Monitoring your money
Keeping track of your financial vital signs
Just as your doctor likes to keep tabs on your heart rate and weight, you should keep track of your financial vitals.
Here are a few money number basics to know:
1 Income and expenses Your after-tax income is your gross income minus the taxes you pay. You can use your latest pay stub or tax return to calculate this.
After-tax income is the basis for the 50/30/20 budget, a spending plan that helps you balance current expenses, debt payments and savings. That budget suggests limiting your essential or must-have expenses — shelter, utilities, transportation, food, insurance, minimum loan payments and child care needed to work — to 50% of after-tax income. Wants, such as vacations and dining out, make up 30%. That leaves 20% for savings and extra debt payments.
2 Lifetime income and net worth You can access your Social Security statement, including your lifetime earnings history, by signing up at socialsecurity.gov/myaccount. Add up your annual earnings, plus any other income you’ve received such as gifts, inheritances, investment income, pensions, underthe-table earnings or government benefits.
Now, calculate your net worth by subtracting what you owe from what you own. Compare your net worth to your lifetime income to see what you’ve done with the money that came into your hands.
This exercise is meant to make you more aware of what you do with your money. If you think you should have more to show for the money you’ve received, consider trying to save more of your income.
3 Full retirement age and expected social security benefit Your full retirement age is the age at which you are entitled to 100% of the Social Security benefits you’ve earned. If you apply for benefits before that age, your checks will be permanently reduced. If you delay your application until after full retirement age, you can qualify for delayed retirement credits that boost your benefit.
The full retirement age has gradually been increasing. To better plan for retirement, you should have some idea of when you hope to retire and how much you can expect from Social Security. You’ll find this information in your Social Security statement.
4 Credit score You’ll have a better idea of how lenders view your credit applications if you know your credit scores. Monitoring them also allows you to see your progress in building credit and alert you to problems, such as identity theft.