The Five Numbers Every Australian Should Know (But Most Don't)

Most Australians know their bank balance.

Some know the value of their home. Although less know the current interest rate on their loan.

A few might even know how much they have in super.

But surprisingly few people regularly track the financial numbers that have the biggest influence on their long-term wealth.

The reality is simple, What gets measured gets managed.

Just as businesses monitor key performance indicators (KPIs), your personal finances benefit from tracking a handful of meaningful numbers over time but the reality is, most of us don't even consider these. For some, it's a choice. For others it is simply too confronting.

It shouldn't be.

So, here are the five numbers we'd encourage every Australian to know and track.

1. Your Net Worth

This is arguably the most important financial number you have. Your net worth is simply:

Assets – Liabilities = Net Worth

It tells you how much wealth you've actually accumulated—not just how much you earn.

Rather than focusing solely on your income, ask yourself Is my net worth increasing every year?

For many of us, we feel like we are simply treading water financially but when we ask why that is and what their Net Worth is, most don't know. Usually that feeling of being a mouse in the running wheel is as much a case of not actually knowing as it is of actually having no financial growth.

Track it:

• Quarterly.

Tools:

• Excel (try our example below)

• MoneySmart Net Worth Calculator (a free tool)

• PocketSmith (a paid tool)

2. Your Savings Rate

Income alone doesn't create wealth. Rather the proportion of your income that you consistently save and invest does. In Australia we're blessed with the forced saving of Superannuation but that shouldn't be all we do.

Financial independence doesn't come from Superannuation alone. For example, if your version of Financial Independence is "having the choice to retire at age 50" then Superannuation, while important, isn't the only strategy you need. You need to save outside of your compulsory super, in an environment where you can access the money, or more importantly the income stream before you become eligible to access your super (currently age 60 and retired from gainful employment).

As an example, if a newly employed 20-year-old wanted to have $500,000 in savings by age 40 they would need to save $954 per month and earn a return of 7% per annum.

For most of us saving that amount each and every month takes planning and perhaps some sacrifice.

We will cover what a good savings rate is in another article.

Track it:

Monthly.

Aim to gradually increase your savings rate as your income grows.

Tools:

• Most Banking apps

• Moneysmart - Savings Goal Calculator

• PocketSmith (paid but multi-use)

• Excel

3. Your Superannuation Balance

For many Australians, super will become their largest investment. Yet it's often the least understood and most ignored. Aussies often think "I can't touch it until I retire, so who cares". To be a little blunt, future you cares.

In the above example we looked at retiring before age 60 but if you are happy working longer (and beyond age 60) then superannuation is the single most tax effective structure through which to build wealth.

Salary sacrificing or personal deductible contributions offer tax savings for those in the higher tax brackets. A maximum tax rate of 15% on earnings is super is also lower than most other tax rates and post budget, Superannuation is the only structure that retains a capital gain discount rather than the new capital gains rules.

Rather than leaving your retirement savings entirely on autopilot know your balance, your contributions and just as importantly how it is invested.

Track it:

• Every six months.

Also review:

• Fees

• Investment option

• Insurance

• Beneficiary nominations

Tools:

• Your super fund app

• myGov

• Annual member statements

• A financial adviser

4. Your Investment Return

Don't obsess over daily market movements.

Instead, review your long-term investment performance.

Focus on whether your investments are helping you achieve your goals rather than comparing yourself with headlines, social media or the returns someone else 'gets'.

More importantly, be aware of promises of high returns. If it sounds too good, it probably is.

Remember, investing is a marathon—not a sprint. Or rather, focus on getting rich slowly.

Track it:

• Annually.

Tools:

• Investment platform reports

• Portfolio Performance

• Sharesight

• Adviser reports

5. Your Annual Living Expenses

This number surprises almost everyone. Partly because we don't know, partly because it's higher than we estimate.

Knowing what it actually costs to fund your lifestyle helps answer some of life's biggest financial questions, including:

1. Can I afford to retire?

2. How much emergency savings should I have?

3. How much life insurance do I need?

4. How much passive income would I need to become financially independent?

In the world of finance, it is often far easier to start with the end in mind and work backwards so every year it pays to do a quick check on your spending to ensure lifestyle inflation isn't eroding all your hard work to plan and montior your finances.

Track it:

• Annually.

Tools:

• Banking transaction summaries

• MoneySmart Budget Planner

• Excel

Create Your Own Financial Dashboard

Imagine checking just five numbers every quarter:

✓ Net Worth

✓ Savings Rate

✓ Super Balance

✓ Investment Performance

✓ Annual Spending

In less than 15 minutes, you'd have a far better understanding of your financial position than most Australians.

More importantly, you'd be able to identify trends, celebrate progress and make informed decisions before small issues become major problems. Being able to tick of those small goals or see any kind of progress is the best motivation to become even more focussed.

In fact, we think it's so important here is a simple Dashboard we've created for you! (we're nice like that)

Zinc_Wealth_Integrated_Financial_Dashboard v1.xlsx

Download XLSX • 43KB

Final Thoughts

Successful wealth creation isn't about constantly checking share prices or trying to predict what markets will do next.

It's about mastering your finances and by measuring the things that truly matter and making small improvements over time you will make more progress than you ever thought possible.

After all, if you don't know where you stand today, it's difficult to know whether you're moving closer to your financial goals tomorrow.