Numbers for Better Health and Wealth
Get a financial health checkup by evaluating a few key indicators.
Your doctor must know certain numbers about you to assess your physical health, such as your weight, blood pressure, and cholesterol levels. To monitor your financial health, you also need to know certain numbers.
Take Home Income Number
Know Your Number:
Knowing your salary or hourly wage can be confusing for budget planning since you will never really have that much money to spend. The amount of money you bring home from your paycheck is called your net income. In other words, your take-home pay is your total income (gross income) less taxes, insurance, and other deductions. The number represents how much money you have available to pay bills, save, and invest.
What to Do Next:
- List all your sources of income such as primary job, part-time job or side gigs, dividends, government benefits, etc.
- Next to your sources of income list, write the income made from each source.
- Total the number of sources and income.
Total Monthly Net Income - Total Monthly Expenses = Net Cash Flow
Worksheet: Income and benefits tracker tool (consumerfinance.gov)
Net Cash Flow
Know Your Number:
The cash flow number indicates whether you have enough income to cover your expenses every month. If calculated monthly, it can help you see if you are living within, below, or above your means. If your net cash flow is positive, you have extra money to put towards your financial goals. If your net cash flow is negative, it may be time to cut back on expenses and increase your income.
What to Do Next:
- Add the monthly income from all sources.
- Add all the monthly expenses.
- Subtract the total monthly net income with total monthly expenses to get your Net Cash Flow.
Net Cash Flow = Total net income-Total monthly expenses
Worksheets: Spending tracker tool (consumerfinance.gov), Creating a cash flow budget tool (consumerfinance.gov)
Debt-to- Income
Know Your Number: Your debt-to-income (DTI) can show if your income is heavily allocated toward debt. Having a lower DTI indicates a better financial standing and less risk to lenders.
What to Do Next:
- Add your monthly bills (mortgage payments; student, auto, or other fixed monthly payments; credit card minimum monthly payments; other debts).
- Divide the total of your monthly loan payments by your monthly gross income (income before taxes).
- The result is a percentage called your DTI ratio.
Total monthly debt payments/Total gross monthly income = Debt to Income (DTI) Ratio
Worksheets: Debt log tool (consumerfinance.gov), Debt-to-income calculator tool (consumerfinance.gov), Debt action plan tool (consumerfinance.gov)
Net Worth
Know Your Number: Your net worth is one of the best indicators of your overall financial well-being. This number can help you determine if you are building wealth and on the right track to meet financial goal(s). Net worth is calculated by subtracting everything you owe from everything you have.
What to Do Next:
- List your assets, estimate the value of each, and add up the total.
- Assets may include money in savings accounts, investments, the value of your car, market value of a home, retirement accounts, real estate property, etc.
- List your liabilities and add up the total.
- Liabilities may include loans, credit card balances, mortgages, etc.
- Subtract what you own from what you owe.
Net worth = Assets (what you own) - Liabilities (what you owe)
Worksheet: MF2721 How Are You Doing? A Financial Checkup, Fact Sheet (ksu.edu)
Now you know the important financial numbers that will help you track how you are doing regarding debt, income, and savings.
