSystems score as much as you do your credit score. The number is more useful to banks than it is to you as a consumer.
Still, you’re entitled to check your score once every 12 months. The higher your score, the more trustworthy a bank will likely find you.
Your savings rate
Your savings rate is a percentage that measures the amount of money you save compared to the amount you spend.
Experts generally recommend saving at least 15% of your income specifically for retirement, plus saving an additional amount to keep in an emergency fund. A good savings rate is around 20%.
If you’re coming in under that percentage, you might want to think seriously about boosting your savings while decreasing your non-essential purchases.
Your front-end debt-to-income ratio
A front-end debt-to-income (DTI) ratio — also called a housing ratio — shows what percentage of your gross income goes toward housing. Your front-end DTI impacts whether you’ll qualify for a mortgage loan.
For instance, if a potential mortgage takes up too much of your gross monthly income, a lender won’t give you a loan. Not even if you have a perfect credit score or a long-term stable job.
Your back-end debt-to-income ratio
The back-end DTI is another crucial calculation a lender makes when you apply for a mortgage loan.
Instead of measuring just one type of debt, it looks at the total debt you owe (including housing debt) compared to your total income.
As with your front-end DTI, your back-end DTI plays a crucial role in determining whether you can or can’t qualify for a mortgage.
Your mortgage rate
We’ve talked about some numbers that determine your mortgage rate, including your credit score and DTI ratios. But it’s just as important to get to know your mortgage rate once you eventually secure a loan.
As of October 24, 2022, mortgages are at an average high of over 7%. Knowing your mortgage rate can help you decide if you should buy a house now, wait until rates drop, or if you can afford to buy now and refinance at a lower rate later.
Your 401(k) match
A 401(k) is an investment savings account that many Americans use to save for retirement. 401(k)s are usually self-funded, but some employers offer a 401(k) match.
If you aren’t capitalizing on your employer’s retirement match, you should do so immediately. Otherwise, you’re practically throwing away money that could make a huge difference in your post-retirement quality of life.
Your zip code
Where you live might have a greater impact on your wallet than any other number on this list. That’s because your state determines your Medicare benefits and state income tax rates.
While inflation is high all over the country, it’s definitely worse in some areas than others, varying not just from state to state but from city to city.
For example, if you’ve bought gas in the suburbs and had to refill your tank once you reach the city center just 50 miles away, you already understand how much of a difference your zip code can make.
Your age can help determine how much you pay out of pocket for things like insurance. With car insurance, in particular, younger drivers usually have higher insurance rates than middle-aged drivers. Insurance rates start to increase for individuals aged 75 and older.
Your retirement age
Speaking of age, the longer you wait to retire or to claim benefits — which you can suspend until you reach 70 — the higher your monthly Social Security payouts will be once you start to claim them.
Your tax bracket
Tax rates and brackets can change from year to year. Additionally, the bracket you fall under will likely change during your lifetime depending on your retirement savings contributions, raises, promotions, and other income.
Taxes are complicated, so it’s wise to meet with a financial advisor to understand which tax bracket you fall under and how much you can expect to pay each year.
Your Social Security tax rate
This tax year, your Social Security tax rate is 6.2% (a rate that is equally matched by your employer). This flat tax rate often changes from year to year, though it usually changes incrementally.
You’ll want to pay attention to Social Security tax changes as they happen — they won’t impact your take-home pay too much, but it’s worth bearing in mind.
The current inflation rate
As we said earlier, inflation rates can differ from city to city and state to state. However, you can still look at the average national inflation rate to understand how much prices have changed between this year and the last.
Checking in on the rate of inflation can help you adjust your budget for inflation, discretionary spending, and savings to account for real-world changes that hugely impact your bottom line and quality of life.
Knowledge is power, and getting to know the numbers that control your life can empower you to steer your own financial ship and reduce your financial stress.
Use them as useful benchmarks to ensure you’re moving toward your fiscal goals — but remember that in the end, numbers are just numbers. You’re the one who can use the data to build the life you want.
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