3 Ways to Measure if You’re Financially Successful

Wondering if you’re on track with your finances, but not sure how to tell? These three metrics can give you a good indication of where you stand.

Written by Caish Echols AFC®, CFP® / June 13, 2022

Quick Bites

  • Investment returns are out of your control, so don’t focus on those.
  • Your personal net worth can give you a snapshot of your complete financial picture with one number.
  • Don’t spend all your money on housing. Try to keep your housing-to-income ratio to 30% or less.
  • Knowing the trends in your cash flow, by calculating your cash flow rates, can help you increase saving and pay down debt.

Has this ever happened to you? You pull up to the gas station, thinking you’ve found a steal of a gas price, only to realize the price you saw advertised on the sign was for people paying with cash and all you have is a credit card.

This has happened to me so many times, and it drives me crazy! I get sucked in by the promise of shiny numbers and good deals, and then find it was a waste of time.

Just like those gas price numbers are useless in that scenario, so are a lot of the financial numbers people say we should focus on. The biggest one I can think of is your “investment return.” Yes, you want your investments to grow in the long run, but trying to chase the highest return or compete with how someone else or a benchmark is doing, does you no good.

Just like we can’t control the price of gas, we also can’t control what the stock market does and it’s silly to waste time stressing over it.

However, there are things that are helpful and completely within our control. I’ve found that to really move the financial needle in your life, you should focus on controlling these three factors. Let’s break them down.

1. Your personal net worth

Your net worth is the most important financial metric because it gives you your complete financial picture in one number. It basically says, “if you were to sell everything you had today and use it to pay off all of your debt, how much money would you have left?”

I love tracking my net worth and focusing on building it because it’s easy to improve and shows me my financial progress. The more I save, and/or the more debt I pay off, the higher it grows.

Here is how to calculate it:

1. Add up everything you own

Checking, savings, retirement accounts, investment accounts, the value of your home, etc.

2. Add up everything you owe

Credit card debt, vehicle loans, mortgages, student loans, personal loans, etc.

3. Then subtract.

Total you own - Total you owe = Net Worth

One of the best things you can do is track this number over time. I recommend tracking it at least two times per year. Calculate your net worth this month. Then, six months from now, you should repeat the same process. Afterward, take the difference between your net worth today and your net worth six months in the future and see how much it’s changed.

When I look at my historical net worth it feels like my money story. I can see how my money choices have affected my overall financial position. It gives me insight regarding financial changes I can make and helps me keep building healthy financial habits. The general idea is to keep growing your net worth every time you check it.

2. Your housing ratio

Ever heard the term “house-poor?” This metric helps you make sure you don’t spend all your money on where you live. It’s easy to get trapped in a situation where you’re spending way too much on housing—especially in today’s insane housing market. However, if you use this metric as a rule of thumb going forward, you won’t find yourself spending everything on housing with nothing left over to enjoy your life.

Here’s a simple way to check your housing ratio:

Total Monthly Housing Costs (rent/mortgage payment plus PITI and/or HOA fees if applicable) ÷ Monthly gross income = Housing Ratio

As a rule of thumb, you want to keep this ratio at 30% or less. If you can do that, it will give you more freedom to spend on other things you want. It also will be a layer of protection in the event of job loss or emergency, so that your housing costs aren’t so high that you end up evicted or having your home foreclosed.


If you find yourself in a situation where you can’t afford your housing, you can meet with an AFC® (accredited financial counselor) for free and they can help you navigate your options.

** If you find yourself in a situation where you can’t afford your housing, you can meet with an AFC® (accredited financial counselor) for free and they can help you navigate your options.

3. Your cash flow rates

I used to wonder at the end of each month where my money went. While spending plans and budgeting are essential in figuring out where each dollar goes, they don't tell you the trends of your cash flow.

Analyzing your cash flow rates is a quick way to see if you’re on track with your financial goals. It also can help you easily see areas where you can make a change and boost your net worth.

The different cash flow rates include:

  • Your savings rate: the percentage of your income you’re saving each month

  • Your debt rate: the percentage of your income that is going to debt payments each month

  • Your tax rate: the percentage of your monthly income that goes to taxes

  • Your spending rate: the percentage of your income you spend monthly

Here’s how you can calculate each one.

Savings rate:

Total amount you save monthly (add your monthly amounts going to emergency savings, travel savings, 401(k) or other retirement contributions, etc.) ÷ Monthly gross income

Debt rate:

Total amount you pay toward debt monthly (add your monthly payments for credit card debt, mortgage, car loan(s), student loans, etc.) ÷ Monthly gross income

Tax rate:

Using your pay stubs, add up the total amount of taxes taken out of your paycheck for the month. This will give you your total monthly taxes.

Total monthly taxes ÷ Monthly gross income = tax rate

Spending rate: (calculate this last)

Monthly Gross income - total monthly savings - total monthly debt payments - total monthly taxes = total monthly spending (this will include all your monthly payments like groceries, rent, insurance payments, entertainment, etc.)

Total monthly spending ÷ Monthly gross income = spending rate

These four different rates, make up 100% of your gross monthly income (i.e the amount of your paycheck before they take taxes out). Using these rates, you can decide if you want to save more, spend less, more aggressively pay off debt, or increase your income and do all three. Increasing your savings rate and decreasing your debt rate in the long run, will help your net worth grow.

About the Author

Caish Echols

Caish Echols AFC®, CFP®

Caish has worked in the financial planning industry for over 5 years, including working for one of the pioneer financial planners who brought fee-only financial advice to Millennials. She loves making the complexities of finance simple to understand and helping people follow their own paths.

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