If you’re reading this article, chances are you’re already working hard to build a financially secure future. But how do you know if it’s enough?

In a culture that frowns on honest financial conversations, it can be difficult to gauge how well you’re doing compared to everyone else. Thankfully, there are some tried-and-true metrics you can use to evaluate the health of your finances.

Are you doing OK? As a CFP™ working with clients for almost a decade, these are some of the questions that could be answered to find out.

How Much Are You Saving?

Knowing how much you spend compared to how much you save is the first question you should be able to answer.

Add up how much you invest for retirement and how much you save for other goals, then divide that number by your annual gross income. Ideally, if you want to get ahead, you should be investing between 15% and 20% for retirement while also saving for other goals, like buying a new car, saving for your child’s college or remodeling your home.

At some point in your life saving 20% will be impossible, so when times are good (bonus/equity compensation) take advantage and go over that 20% mark.

It’s also important to examine what you’re investing in. A common mistake is for consumers to contribute money to their retirement accounts without actually investing the money in a particular investment vehicle. Instead, the money just sits there without growing.

If you only started investing recently, consider increasing the percentage to catch up a bit. We also suggest a good habit to get into is that every time you get a raise, bump up your contribution rate by 1% or 2%.

How Much Do You Owe?

By the time you reach 40, you should have very little debt outside of a mortgage. Your student loans and credit card bills should be paid off. If you do have any debt, it should be at a low interest rate.

If you do have high-interest debt, create a concrete plan for paying it off as soon as possible. If you have any loan above a 5% interest rate, see if you qualify for refinancing. If you secure a lower interest rate and keep making the same payment as before, you could pay off the loan early and pay less interest.

If you’re still paying off student loans, consider if you’re eligible for any loan forgiveness programs. The federal government recently expanded the Public Service Loan Forgiveness (PSLF) program, rendering thousands of borrowers newly eligible.

Are You Happy with Your Lifestyle?

Money should be a tool that helps you live the life you want – not an end unto itself. If you have a high-earning job but dread coming into work, it may be time for a lifestyle change. (To learn more about leaving the rat race and if its time for you to make the change, read my article in Kiplinger that details my own experience)

Consider switching industries, starting a business or going back to school. A financial planner can help you weigh the financial risks of leaving your current job and guide you in making a secure decision for you and your family.

Do You Have a Safety Net?

If the Covid-19 pandemic taught us anything, it’s that you can never be too secure in your job. Now, it’s even more important to have a financial safety net.

Financial planning 101 says you should have at least three months of expenses in a savings account. If you have kids, a mortgage or are self-employed, consider having between six and twelve months of expenses. Now, remember these are just guidelines and you need to consider your own personal risk tolerance and risk capacity to come up with an amount that is right for you.

Go through your budget and make a list of all your bills and necessary expenses, including groceries, housing, transportation, health insurance, childcare, utilities and more. Multiply that figure by the number of months you need to save for and the result will be your ideal emergency fund.

Is Your Net Worth Going Up?

One of the best ways to chart your progress is to monitor your net worth on a regular basis. Your net worth is your total assets minus your total liabilities. Assets include investments, the money in your bank accounts and your home’s value. Liabilities include debts, like a mortgage, auto loan, home equity line of credit, credit card balance and more.

Similar to the stock market, your net worth can fluctuate month to month or even year to year, but your long term trend should be up. When your net worth increases, it means your assets (investments/real estate) are growing at a faster rate than your liabilities (mortgages/student loans/credit cards).

How Can I Correct Course?

If you’ve answered the questions above and find yourself falling short, it’s not too late to get back on track. Start by tracking your expenses and finding ways to divert more money toward saving and investing. Look for a higher-paying job or ask for a raise at work.

Remember, it’s never too late to build good habits and achieve your financial goals. Just be clear about what you’re working toward and let those goals guide your behavior.

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN).