Know your personal savings and financial statistics

If you’re like many football fans, you can recite every statistic out there about your favorite team, from the big picture, such as score, win-loss record, and league standing, to the details, like total passing yards, average yards per carry, and turnovers.

But what about your own financial stats? Your net worth? Your savings? Your FICO score? Your retirement savings needs? It’s important to have these key numbers at your fingertips, to know how you’re doing and to assess what it will take to get where you want to be. Let’s break down what these numbers actually mean.

Net worth

Individual net worth may sound complicated, but it’s really a matter of some addition and subtraction. First, add up the money in your bank accounts, retirement accounts, investment accounts, your home’s market value, any business interests, the estimated value of your possessions, and the cash value of your life insurance. These are your assets. Then, add up things like the balance on your mortgage, car and student loans, and credit card balance. These are your liabilities. Subtract your liabilities from your assets to find your net worth.1 For comparison, the average American has a net worth of $68,828, according to the U.S. Census Bureau's latest numbers.Knowing your assets and liabilities is key to helping you figure out where to start as you plan what you want in life.

Savings tip: Finding creative ways to live within your means is one way to reduce your debt and increase your net worth.  Create an account other than your savings account for splurges and emergencies.

Rate of savings

How much do you save? The average American puts away less than 5% of his or her income.3 If you don’t have one already, set up a personal savings account, and be disciplined about regularly making deposits of 15 to 20% of your income. You can have the money moved to savings automatically – many banks have programs you can enroll in to help you save. You can also have your tax refund deposited directly into savings, rather than into a checking account, if you get one. Set up a regular check-in to see how your savings is growing, whether monthly, quarterly or annually.

Savings tip: Avoid the temptation to look at your savings too frequently: i.e., hourly, daily or weekly. Awareness is healthy. Obsessing, not so much.

Total savings

Related to your rate of savings, your total savings is a critical number to keep track of, too. Add up your retirement savings accounts and your personal savings accounts. Ideally, for your personal savings, you should consider having the equivalent of one year’s income to cover emergencies and unexpected events.

Savings tip: Avoid dipping into your savings. You may even want to keep your savings account(s) in separate banks from your checking account to make transfers more difficult.

FICO score

Related to debt, your credit rating, represented as a FICO score, affects your ability to take out a loan. This rating is based on five categories, composed of many data points. The categories are payment history, amounts owed, length of credit history, credit mix, and new credit.4 The FICO score ranges from 300 to 850, and the average is 706.5 How can you raise your score? First, get a copy of your credit report so you know your rating. Then, set up reminders to make sure you pay your bills on time. And try to keep a low balance on your credit cards.6

Savings tip: If you find your credit card balances are getting away from you, limit yourself to a single card, preferably a rewards card with no annual fee. And if you’re really having trouble, consult with a reputable debt consolidator to help you manage payments and reduce your rates.

Retirement balance

The most common retirement accounts are 401(k)s, which are provided pre-tax through employers; traditional IRAs, which are available to anyone, are tax-deductible now and taxed during retirement; and Roth IRAs, which are also available to anyone, are not tax-deductible, and not taxed during retirement. Planning for retirement is complicated. Working with a financial professional to create a comprehensive strategy can help make sure you don’t outlive your money. A professional can help you determine if you have a retirement income gap and put a plan of action together to help close the gap. 

Savings tip: Regardless of your age, and especially if you’re over 50 years old, consider making the maximum contribution into your 401(k), especially if your employer offers a matching contribution.

Insurance coverage

How well are you and your family protected in the event of a death or inability to work? It’s important to know both how much life insurance and disability insurance protection you have and how much protection is appropriate. A simple guideline for calculating how much life insurance you should consider, based on your age is: In your 20s and 30s, you want to consider coverage equal to 30 times your income. In your 40s, 20 times your income. In your 50s, 15 times your income. In your 60s, 10 times your income. And, finally, 65 and above, one time your income or your net worth.

Savings tip: In addition to the death benefit, the money your loved ones get when you pass away, a whole life insurance policy can provide cash value that can be used during your lifetime, for any reason, and it is insulated from market fluctuations.7,8

These are just some of the basic stats to have at your fingertips year-round. Once you know your key financial stats and how you stack up, you can identify where you need practice and, with the help of a financial professional, map out a thorough game plan.

Disclaimer

1

http://www.schwabmoneywise.com/public/moneywise/essentials/goals_budgeting/personal_net_worth

2

https://www.thebalance.com/american-net-worth-by-state-metropolitan-4135839

4

http://www.myfico.com/credit-education/whats-in-your-credit-score/

6

http://www.myfico.com/credit-education/improve-your-credit-score/

7

Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year.  Talk to your financial representative and refer to your individual whole life policy illustration for more information.

8

Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

All investments contain risk and may lose value. Diversification does not guarantee profit or protect against market loss.

All annuity guarantees are based on the claims paying ability of the issuing insurance company.

Investors should consider the investment objectives, risks, charges and expenses of mutual funds carefully before investing. This and other information are contained in the fund’s prospectus, which may be obtained from your investment professional.  Please read it before you invest or send money. Investments in mutual funds are subject to risk, including possible loss of the principal amount invested.

Securities products and advisory services offered through Park Avenue Securities LLC (PAS), a registered broker-dealer and investment adviser.

PAS is a wholly owned subsidiary of Guardian and a member FINRASIPC.

Mutual Funds Disclosure for PAS

 

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