What’s Your PF Score?

You know how we’re always so concerned about our Credit Score? The dreaded Mr. Fico who goes up and down and all around, playing with our emotions quicker than an episode of The Bachelor?

Well, not to worry anymore… There’s a new score in town, folks.

It’s called the “PF” Score, and here’s more from the founder:

The new score that I’m proposing is called the PF Score, or Personal Finance Score. This is measured by taking the ratio of your net worth and dividing it by your annual expenses. So if you have a net worth of $100,000 and your annual expenses are $25,000, your score is 4. Alternatively you can have a negative score if you have a negative net worth, someone who owes more to others than the cumulative total of all their personal assets.

Pay no attention to that “proposal” part, a minor formality at this point. What jly224 has come up with (his real name, btw) is the next Big Thing to hit personal finance since Dave Ramsey – I’m calling it now. When you’re discussing this with your kids 20 years from now, you can tell them you were one of the first to know about this, courtesy of your billionaire friend J. Money ;)

In all seriousness though, I agree this is a much better score to keep track of than your credit one. Sure it’s a necessary evil and we’ve gotta make sure it looks okay for that next time we finance a car/house/spaceship (those things are expensive!), but watching your net worth and expenses can do you much better over the years.

Here’s two reasons why:

  1. Your net worth gives you an overall snapshot of your money. Your credit score gives you an overall score on how much cheaper you can take on debt.
  2. Your expenses tells you how much you’re leaking every month. Your credit score tells you that at least you’re leaking it with less interest. (That is if you’ve got a good score. If not, it’s laughing at you while punching you in the ‘nads)

I also like this score tracks a ratio vs credit history too, since you can have a great credit score but still have lots of debt and/or no savings/investments/worth whatsoever. Whereas with this new “proposed” PF Score it gives you a much more accurate financial picture.

Again, Fico scores are still important because companies need to know how trustworthy you are with your money (though I had a good laugh when jly224 mentioned: “I have to give the banks credit here for coming up with a great money making idea”), but it doesn’t mean we can’t track both.

So step #1 is to figure out your net worth

You probably already know this number if you’ve been a reader of this blog for more than 2 days (I tend to shove this down people’s throat, but that’s only because I care! ;)) but if you haven’t, here’s the general equation: Assets – Liabilities = Net Worth.

Now what entails an “asset” or “liability” is totally up to you – some people include their cars, homes, personal effects, while others ignore them all, even their retirement accounts! (crazy, I know) – but it’s really whatever you think is important to track. You can use simple excel spreadsheets to document it all too, like the one I created and use every month, or you can use programs such as Mint.com or even Personal Capital which I hear does an excellent job.

Then for fun you can compare your net worth with dozens of personal finance bloggers out there with my nifty Net Worth Tracker post I created last week ;) You can see what others are doing to grow their numbers, as well as those higher – and lower – than you for some prime gawking. But that’s all you’re allowed to do. No getting down on yourself or anything – the only number that matters is YOURS!

Next, it’s time to find your average spending

Hopefully you’re already tracking this stuff too, whether in those same excel spreadsheets or other budget tracking software (YNAB, maybe?), and all you have to do is pop open the screen and add some numbers together. Or if you’re a super nerd like me, you’ve already got it engrained in your head while obsessively trying to lower it every other second ;)

Regardless, once you’ve got those two numbers it’s time to play ball. As a refresher, here’s the ratio again: Net Worth / Annual Expenses = PF Score

Now you know what’s coming next (I’m about to ask you to run the numbers and divulge your own score!), but as always I’ll never ask you to do something that I wouldn’t do first. So, let’s run my numbers, shall we?

  • My net worth: $433,149.74
  • My annual expenses: $66,000 (ugh.)

Making my Personal Finance Score…. bum bum bum… a hefty 6.56! Woohoo!!! Wait… I have no idea if that’s actually good or not? Haha… I forgot to check out/tell you what the scores mean!

What your PF Score says about your finances:

Here we are…. taken from the PF Score Master of Ceremonies himself:

  • <0 : You have a negative net worth and need to get out of debt NOW!
  • 1: Nice Work! You’ve successfully saved up one year’s worth expenses.
  • 5: You starting to pick up steam, keep up the good work.
  • 10: The ball is really rolling now. You’re money is getting behind you every step of the way.
  • 25: Congratulations you are now financially independent. You can now withdraw 4% annually from your investment, without ever touching the principal, to cover all of your expenses. You no longer have to work for money.
  • 30: Your investments are now out earning your spending and continuing to grow.

So it looks like I’m in between “picking up steam” and “the ball is starting to really roll now”… that’s comforting? (Who made these rules up?? I’ve got half a mil banked bitch! ;)).

But there you have it. A new score to measure your success that’s primed to take over the Credit Score in no time… You saw it here first second, folks!

Now, how’s your score looking pray tell?

PS:  Did I mention I’m tracking all the bloggers’ net worths? CHECK IT OUT NOW – or else!
PPS: “Or else” = sicking this guy on you.

[Photo by andymag]

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PS: If you’re just getting started in your journey, here are a few good resources to help track your money. Doesn’t matter which route you go, just that it ends up sticking!

If you're not a spreadsheet guy like me and prefer something more automated (which is fine, whatever gets you to take action!), you can try your hand with a free Empower account instead (formerly Personal Capital)

Empower is a cool tool that connects with your bank & investment accounts to give you an automated way to track your net worth. You'll get a crystal clear picture of how your spending and investments affect your financial goals (early retirement?), and it's super easy to use.

personal capital dashboard

It only takes a couple minutes to set up and you can grab your free account here. They also do a lot of other cool stuff as well which my early retired friend Justin covers in our full review of Empower - check it out here: Why I Use Empower Almost Every Single Day.

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  1. Tom S February 17, 2014 at 6:23 AM

    o_o Why do I click on those….

  2. Pengepugeren February 17, 2014 at 6:36 AM

    1.05. That’s not too bad considering that we graduated only 3 years ago. Still, it’s far from optimal.

  3. Charles@gettingarichlife.com February 17, 2014 at 6:38 AM

    I look at cash flow more than net worth as some people have their wealth tied up in cars and collectibles. They have value but won’t generate money to live on. Rents for our properties are low compared to the values thus inflating our number.

    1. J. Money February 17, 2014 at 3:39 PM

      Very good thing to keep in mind, you’re right!

  4. eemusings February 17, 2014 at 6:54 AM

    Am I missing something? I’m not in debt but my net worth is lower than annual expenses at the moment, so I have a negative score.

    1. Scooze February 17, 2014 at 8:14 AM

      I think that should give you a fraction, not a negative score.

  5. Sharon February 17, 2014 at 7:15 AM


    That puts a smile on my face this morning. :-)

    1. Josh February 17, 2014 at 10:44 AM

      Sharon, Wow! You’re almost there, in fact, you’ll be there in no time. Keep up the great work.

  6. Sarah February 17, 2014 at 7:18 AM

    Define expenses. The money you need to live without including savings? Should I include frivolous expenditures? My expenses are LOW if I don’t count the money that i piss away on optional purchases.

    1. Josh February 17, 2014 at 12:30 PM

      You can include your savings if you would like. It’s up to your. The purpose of the PF Score is to give you an idea of what the earnings off of your investments making up your net worth will cover.
      If you hit that magic 25 number and include savings in your expenses then you’ll be able to continue to save as well as cover all your expenses without ever having to work for money again.
      If you hit 25 and don’t include your monthly savings, you can count on your expenses being covered but will have to keep on working if you want to continue stashing cash.

  7. Alicia @ Financial Diffraction February 17, 2014 at 7:22 AM

    EE, I think that you read the “greater than, less than” signs backwards. You are in a category between the first and second that isn’t listed. Your score shouldn’t be negative, it should be between 0 and 1 (20k net worth over 25k expenses is 0.8, for example).

    Mine is -1 or so (rough math in my head). But it’s on the climb, and I’ll be getting out of that first category as soon as possible!

  8. Mrs. Pop @ Planting Our Pennies February 17, 2014 at 7:23 AM

    Haha, we just started including this tracking in our net worth reports, but we do it as
    Net Worth / (12*last month’s spending)
    since we update everything monthly and it’s a nice check-in to see how it gets affected when we have a spendy month.
    Last month it was 10.2! 25 here we come!

  9. Scooze February 17, 2014 at 8:19 AM

    8.23. I like the idea because it’s so simple. However, it aggregates investments with non-income-producing things like houses and cars. Some people have more of these than others so its not perfect.

    But for most of us, it’s a great tool.

    Now how does age figure in? I’m 46.

    1. Scooze February 17, 2014 at 12:03 PM

      Interesting. Now that I look into it, it’s not clear if you should include your savings or not. I included my retirement but not my discretionary savings. (I am building up a large fund of 2 years’ worth of expenses that I can use for travel in retirement if I don’t need it for a job loss). If I did include my retirement and discretionary savings in this number, mine would be 6. If I don’t include retirement savings (assuming that once I hit that 25 number I won’t need to save for retirement anymore), then it would be an 11.

      1. J. Money February 17, 2014 at 3:41 PM

        I think it’s up to you to interpret. To me the point is to get a good overall snapshot of your financial situation, which I think it does pretty well. But you’re right that the non-income producing one (I guess we put savings in there since it doesn’t make much?) certainly skews it.

  10. Laurie @thefrugalfarmer February 17, 2014 at 8:19 AM

    Our PF score isn’t negative, but it’s embarrassingly low, though. We’re working on this, however, so I would imagine we get a point for that. :-)

    1. Josh February 17, 2014 at 11:00 AM

      Persistence is key here. Everyone starts at different points, the key is sticking to it. You’ll begin to notice eventually that the time and effort it takes to get to that next level decreases with each level you hit. That’s the magic of compound interest working on your side. Keep up the good work.

  11. Anne @ Unique Gifter February 17, 2014 at 8:20 AM

    I think I’m roughly around 8.5… But that’s a super rough estimate.

  12. nofearingthemoney February 17, 2014 at 8:21 AM

    Interesting exercise. Our score is 17 at the moment. The change is net worth is outpacing the change in expenses (meaning our net worth is growing at a faster rate than our expenses), so that is helpful.

    1. J. Money February 17, 2014 at 3:42 PM

      DEFINITELY a good place to be! Way to go!

  13. Brian @ Debt Discipline February 17, 2014 at 8:22 AM

    Under 2, but still working the debt snowball. So bigger numbers to come in the future!

  14. Holly@ClubThrifty February 17, 2014 at 8:26 AM

    Sweet! I try not to get too caught up in our net worth, and mostly focus on the fact that it’s heading upward. However, I think this is a cool way to track it! I’m shooting for a 30! =)

  15. John S @ Frugal Rules February 17, 2014 at 8:27 AM

    Looks like we come in right around 9.5 – not too far off from 10 and then we really get the momentum going as we head towards that 25. :)

  16. Michelle February 17, 2014 at 8:43 AM

    Interesting! I really like this. Our number is around a 5, I really want to work on increasing that!

  17. Jen @ Jen Spends February 17, 2014 at 9:04 AM

    I’ll need to look at this in more detail later, but my quick estimate is somewhere between 1 and 2. I’m proud of that, considering what we have to work with. We’re almost finished saving our emergency fund, so should have extra money to invest soon. I definitely like this idea better than FICO, which has little to do with financial health.

    1. J. Money February 17, 2014 at 3:42 PM


  18. save. spend. splurge. February 17, 2014 at 9:14 AM

    If I spent the way I spent last year: 5.606

    If I spend the way I PLAN on spending this year, assuming my net worth stays about the same: 10.86

    Ooo. that is really motivating.

  19. Lucas February 17, 2014 at 9:20 AM

    22 :-) Counting home equity that is used to reduce expenses but not available for investment withdrawls is a little deceptive in terms of the financial independence part.

    Personally i have been advocating 3 numbers
    1) Networth/annual expenses – the PF number here tells roughly how close you are to FI. The best part about this number is that it shows the power of reducing expenses!
    2) Networth/annual income – tells how well you are doing at savings and coupled with PF number tells others what percentage you are living on of your income without being explicit about it.
    3) Debt/Networth – tells how much you are using debt to leverage your investments – not always a bad thing, but deals with security. (lower numbers better here)

    My numbers on these three scales are 22, 6, 0

    1. J. Money February 17, 2014 at 3:43 PM

      That’s a good way of tracking progress. You hit all the major areas :)

  20. Mark Ross February 17, 2014 at 9:23 AM

    I like this one than credit scores. PF scores are easier to compute, and it does not require many factors with different percentages. Really nice.

  21. Kim@Eyesonthedollar February 17, 2014 at 9:31 AM

    You can be dead broke with an awesome credit score. Credit scores just mean you can make payments on time and have lots of available credit.

  22. Dave @ The New York Budget February 17, 2014 at 9:42 AM

    The PF score is great! The financial blogging community should make a concerted effort to promote the use of this number – seriously!

    1. J. Money February 17, 2014 at 3:44 PM

      Watch us fast forward to next year and it’s “all the rage” ;)

      The credit card companies wouldn’t like us very much though… meaning all those bloggers who churn cards for rewards will be in hot water, haha…

  23. Jon @ Money Smart Guides February 17, 2014 at 9:45 AM

    I like this score for all of the reasons you pointed out. The only problem I see with it is that most people have no clue how much they are spending! I’m not just talking the average joe either. I worked in a high net worth financial planning firm dealing with clients who were multi-millionaires and even many of them had no clue how much they spend. In some ways, it amazed me that they were able to amass the wealth they had while having no clue about their spending.

    1. J. Money February 17, 2014 at 3:45 PM

      That’s definitely scary, you’re right. But at least this way of scoring stuff makes you stop and at least think about it for a hot few – which we can’t say for credit scores :(

  24. Mel @ brokeGIRLrich February 17, 2014 at 10:28 AM

    I love that it takes into account your annual expenses! It doesn’t seem like any other formula rewards frugality and thrifty spending habits.

    I would’ve nailed this formula back when I lived on a cruise ship – if I hadn’t been paying off student loans. At least I’ve made it past 1 for now!

    1. J. Money February 17, 2014 at 3:46 PM

      You lived on a cruise ship??? That’s awesome! Would you ever want to write up a guest post on your experience? :)

  25. Wunderwriter February 17, 2014 at 10:34 AM

    A couple of questions:

    1. Monthly expenses x 12 = annual expenses, but that number includes what? Money that goes into investments? Savings? Groceries? Discretionary? Or just monthly hard costs such as mortgage, loans, utilities, etc.?

    2. Net worth already dings you for liabilities, i.e. your mortgage balances, vehicle loan balances, etc. Dividing a net number by annual expenses (which includes the payments on the mortgage, car, etc.) smacks of a double whammy…

    Am I missing something here? BTW, dividing our current net worth by monthly expenses (including all payments on everything I track, including utilities, medical, etc. but excluding groceries, vet, discretionary), we come out to 12.1748 PF (whatever that actually means).

    I always like to look at “what if” scenarios when calculating overall net worth, i.e. what if I actually did sell my home (add 8% for sales costs), what if I did move to a cheaper place (moving costs), what if I rented instead of owning (subtract maintenance and repairs, insurance, upkeep, HOA, etc.). It’s easy to romanticize the process and choose the number that makes you feel the best about yourself, but at the end of the day, if you sold your home, your cars, your clothes and your jewelry, you might have a nice tidy stack of cash, but you’d also be naked, homeless and hungry!

    1. Josh February 17, 2014 at 11:14 AM

      A couple of answers for you:
      1. Monthly expenses here are up to you to define. Eventually if you would like for your passive income via the investments making up your net worth to cover savings, discretionary spending etc. then you should include them here.
      2. While net worth does ding you for liabilities, it doesn’t ding you for monthly grocery expenses, or your rent if you are a renter. The point of this score is to show weather your passive income off of your net worth can cover your expenses on into perpetuity.

      The point of the PF Score is to give you a number that tells you how close your are to being financially independent or as one of my favorite bloggers out there says, “Having FU Money.” For further reading see: http://jlcollinsnh.com/2011/06/06/why-you-need-f-you-money/

      1. J. Money February 17, 2014 at 3:48 PM

        (Great article, and guy, indeed)

  26. Erik February 17, 2014 at 10:42 AM

    I got 2.06.

    Considering I graduated from college less than a year ago I think that’s pretty good :D Was able to work through college so I have zero debt.

    1. Josh February 17, 2014 at 11:05 AM

      Nice Job Erik, you’re way ahead of where I was one year out of college.

  27. a terrible husband... February 17, 2014 at 10:57 AM

    We’ve been pretty blessed. Ours is a little misleading though because a vast majority of our net worth is in retirement accounts and home equity, which we can’t live on (at least w/o penalty) for another 24 years or without selling our home.

    If we include our legit “net worth” and only include living expenses and 529 additions (but not including retirement savings) we’re at about 17. BOOM!

    But if you were to exclude retirement savings balances, 529 balances and our home equity, and only include taxable investment accounts and savings we’re at about 4. SAD FACE.

    Love these posts, and particularly the way it makes people think.

    Thinking is a novel concept sometime…

    1. J. Money February 17, 2014 at 3:51 PM

      Haha… You can tell by the amount of comments here already how much we love a new and refreshing take :) A nice change of pace from all the stuff we read/see day in and day out (it’s not like the principles of money has changed much over the past centuries, haha…)

  28. Matt Becker February 17, 2014 at 11:06 AM

    Love it! Ours is about 3.75. Still a ways to go!

  29. Debt and the Girl February 17, 2014 at 11:08 AM

    Very interesting. I never know what to include in net worth. We have a house but that is a changing asset so never know if I should count it in or not. I am glad to be in my 20’s with a positive net worth. Many people can’t say that.

    1. Josh February 17, 2014 at 11:22 AM

      I would include the equity you have in your house in your net worth calculation, your home’s value minus what you owe on it. That way you get watch how appreciation can give you a great boost.
      Being in your 20’s with a positive NW is awesome, I started out of college with a negative $50k NW, and it took me a good 2 1/2 years to finally turn it positive. Keep up the great work, you’re doing awesome.

      1. J. Money February 17, 2014 at 3:52 PM

        (I second what Josh said)

  30. Samantha February 17, 2014 at 11:08 AM

    Woo hoo! 7.2 !

    Right there with you J$ – in between “picking up steam” and the “ball is rolling”. We should have our mortgage GONE by the end of this year, so next year we will have much more ‘extra’ money to invest and raise that number to 25!

    1. J. Money February 17, 2014 at 3:52 PM

      Holy crap – no mortgage?? I wouldn’t even know what to do with myself! :)

  31. Done by Forty February 17, 2014 at 12:25 PM

    I tweeted your post over at Rockstar Finance…such a cool idea. I think the benefits far outweigh the negatives (as other poster have noted, home equity may or may not be a great idea to include for some people). But it covers the two biggest drivers: your expenses and your ability to invest.

    Right now we’re at about 15.33 but we’re using a gross estimate of our annual expenses. We’ll have a much more accurate idea of what they are at the end of 2014.

    1. J. Money February 17, 2014 at 3:53 PM

      Thanks for the love man, glad you liked it :) You’ll actually be featured on Rockstar Finance here soon too! Keep your eyes open for it.

      1. Done by Forty February 18, 2014 at 10:45 AM

        Thanks, buddy! That’s awesome news and I’ll definitely keep an eye out. Cheers!

  32. Will Murphey February 17, 2014 at 12:39 PM

    30+ score here
    39 years old family of 4 (one child in college, one in elementary school)
    Retired 2 years ago.

    Methods that help with reaching early retirement:
    Never Divorce
    Have an extremely high saving rate (example at least 70%)
    Pick a monthly budget spending amount, never deviate from it, (stash raises and bonuses)
    Save, save, save, invest the rest.

    1. Josh February 17, 2014 at 1:11 PM

      Will, excellent job sir! You’ve done exceptionally well. I’m curious, what PF Score did you hit when you finally felt secure enough to jump off the hamster wheel? Was it 25, or did you wait until you hit 30?

      Great tips too, thanks for sharing.

      1. J. Money February 17, 2014 at 3:53 PM

        HOLY CRAP!! Way to go!!

        1. Will Murphey February 18, 2014 at 10:45 AM


          My score was 21 when my wife and I quit work to move with my wife’s terminal father. Sucky deal, but we made some great memories before he passed. My investments at that time almost covered my families living expenses, but since we were living with him, we were okay. After a few months, we started investing in rental properties and our number continued to climb upward. We purchased several homes at the bottom of the last housing bust and have realized some nice equity. Our living expenses have never been above 3K a month even when we earned over $150K combined during our peak earning years. As you both know, the key is to maximize your earnings while keeping your expenses low, and save and invest the rest.

          I just discovered both your sites withing the last 2 weeks, I’ll be hanging around more. Nice job guys!!


          1. J. Money February 22, 2014 at 8:29 AM

            Rock n’ Roll, man. You’ve kicked lifestyle inflation in the ass!

  33. Ree Klein February 17, 2014 at 12:49 PM

    I LOVE THIS METHOD!!!! What a simple formula that forces you to pay attention to the two most critical factors in growing wealth: how much you keep vs how much you spend.

    I’m in an odd place right now because I’m trying to build a business while living off some contract income and savings earmarked for this purpose. But, with that said, my PF score is 18.33 not bad, but that number 25 looks so much better!!!

    This formula is a nice confirmation that the 1.6 million I’m working towards is about the right number for the amount of spending I like to do. Yeah!

    1. J. Money February 17, 2014 at 3:54 PM

      What I love about you too is that you’re totally cool with your spending habits even though you know they could be lowered if you really wanted to ;) But you don’t! You’re a woman who knows what she wants!

  34. Jacob February 17, 2014 at 2:13 PM

    Too embarrassed to post my number, but let’s just say it’s under 10. ;-)

    I love this idea, tho. Nice work, Josh!

  35. Crystal February 17, 2014 at 2:15 PM

    Our net worth (with homes and the one mortgage) divided by our annual expenses not including taxes was 6.25. If you include taxes, it’s 4.5. Seems we have a ways to go. :-)

  36. Flannel Guy ROI February 17, 2014 at 2:27 PM

    I really like this idea because you don’t have to give away all your financial details if you aren’t comfortable with it, although, you can sort of back into them with a few estimates. I am sure some of the cash-flow crew would insist that an alternative, parallel cash-flow calculation be considered. I guess the equivalent would be take your annual cash flow, multiply by 25 and then divide by your annual expenses.

    Regardless, I’m about to turn the corner on 3!

    Also, the a variation of this ratio is sort of cool too. While the calculation is a little less intuitive, the stat is pretty easy to understand. Divide your net worth by 25 (this is your safe withdrawal number more or less) and then divide that number by your annual expenses. This will tell you what percentage of your expenses can be covered with passive income. A number over 1.0 indicates you are financially independent. A number of 1.2 (derived from PF score of 30 above) means your money is definitely growing faster than your spending… definitely a first world problem.

    1. Josh February 17, 2014 at 3:10 PM

      Thanks for your comments Flannel Guy! That is one of the perks of the PF Score being that you don’t have to disclose your actual net worth or your annual expenses.

      You can be a doctor with a huge income, driving a BMW, but with that have huge expenses that brings you down to a low score. While the nurse assisting you with a salary 1/4 the size can be doing much better depending on how she is managing her expenses. This score is a great equalizer, and really shows who is managing their finances for the better.

      1. James @ Flannel Guy ROI February 17, 2014 at 3:29 PM

        Then there are of course the people who just love their jobs so much that they never want to quit and aren’t worried about retiring unless their health forces it. Their PF score probably doesn’t need to be as high, because let’s face it… they are already living the dream :)

        They have us all beat in a way. Anyway, I really like your blog, and good work with the PF score!

        Much respect from a fellow cascadian. Cheers-

        1. J. Money February 17, 2014 at 3:57 PM

          I agree – it’s a nice equalizeer indeed.

  37. Gene Roberts February 17, 2014 at 2:27 PM

    Net worth divided by basic budgeted expenses = 13

    If I use a more reasonable expense figure that includes discretionary spending, it is more like 10ish.

    Still, not too bad for 43 years old.

    1. Gene Roberts February 17, 2014 at 11:15 PM

      Oh, and if you are using your PF as a guide to when you’re ready to retire (or financially independant) you would want to deduct those budget items that you won’t have when you are retired.

      For me, that means taking off the mortgage which I will pay off prior to retiring.

      That brings me to a PF of 26 or 16.6 depending on whether you include discressionary or not.

  38. Kali @ CommonSenseMillennial February 17, 2014 at 2:48 PM

    Neat method! We scored right under 4 – not bad for being so young, I’d say. I’m excited to return to this calculation at the end of the year when I update our net worth to see how much it’s grown!

  39. Angella February 17, 2014 at 3:31 PM

    I get a 3.66. Ouch, but better than negative I suppose. 31 here and working my ass off to save and make up for allll the mistakes we made in our early 20’s. Live and learn :)

    1. J. Money February 17, 2014 at 3:56 PM

      (Hopefully you had a ton of fun doing so at least ;))

  40. Broke Millennial February 17, 2014 at 4:25 PM

    Under 5. If I lived anywhere else in the country (other than maybe SF or LA) I’d probably be much better off. I love the idea of a PF score vs. a FICO score. Not a fan of debt-based scoring.

  41. Steve February 17, 2014 at 4:41 PM

    My wife and I am right about at 10.

    The authors of The Millionaire Next Door have a calculation which determines if you are a Prodigious Accumulators of Wealth (PAW) or a Under Accumulator of Wealth (UAW). Take your age and divide by 10 and then multiple by your income. That gives the expected net worth for someone your age and your income. A PAW would have twice that amount in net worth, a UAW would have half that amount in net worth. So based on this, a 50 year old who makes 100K a year would expect to have 500K in net worth. To be a PAW, they would have 1 million or more, to be a UAW, they would have 250K or less.

    This formula does not work well for those who are younger and just entering the work force who have not had time to build net worth, especially through passive income such as compounding interest.

    Based on that formula, me and the wife are about half way between the expected average and being a PAW. That being said, 6 years ago, before we met, we were probably half way between the average and being a UAW.

    1. J. Money February 22, 2014 at 8:32 AM

      Oh yeah! I forgot about that calculation – good one indeed… It’s been about 6 years since I first/last read that book too – might be due for a refresher :) Thanks for stopping by.

  42. Frankie's Girl February 17, 2014 at 5:00 PM

    Mine comes out to 22.6, so not too shabby.

    I’m on target to retire early in 2015 at age 41, and if the husband so chooses, he’ll follow in 2017.
    Not bad for a couple that has never gotten close to a 6 figure income combined!

    1. Josh February 17, 2014 at 6:57 PM

      That’s the beauty of knowing how to manage your money. You get it to work harder for you, and you don’t ever have to have a huge salary to come out wealthy in the end. Nice going!

  43. Blake @ BeanCounterbyDay February 17, 2014 at 6:07 PM

    Ugh….I’m at about 1.3

    That’s freaking sad for an accountant. It’s posts like this that really make me hate myself for all that spending I did in my early twenties, haha.

    1. Josh February 17, 2014 at 6:59 PM

      The first step is always realizing you need to make a change. You’ve clearly done that, and now I’m sure all of those bean counting skills you’ve built up will rapidly speed up your progress towards future goals. You can do this!

      1. J. Money February 22, 2014 at 8:32 AM

        Agreed – we’re all in different stages, baby!

  44. Jay February 17, 2014 at 7:07 PM

    Awesome, I love it! Here are a couple of other interesting ratios

    Net Worth/Basic expenses upon retirement(not current expenses)
    Accessible Net Worth/basic expenses upon retirement
    Accessible and income producing wealth/basic expenses upon retirement.

    This last one is most important for us – because some things like home equity and precious metals do not produce income. Increasing home equity is a tough one in the calculations, because the monthly expense doesn’t go down with increased principal – but its still a great idea IMO!

    1. J. Money February 22, 2014 at 8:33 AM

      Cheers to that! :)

  45. stephanie February 17, 2014 at 9:45 PM

    I like this one J$$$. I can tell you, I’m with the very low scores (note embarrassed face) however, it looks like next year this time I’ll be much better off. That’s a feeling I like!
    I’m also one of those people who LOVES, as in absolutely, positively, is 10000% into her work. I don’t know when I’d even consider retiring. My work is just that important to me, and in my scheme of things, it’s a very giving place to be. I suppose at some point I should be concerned; I put 10% into my 403b, and my company has an additional pension they contribute to on my behalf. When I hit 15 years of employment, there is another pension that kicks in. Small, but since they’re the one funding it, I’m not complaining. The 1st pension is a % of my salary each year I’m employed.
    Is it possible to have a low score and still be happily on the right side?

    1. J. Money February 22, 2014 at 8:36 AM

      I think anyone who’s figured out a way to be that happy at a job has hit a jackpot! Haha…. Good for you! :) And that the place you’ve found also still has a pension??? Double jackpot! I don’t know how much or not you’ve saved/invested already, or what your expenses are/etc, but I’m sure if you sat down and ran the numbers and projected you’d be able to figure out a decent game plan :) I think as long as you’re always aware of your financial snapshot, and can adjust as time goes on, you’ll be fine. But you def. gotta stop and run the numbers for a bit so you get that good grasp sooner than later.

  46. The First Million is the Hardest February 17, 2014 at 10:03 PM

    I really like this. Its an easy way to look at your financial situation! We came in at 7.02. I think we could improve that a little bit by cutting down those annual expenses though!

  47. martha February 17, 2014 at 10:53 PM

    I never thought this was something I should think about! My net work isn’t that high since I just got out of school and I don’t make that much but this really made me look at my sprending

  48. LAL February 19, 2014 at 6:30 PM

    With mortgage and current burn rate I have a PF number of 14.5. If I got rid of the mortgage and moved and bought a different home my PF number would be 24.4

    1. J. Money February 22, 2014 at 8:37 AM

      Nice! That’s quite the jump too!

  49. Nic February 21, 2014 at 9:02 AM

    I guess I just have a hard time with the name…..

    I like the concept if you are tailoring it towards retirement savings and how much one needs to retire, however to call it a personal finance ratio, I feel it’s a little misleading as it doesn’t tell you how well you’re doing in terms of current inflows/outflows (which I would think is what a personal finance ratio would tell me).

    1. J. Money February 22, 2014 at 8:37 AM

      I give you permission to change it ;)

  50. Grayson @ Debt Roundup February 24, 2014 at 11:12 AM

    Well, I am at a 1.4 right now. While I am not happy with that, I know that my net worth is low. Just got into the black a year ago, so I am shooting for 10 within the next year or so.

  51. Slinky February 24, 2014 at 1:40 PM

    I like this ratio too. It’s a nice abstract way to compare situations without getting into all the details. It also feels like it’s uniting the two “sides” of personal finance – earn more (increase net worth) or spend less (decrease expenses). They’re really two sides of the same coin and either will work. Both works even better though!

    I’m on the low end with a 3.5. Not as high as I’d like, but not bad all things considered. Projecting out to next year, I should easily blow past 5. Woo! Look at me go! It seems like things should pick up a bit now that I made it past the typical “getting started” gauntlet of expenses (car, wedding, house, etc). Also a second car because city buses are evil. EVIL.

    And completely off topic, but I have to share with a fellow PF nerd, because no one else will care! My mortgage payment just adjusted and is now $997, which feels so much more awesome than $1,002.

    1. J. Money February 24, 2014 at 6:14 PM

      Rock n’ roll! That $5 re-invested over time will probably make you rich in itself ;)

  52. Shannon February 24, 2014 at 5:57 PM

    Ooh, I haven’t heard of this calculator before! 10.3 over here. We only have two year’s worth of expenses data so far being having been married not even two years yet.

    1. J. Money February 24, 2014 at 6:14 PM

      damn good number! keep it up!