What Does Being ‘Good with Money’ Actually Look Like?

Personal Finance  / Zina Kumok

People tend to talk about being financially savvy in a black and white way. You’re either good with money or you’re not.  But as with most things related to your finances, it’s a little more complicated than that. You could be great at earning money and terrible at saving it – or vice versa. You could have an impressive net worth and a terrible credit score. You could be the world’s greatest budgeter and the world’s worst investor.

In other words, being “good with money” can mean a lot of things. Let’s take a look at some of the most important factors to consider.

Metrics to Track

While there’s not a single figure that shows you’re good with money, there are some numbers you can track to see how you’re doing (Mint tracks these for you):

Net Worth

Your net worth is your total assets minus your liabilities. Assets include the money in your bank accounts, investment accounts, collectible items, home equity and more. Liabilities include what you owe, like your credit card balance, auto loans, student loans, mortgage balance and more.

To calculate your net worth, add up your assets and liabilities separately. Then, subtract the liabilities from the assets. Don’t be surprised if your net worth is negative. That means you owe more money than you currently have. Recent graduates and young adults often have a negative net worth, especially if they have a lot of student loans.

But as you get older, your net worth should increase as you pay down debt and start investing consistently. Try to track your net worth a couple times a year. You can create your own spreadsheet or use Mint’s net worth tracker.

“Over time you will see your assets really starting to grow,” said Ryan C. Phillips, CFA, CFP, and founder of GuidePoint Financial Planning. “The success from this can be really motivating and many times will lead individuals to save and invest even more.”

Credit Score

Your credit score shows how responsible you are as a borrower. Potential lenders, utility companies, cell phone providers, car insurance companies and landlords will look at your credit score before approving you.

A credit score doesn’t take your savings rate or investment success into account, so it’s not a holistic number. But it does show if you’re good at borrowing money and paying it back. Even if you plan to avoid taking out loans, you may still need a good credit score.

Meeting Your Personal Goals

To continue reading, please go to the original article here:

https://mint.intuit.com/blog/personal-finance/what-does-being-good-with-money-actually-look-like/