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If tracking your money is so important, what are the key numbers couples need to know? We'll get into the three to keep an eye on, and the real deal about credit scores!
Why Tracking Your Money is Key to Mastering It
You hear these stories of couples who got out of debt, became financially independent, travel the world, started a business..basically enjoying life.
They all have different paths they take to get there – debt snowball, avalanche to become debt free.
They’re saving 20, 30, or even half their income. Maybe they’re going all in with FIRE with their dual income and are investing 70% of their income.
One of the things I love about personal finance when hearing from others is how varied it can be. Each couple has their own advantages and struggles on their journey.
However, having written about personal finances and interviewed others for the podcast I do notice that there are certain crucial things they did to create a system that worked for them.
I wrote about it in detail in my book Jumpstart your Marriage and Your Money, but I want to hone in on one component today – they became aware of their money.
And how they did it was by tracking it.
Once they had that down, they began shifting it towards what mattered most to them.
Money stopped being a source of stress and instead became a tool they could use together.
The best part is that you don’t have to track a ton of numbers or worry about every penny. It can be something you check in on once a month.
In this episode, we’ll get into:
- Which three numbers matters most for gauging your financial health
- The real deal on credit scores
- Creating an easy system to track your numbers
Let’s get started!
Resources to Easily Stay on Top of Your Money
Here are some resources we mentioned in the episode as well as some other handy articles to check out:
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
- 5 Days to $5K Course
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union. If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!
Key Takeaways on tracking your money
If you want to quickly grab the big lessons, here are the main takeaways I had when preparing this episode.
- The power of tracking your money isn’t the amount, it’s the awareness.
- Your financial health can’t be summed into one number.
- Focus on the signals not the noise.
If you want to discuss this more, please come chat with us on Facebook in the Thriving Families Group. We’re supportive. We’d love to see you there!
Three Key Numbers to Stay on Top of Your Money
In the personal finance world, there is no shortage of numbers that you can track, but you'd be better off putting your energy towards numbers that give you a picture of your financial health.
And just like with your physical health, one number isn't going to give you the whole story. Instead, you can get a clearer picture of how you're doing financially by tracking these three numbers, your net worth your monthly cashflow, and your savings rate.
And depending on where you are are with your financial journey, you're going to prioritize them differently. A couple who is dealing with a ton of debt are going to be looking at billing, some financial stability, get some buffer buildup, put out some of those financial fire, so to speak with those high interest.
And then you have a couple who could be on their way paying Austria dad's they already have an emergency fund. And so they do have a little bit of breathing room in their budget. So now they're looking to optimize their expenses and find other ways to grow their income. And finally, you have a couple that gains a little more agency and option start opening up because their finances are in a pretty good spot and they might be interested in pursuing financial freedom or independence.
So now they're figuring out, okay. That line of where there are speeding up the process of getting towards financial independence while still enjoying the journey and their quality of life. So let's talk about why these particular numbers matter and what they can tell you about your money, your net worth.
Think of this as the big picture view. If you've been reading or following podcasts in the personal finance space, then you've probably seen different ones sharing their net worth updates. And I have to admit it's pretty fascinating. I see some who have started deep in debt achieve their goal of financial independence.
And I did this for the first few years on the blog. As we were getting out of debt pain, car loans, the student loans, until we hit a hundred thousand dollars for our net worth. And just coming from our perspective, as the ones writing it, I found it encouraging and motivating to see the numbers move in a positive direction.
And yet there were times when we had setbacks, but having that snapshot gave us an idea of what the problem was at that time. And the great thing about your net worth update. It's fairly simple. You're taking everything you own cash you have in your bank accounts investments, the value of the assets that you own could be your house, your car, and then you're subtracting what you own.
If you have a house, what's the mortgage on that. If you have a car and the car loan, then you subtract that car loan. And so with that formula, you get that snapshot view. What you. Oh, minus what you own is your net worth. The second one is your monthly cashflow. This is ground level. View of your finances is usually how we approach things.
We plan for the month. We take our paychecks, make sure that we take care of the necessary expenses, set aside some money for paying down debts or saving, and then having some money to enjoy now. And so if you already have a budget. This is fairly simple. You're simply comparing what is our actual spending and our actual income coming in.
And if you see that you are running a deficit, then you can fix that by either reducing your expenses or increasing your income. And because you're looking at a monthly view, you can also see if there are certain times of year where your expenses run higher than normal. Typically. Couples deal with the regular expenses could be insurance premiums.
If you have kids, maybe back to school supplies and shopping and other expenses like property taxes, and finally your savings rate, while this is usually associated with those in the fire of movement, you don't have to be going all in with financial independence to reap the benefits. I'm going to tell you, at the beginning of our marriage, we didn't initially track our savings rate, but when we did start tracking it, it was pretty small thinking around maybe 5%.
But we started improving it by making small changes. If we got to raise a portion of it was automatically put towards savings, any windfalls like tax refunds or surprise bonus also had a portion diverted towards savings. So, if you are embarrassed about what your current savings rate is, do not worry where you start is not where you will finish now that you know what to look for.
How can you track these? Every couple is different, but the key here is making sure it's done in a way that's quick and easy for you. One of the most convenient ways I've seen couples track their money. Is by using apps. There are a ton of them out there pending on how many accounts you have, how important it is for the two of you to communicate back and forth.
In what particular goals you're tackling. There's going to be a different app for every couple, some apps that I've mentioned before on the show. And I'm going to mention again, Our personal capital mint, Zeta, and honey fi what makes apps like Zaida and honey fi really special is that they are created specifically for couples.
You can adjust it to share whatever accounts you need to between each other. Another option that might be perfect for you is using spreadsheets. Spreadsheets might seem old school, but with options like teller, They've been completely updated. Tiller allows you to have the customization of spreadsheets along with the convenience of apps, because they pulled the data for you.
So you can start off with a template based on a budget that you would like to use and then adjusted for your specific needs. Of course I can't list. All of the options out there for you tracking your budget. But I just wanted to the highlight a few of my favorites. And if you want to discuss this more, please join me in our thriving family Facebook group, besides getting my take on different apps that are out there, you can also ask and swap stories with other families to see what's worked for them.
And what hasn't. However you decide to track your money. Just make it simple enough that you can check in every month during your money dates. Get a good idea of those three critical numbers.
Why Your Credit Score Matters (and When It Doesn't)
Alright, so we talked about net worth your savings rate and your monthly cashflow as crucial numbers to know. But if you remember at the top of the show, I mentioned a fourth one. Your credit score for most people, that's the number they are most familiar with and it can be understandable well, because your credit score is used in so many different ways.
Lenders, take a look at your credit score when deciding what interest rates you qualify for with credit cards, Carla loans and mortgages, Lawrence companies also use information from your credit report and credit score along with a couple other things to calculate what premiums to charge you. And depending on what industry you're working in, say, finances, your employer may check your credit as a precaution.
So why didn't I include your credit score with the other three numbers? The first reason is what exactly is a credit score. Measuring. You may think that since so many lenders use this number, that it would be a good indicator of your financial health, but in reality, your credit score gives lenders an idea of how credit worthy you are.
How well can you handle the debt? So what does this mean first? Let's talk about how your credit score is calculated. So your credit score is based on what your credit report and that report should have a history of your debt payments, your credit cards, your car, and student loans and mortgage, and then taking that information, how they calculate your score is based on five factors, your payment, history, the amount of debt, UL, the length of your credit history.
Any new credit you have, and the types of credit, the first three are where your credit score is weighed heavily on. So if you have a history of making late payments or missing payments, that's going to really drop your credit score. But if you're looking to get the best score possible, you want to, because on all of those key factors and I do have a couple episodes and posts that go into detail on how to raise your credit score, but you may have noticed that your credit score only focuses on one thing, debt.
Your savings rate that you have invested those aren't a factor with calculating your credit score. So you're not getting an overall view of your financial health and another thing to consider. If you are thinking about pursuing financial freedom or independence in getting out of debt is part of your goal completely debt free.
Then your credit score is even a smaller factor in the long run. And then finally, nowadays for better or worse, it is easy to track your credit score. In fact, I have several ways that I could see what my credit scores are. With the different bureaus based on different apps that I already have, or even your banking institution.
So while I won't say completely ignore your credit score. I don't think it's one of the big ones that really matter. In fact, if you take care of the other three and you are slowly building financial stability agency and eventually freedom. Your credit score will improve because you have your financial system in place and you also won't be so dependent on it.
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Like the music in this episode? Our theme song is by Gentle Regime. Additional music by Lee Rosevere