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What are the key metrics to track in order to measure your wealth-building progress?

Curious about wealth mindset

What are the key metrics to track in order to measure your wealth-building progress?

Tracking key metrics is essential to gauge your progress in wealth building and to make informed financial decisions. The following key metrics can help you assess how well you are building wealth:

1. Net Worth: Your net worth is the most fundamental metric to track. It represents the difference between your total assets (e.g., investments, real estate, savings) and your total liabilities (e.g., debts, loans). As you build wealth, your net worth should increase over time.

2. Savings Rate: Calculate your savings rate by dividing the amount you save each month by your total monthly income. Monitoring your savings rate helps ensure you are consistently saving enough to support your wealthbuilding goals.

3. Investment Returns: Keep track of the returns generated by your investment portfolio. Regularly assess how your investments are performing relative to your financial goals and risk tolerance.

4. DebttoIncome Ratio: Your debttoincome ratio is the percentage of your monthly income that goes toward debt payments. A lower ratio indicates less debt burden and better financial health.

5. Emergency Fund Coverage: Measure the size of your emergency fund as a multiple of your monthly expenses. Having an adequate emergency fund (typically 3 to 6 months' worth of expenses) provides a safety net during unforeseen circumstances.

6. Retirement Savings Progress: Monitor the growth of your retirement savings to ensure you are on track to achieve your desired retirement lifestyle.

7. Real Estate Returns: If you have invested in real estate, track the rental income, expenses, and property value appreciation to assess the overall returns.

8. Income Growth: Monitor your income growth over time. Increasing your income can accelerate your wealthbuilding journey.

9. Diversification: Assess the diversification of your investment portfolio. A welldiversified portfolio spreads risk and enhances the potential for stable returns.

10. Tax Efficiency: Evaluate the tax efficiency of your investments and financial decisions. Minimizing tax liability can increase your net returns.

11. Life Insurance Coverage: Review your life insurance coverage to ensure it adequately protects your family's financial wellbeing.

12. Health Insurance Coverage: Monitor your health insurance coverage to handle medical expenses without jeopardizing your financial stability.

13. Sustainable Spending Rate: For retirees, track your sustainable spending rate to ensure your retirement savings can support your lifestyle without running out of money.

14. Goal Progress: Measure your progress toward achieving specific financial goals, such as buying a house, funding education, or starting a business.

15. Behavioral Metrics: Reflect on your financial behavior and decisionmaking. Identify any biases or emotional patterns that may impact your wealthbuilding progress.

By regularly tracking these key metrics, you can assess your financial health, identify areas for improvement, and stay on course to achieve your wealthbuilding goals. Periodic reviews and adjustments to your financial plan can help you make datadriven decisions and optimize your journey toward financial success and security.

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