Here’s a quick tool to do a health check of yourself financially. Compare your finances to other households around the same age.
The numbers are based off of the results of the 2019 Survey of Consumer Finances by the Federal Reserve, the 2015 Consumer Expenditure Survey by the Bureau of Labor Statistics and the 2017 American Communities Survey. This tool calculates the percentiles by using a +/-5 year range from the specified age and compares the inputs to other househoulds/consumer units who's primary person is within the +/- 5 year range.
17 thoughts on “Financial Health Calculator”
This website is very interesting and easy to use. Thank you for building it. I wonder if the financial health tool has some bugs in it. While playing with it, I kept upping desirable financial health numbers and lowering age and it kept saying normal. For example, a 30 year old with $250k of income, $4k in monthly expenses, $2 million in net worth, $80k in cash, $850k in retirement and $20k in debt comes out with 309 out of 400 points, “about average financially.” That is certainly not me, and I am thinking that over 99% of 30 year olds would trade their financial situation for that scenario–shouldn’t the score and assessment reflect that?
in calculating financial health, it states three categories: networth, cash and retirement savings. my cash and retirement savings are included in my networth how should I address each category?
I believe this calculator compares your answers in each category to averages for your age. It then calculates a single number by assigning points to each answer. This is not very helpful since these numbers all interact. For instance, if you have $500,000 in cash and $100,000 in debt, you are in approximately the same situation as a person with $400,000 in cash and no debt, but the numbers will not be the same at all. So if you want to “optimize” your score, try trading some of your numbers around like this–and maybe you even ought to consider doing so in real life. After all, a person with no debt and $400,000 in cash is actually more secure than one with $500,000 in cash and $100,000 in debt because of uncertain futures. (But I think there are better calculators.)
Actually, 5 years ago I had no debt. Now, technically, I have over $300,000 in debt. It’s mortgage debt on rental properties that have generated an average of of about 15% on equity for several years running. Since I have a sizeable retirement nest egg, I consider the leverage I get from the mortgage loans to provide MORE security. After all, anytime I want to, I could retire pay off a big chunk of the mortgage debt (some of my retirement money is in Roth accounts, so it wouldn’t even be taxed). But that would be dumb; I’d be sacrificing the tax deductibilty of the interest on mortgage debt on investments. My money can do better in the safest interest accruing part of my retirement account. Moral of story: as long as you’re prudent and not over- leveraged, debt can enhance your financial security by providing a low-risk, solid return on investment.
Quick clarification: does debt include traditional mortgages on the family home? What about stocks not in tax deferred acvoun? Does annual income include vested stock options from an employer?
Shnugi, anyone else: The number of points calculated for Cash don’t make sense to me. My Cash amount of $93,000 puts me in the 92.8% percentile for my age and I only score 18.56 points. My Net Worth is in the 92.54% percentile for my age and I score 92.54 points which makes sense. I would think the Cash calculation from percentile to points would be the same as it is for Net Worth. Can someone clarify this for me ? Thanks !
Another question: I own commercial real estate that is debt free and generates about 5% return per year on the value of the property. While this is not as liquid as Retirement funds in more liquid instruments, it is nonetheless a valuable part of my retirement portfolio. Should I include the commercial real estate value as part of Retirement as well as Net Worth, or only include it in Net Worth ?
I got a low score on “expenses,” because my savings contributions are so high. This makes no sense whatsoever.
Don’t include your savings contributions in your expenses. The comparison data is only comparing spending.
I just realized it says “exclude savings contributions.” I totally read it as “include.” Thanks for your response!
you should consider weighing the categories more disproportionately, for example, adding another 0 to my income figure and taking it to 7 figures barely impacts my score but truthfully that extra 0 would change things drastically.
“Monthly housing expenses” should actually be “Annual housing expenses” based on the Benchmark % analysis.
You’re right! Just fixed it
I am a bit confused by the monthly expenses line. Does that include taxes? What about deductions straight from the paycheck? Is a required pension contribution considered an expense?
Expenses don’t include payroll taxes, income taxes or savings such as pensions or other retirement savings. I will update the notes to make it more clear.
I think this is a very good tool, but your assumptions regarding debt and net worth are somewhat amiss. If I increase my net worth and debt by 400,000 each my score goes down, but if I can borrow at 3% and invest at net 8% I can leverage that debt for a after tax free return of 3 to 4% depending on my overall incremental income tax rate. Your model does not accurately reflect the benefits of such a strategy. But for basic investment strategies which continue to focus on reducing debt to the average household this model is good
Sounds like an expected net worth versus today’s net worth.