Personal finance and financial planning both focus on a set of numbers to gauge your financial health. If you ask people what is the most important number, many would say “their target sum for retirement”. This number is usually around $1 million or more. A few might mention their investment rate of return, their net worth, or their anticipated life expectancy. But there are more important (yet often overlooked) numbers you should really be concerned with.
The Typical Financial Numbers
Financial planners and advisors will often ask you about your net worth (assets minus liabilities) and cash flow (your “diary” of money transactions). They might ask you about your goals, but these refer specifically to “money” goals (e.g., your target retirement sum) or “material” goals (e.g., to own a condo).
Rarely, if ever, are you asked about your real life purpose goals (e.g., to be a good parent, a professional musician, an award-winning scientist, etc.). They usually won’t consider these as goals because they can’t easily be quantified and tracked by a number. Or can they?
Here is my list of important financial numbers. Some may at first seem tangential to personal finance and require further reflection before seeing how they impact your financial well-being and life.
Some numbers can be disheartening, but it is important to not give up and to avoid being excessively self-critical or judgmental. These numbers should instead be empowering, and bring more awareness to your life.
The Overlooked Yet Important Financial Numbers
1. Your total summation of earnings to date.
This number will give you a good sense of the power you have as an earner, and the extent of your unconscious consumerism. You can get this number by adding all your year-end pay stubs or tax statements.
For a person who has been working 10 to 20 years, you might find that you’ve made over $1 million already. What do you have to show for it? How much of that did you save? Could you recall how you spent it? Do your possessions, bank account, CPF accounts, life satisfaction and life experiences reflect this number?
For those who have already let $1 million come and go, know that you’re not alone. Let this awareness be a turning point for you to either hold onto or mindfully spend the next million.
2. Your financial cushion.
If you lose your job, get injured, or simply can’t work, how many months or years of expenses can your emergency fund cover? Most financial advisors recommend that your cushion be equal to 3 to 6 months of expenses. However, these days, I would recommend a minimum of 1 year.
Why? Because we now live in a time when job loss and retrenchment is common, and wage growth for many industries has been stagnant. We’re also living in the era of automation and globalisation, where workers may compete against AI or cheap overseas labor.
Also, job loss often comes as a result of health issues. In this circumstance, you are not just closing an income stream, but opening an expense hole. This will make it so that a 3-month emergency fund, may only cover perhaps 1 or 2 months.
3. Your true hourly wage.
No, this is not your monthly salary, converted into hours. Rather, it is your net earnings per hour. To get this number, you would have to add all the real hours you work per month. That total will include transport time, time spent getting ready for work, and the time you spend working at home or elsewhere (this includes checking work email on your mobile).
Then from your monthly salary, you subtract taxes, transport costs, meals, morning coffee, work clothes/uniforms, child care, personal grooming, and other work-related expenses. Take your net monthly salary and divide by your total monthly real hours worked. You might find that this number is much lower that you originally thought.
For example, I know many doctors who think they make around $100 an hour, when they really make $50 or less. If you find that you’re actually making $2 an hour (which happened to one of my former clients), maybe you’re ok with it, or perhaps you might need to explore other options. Is there another job or industry where the monthly salary may be less, but the true hourly wage is actually higher? Are there any ways to reduce your real working hours or your work-related expenses?
4. Hours spent toward your life purpose, values, and goals.
Now that you know how much of your time is spent making money (and how much money you’re actually making), you’ll need to compare that to how much time you devote to your life purpose and goals. Remember that these are non-monetary goals.
One of my goals is to provide nourishing and healthy food for my family. And although exercise is not my favourite thing, I also value it. Your goals, purpose, and values can never be achieved unless you make time for them.
These days, many people are trying to find more meaning in their lives. But this search for meaning requires time. Are you investing enough time toward what you truly want out of life?
5. Hours spent wasting time.
There are things we do with our time that do not get us closer to our goals, which is analogous to eating junk food to achieve health. Although not a complete list, these things may include FOMO (fear of missing out) activities, mindless internet browsing, checking social media, playing games, queuing, and just waiting around.
Some “time wasters” do have positive benefits, but you will have to ask yourself whether the benefits are worth it. For example, I used to go fishing a lot. Sometimes I would spend 4 hours, $4 worth of bait, and not catch a single fish. Could I have just bought a fish for $4? Yes, but for me, that time was restful and enjoyable. It was quality time spent with my husband. So for me, it was worthwhile.
Some things seem like they’re beneficial, but they actually have an overall negative effect. For example, some people might enjoy reading tabloids or beauty magazines. Though they can be relaxing and entertaining, they can also foster materialistic desires and deepen a sense of insecurity. Be protective and clever on how you spend your time, but ultimately you must determine what things are simply not worth your life energy.
6. The total value of all the stuff you’ve bought and accumulated in your life.
This figure doesn’t just include what’s currently in your home. It also includes what has been in your possession throughout your life. If you visualise all the stuff you’ve possessed throughout your life, how many rooms would that stuff fill? How much total rubbish have you thrown out? How much does your accumulation compare to others in 3rd world nations?
Are you any happier, more fulfilled, or satisfied with your life as a result? Were these things you’ve accumulated in alignment with your life purpose, values, and goals?
7. Number of people in your immediate tribe.
No, these are not your Facebook friends, your Instagram followers, or even your family members. These are people who will come to your aid in a time of crisis.
They would check up on your ailing parents, help to babysit while you run errands, or pick up dinner if you had a rather bad day at work. These are people who would listen to you vent or wipe your tears at any hour of the day. And you would, without keeping tabs, do the same for them.
Because these favours are often reciprocal, having such a devoted and close-knit set of “kakis” might not end up saving you money. But it will make life more fulfilling and less stressful, which is priceless!
8. Your carbon footprint or eco legacy.
You can use a Carbon Footprint Calculator to estimate your annual carbon footprint. You can also roughly estimate it based on your level of consumption, which may not be the same as your level of spending. Even “free” things that you consume still add to your carbon footprint.
For example, when I was a primary school student, every day I ate lunch using a styrofoam plate. The meal was cheap (and in my case, it was free), but the carbon footprint of that plate alone was substantial. To see all the styrofoam plates that I’ve consumed over my lifetime all piled in one place is a scary thought. Those plates probably were in use maybe 15 minutes per day, but they took many hours to produce and likely still exist somewhere in this world today. They will continue to exist long after I’m gone, as part of my ecological legacy.
Because of this realisation, I very often bring my own containers when I eat out, in an effort to reduce my consumption of such energy intensive and non-degradable products. Once you are roughly aware of your own personal carbon footprint, you can take steps to reduce it.
Some Final Thoughts
These financial numbers are, in some ways, more important than any net worth number or target retirement sum. But they’re hardly ever mentioned or thought of. These figures can be daunting, and as previously mentioned, they are not meant to deliver judgment but to empower.
Now that you are aware of these important financial numbers, what can you do to maximize the good things and minimise the bad? We all wish for a meaningful life that is not just good for us, but also for the people around us, and for our environment and future generations.
It’s time to make peace with your past beliefs, habits and consumption, and start a new life of mindful and conscious spending of your resources. These resources include not just your money, but your energy, your attention, your time… and your life. Because in the end, isn’t that what real FOMO is?