Most every organization uses metrics to determine success.  Also referred to as key perfor­mance indicators (KPIs), these numeric measurements can be used to assess financial success and progress toward goals. When selecting personal financial KPIs, be sure to: (1) identify what’s important to you for your financial goals; (2) create a system to track your progress, in writing, with a computer file, or an app; (3) involve all household members in the decision process.

Some common KPIs you might consider monitoring include:

• Credit score, which is affected by missed debt payments and involves your ability to access loans in the future.
• Savings rate is vital for future major purchases and planning for retirement. Financial advisors recommend saving 10-15 percent of your income.
• Discretionary spending measures a person’s level of expenses related to meals out, fancy clothes, vacations, and other non-necessities, so money can be saved for more important goals.
• Net worth (total assets minus total liabilities) measures financial health progress, which can increase by paying off debts and increasing saving and investing.

More creative KPIs are available for advanced personal financial planning. The Financial Health Index combines several financial metrics to provide a measure of overall financial health. The Financial Independence Number indicates the amount of money needed to live off the investment returns of your net worth. Living Within Means Index measures if necessary expenses are covered by a person’s income.

For additional information on KPIs for personal finance, go to:

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Article #2

Teaching Suggestions

• Have students create a visual design that might be used to monitor progress for one or more personal finance key performance indicators.
• Have students talk to others about actions they take to monitor their financial progress.
• Refer students to the Road Map/Dashboard feature at the end of each chapter of Personal Finance or Focus on Personal Finance to view additional examples of key performance indicators.

Discussion Questions 

1. What are the benefits and limitations of personal finance KPIs?
2. What are other KPIs that might be valuable indicators of personal finance success?