Do you ever wonder “how am I doing financially”? Suze Orman has a great segment called “How Am I Doing?” where people mail in their financial information and get graded on several different categories. After giving the caller a blunt answer as to how she/he is doing, she then gives them a specific action plan on how to get from their current grade to an A+.
I enjoy watching this segment because I can line myself up with what others are doing and estimate what my grade would be. I also find her tips to be very helpful, even if I am not in the same situation. The third reason why I enjoy show is because, quite frankly, I want to know how I am doing financially. But it is still not the same as being on the show and having a personal consultation with her.
In fact, how many of us are actually ever going to get on her show? It’s not a likely scenario. So I have come up with a way for each of us to grade ourselves using the same metrics that Suze Orman does. Follow along and fill in your own information to determine your financial health. Please note that you will be grading yourself based upon your own feelings and conclusions—stick with your gut and be honest in your assessment. While this is just an exercise to estimate how you are doing, pay attention to any categories that you seem to be doing subpar in and make the changes necessary to warrant an A the next time around.
The “How Am I Doing Financially” Chart
Fill in your own chart using the tools I’ve gathered below:
|Category||Report Card Grade|
Net worth: Add up your total assets, which include your estimated current home value (if you own one), your emergency fund, your investments, and your retirement fund. Then add up your total debt, including your mortgage (if you have one), loans, student loans, loans from family members, credit card debt, etc. Now subtract the two to figure out your total net worth.
- How to Grade Your Net Worth: A helpful tool in grading yourself is finding out what the median net worth is for your age group. Though this should be taken with a severe grain of salt, it will help to give you an idea of what grade to give. If you are on the path to wealth, then you may want to calculate where you should be according to The Millionaire Next Door’s equation: Multiply your age times your realized pre-tax annual household income from all sources except inheritances and divide by 10.
FICO Score: Your FICO score is one of several credit scores that loan officers, mortgage lenders, landlords, and even bosses will look at to determine your financial, credit, and even your trust worthiness.
- How to Grade Your FICO Score: In order to get your FICO score, you will need to purchase it or estimate it for free (there is a 25% discount through this link). If you have just recently bought a home, car, or gotten auto insurance, ask the person whom you worked with to see what your score was. You can also estimate your credit score for free by answering 10 questions. Once you have a score, grade yourself based on the following (these are general guidelines; different lenders will use your information in different ways): Excellent is 720+, Good is 680-719, Average is 620-679, Poor is 580-619, Bad is 500-579, and Miserable is below 500.
Debt: One of the best snapshots about your current financial health (the month-to-month and day-to-day) is your debt-to-income ratio. How much debt do you have compared with how much money you make?
- How to Grade Your Debt: Plug in your information in the debt to income ratio calculator from USnews.com. After you get your answer, you will see that USnews thinks the following: 36% or less is healthy for most people; 37%-42% is not bad, but start paying down your debt now before you get in real trouble; 43%-49% means financial difficulties are imminent; and 50% or more means you need to immediate professional help.
Real Estate: Do you own any real estate?
- How to Grade Your Real Estate: To be quite honest, Suze is a little arbitrary in how she uses this category. I suggest grading yourself based off of whether or not you own any real estate, if you are upside down on a mortgage or if your property seems to be growing in value, if you have at least 20% equity in your home, etc.
Retirement: Are you headed into a comfortable retirement or one where you will be at the mercy of Social Security? Do you have any pensions?
- How to Grade Your Retirement: Check out CNN Money’s retirement calculator to find out how to retire at age 65 with 80% of your pre-retirement income. Grade yourself according to the results and if you are saving that percentage of your income each year or if you plan to. Try out some of the other retirement calculators on this site if this one does not satisfy you.
Estate Planning: Suze is all about the Living Revocable Trust. According to the Washington State Bar Association, a living revocable trust is “an arrangement you make for management and distribution of your property. Like a will, the trust is “revocable,” meaning that you can modify or eliminate it at any time.” (I obviously don’t have one as I had to look it up). Next on the estate planning list, do you have a will?
- How to Grade Your Estate Planning: This one is simple. Do you have a will? Do you have a Living Revocable Trust? How are you going to distribute your estate once you pass on?
Our “How Am I Doing Financially” Report Card
Based upon the above metrics, the following is our personal grading:
|Category||Report Card Grade|
As you can see, the category that we need to give much more attention to is in estate planning (which makes sense, because we are so young).
Thank you for participating! Did you learn anything about your finances? Any areas you need improvement in? Are you on your way to smooth sailing in retirement?