Your financial potential isn’t just income; it’s how well your system converts earnings into freedom and resilience. Answer each question Yes / Somewhat / No and tally your score. After each question, you’ll see why it matters and a quick fix backed by reputable guidance.
How to score
Yes = 2 points, Somewhat = 1 point, No = 0 points.
0–14: Getting started. 15–24: Building momentum. 25–32: Solid footing. 33–40: Strong financial potential.
Cash flow and safety
1) Do you keep at least 3–6 months of essential expenses in an accessible emergency fund?
Why it matters: Cushioning shocks prevents high-interest debt and forced sales. The CFPB teaches the 3–6 month guideline.
Quick fix: Park cash in a federally insured high-yield savings account; confirm FDIC coverage rules.
2) Is no more than 50% of your take-home pay going to essentials while you save ~15% of pretax income for retirement?
Why it matters: Fidelity’s 50/15/5 framework and 15% retirement-savings guideline are a proven baseline.
Quick fix: Automate contributions and raise 1% each quarter until you hit your target.
3) Do you automatically transfer money toward short-term goals every payday?
Why it matters: Automating savings improves follow-through; CFPB provides SMART-goal tools to make plans stick.
Quick fix: Set calendar-aligned transfers and name the goal in your banking app.
Credit and debt
4) Is your credit utilization rate below 30% on each card—and ideally in the single digits?
Why it matters: Lower utilization helps scores; single-digit use is best.
Quick fix: Pay mid-cycle to reduce the statement balance that’s reported.
5) Do you pay all bills on time and monitor the five FICO score factors?
Why it matters: Payment history (35%) and amounts owed (30%) are the biggest levers.
Quick fix: Enable autopay for at least minimums and review reports at AnnualCreditReport.com. Weekly free reports are now permanent.
6) Is your total debt-to-income (DTI) ratio at or under 36%?
Why it matters: Many lenders and guides flag ≤36% as a healthy ceiling; mortgages also reference the 28/36 rule.
Quick fix: Attack high-rate balances first and avoid taking on new installment debt until DTI improves.
7) If you have federal student loans, are you on the best repayment plan for your income?
Why it matters: Income-driven repayment can lower payments—even to $0—based on income and family size.
Quick fix: Use the DoE IDR application and recertify annually.
Retirement and investing
8) Do you contribute enough to capture the full employer match in your workplace plan?
Why it matters: Matching dollars are an immediate, risk-free return; combined with auto-escalation, they boost outcomes.
Quick fix: Increase deferrals to at least the match threshold, then set 1% auto-increases each year.
9) Are you saving at least 15% of pretax income for retirement (including any match)?
Why it matters: Large providers recommend a ~15% long-run rate to reach common replacement goals.
Quick fix: If 15% isn’t feasible, step up 1–2% every raise.
10) Are you using the right tax-advantaged accounts this year?
Why it matters: Knowing the current limits helps you optimize where each dollar goes. For 2025, employee 401(k)/403(b) deferrals cap at $23,500 (catch-up $7,500); IRAs remain $7,000 (plus catch-up). HSAs allow $4,300 self-only and $8,550 family.
Quick fix: Prioritize match → HSA (if HDHP) → IRA/401(k) up to limit.
11) Is your portfolio allocated across stocks, bonds, and cash in line with your time horizon and risk tolerance?
Why it matters: Asset allocation and diversification are the primary drivers of risk/return; targets should track your horizon and risk capacity.
Quick fix: Consider broad index funds or a target-date fund to automate the mix.
12) Do you rebalance at least annually or when allocations drift materially?
Why it matters: Rebalancing manages risk and keeps your plan on track.
Quick fix: Set a 5% band or annual date to rebalance.
13) Do you actively minimize fees and expenses?
Why it matters: Even small fee differences compound and can significantly reduce returns; the SEC and FINRA provide tools and warnings.
Quick fix: Prefer low-cost index funds and check expense ratios before buying.
14) Do you invest on a schedule (e.g., dollar-cost averaging) instead of trying to time the market?
Why it matters: DCA helps manage timing risk and promotes consistency.
Quick fix: Automate monthly contributions to diversified funds.
Protection and planning
15) Do you have adequate term life insurance if someone relies on your income?
Why it matters: Simple rules of thumb suggest a multiple of income; adjust for your situation. Use rules as a starting point, not an endpoint.
Quick fix: Get quotes for level-term coverage aligned with remaining working years.
16) Do you have long-term disability income protection?
Why it matters: About 1 in 4 of today’s 20-year-olds will experience a disabling event before full retirement age; DI helps replace income.
Quick fix: Check group LTD at work; consider a supplemental “own-occupation” policy.
17) Are all financial accounts and insurance policies updated with correct beneficiaries?
Why it matters: Beneficiary designations typically supersede wills; keeping them current prevents misdirected assets.
Quick fix: Review beneficiaries annually and after life events.
18) Do you have basic estate documents: will, powers of attorney, and health-care directive?
Why it matters: Core documents reduce cost, delay, and conflict in incapacity or death. Government and consumer sources outline the basics.
Quick fix: Create or update these now; store and share access with trusted contacts.
19) Is your cash across banks titled to maximize FDIC coverage if you hold >$250,000?
Why it matters: FDIC insurance is $250,000 per depositor, per bank, per ownership category. Titling can expand coverage.
Quick fix: Use multiple banks and ownership categories as needed.
20) Do you have clear, written goals and a simple review cadence?
Why it matters: SMART goals and written plans improve follow-through. The CFPB provides worksheets to turn intentions into steps.
Quick fix: Schedule a 30-minute monthly money check-in.
What your score means and what to do next
0–14 points: Getting started
Focus on foundations: build a starter emergency fund, bring utilization under 30%, and automate a small retirement contribution that you can grow. Use free weekly credit reports to catch errors.
15–24 points: Building momentum
Tackle DTI toward ≤36%, grab the full 401(k)/403(b) match, and set annual rebalancing. Verify you have at least basic estate docs and correct beneficiaries.
25–32 points: Solid footing
Increase savings toward 15% pretax, layer in HSA/IRA contributions if eligible, and continue fee-minimization. Confirm disability coverage and review term life needs.
33–40 points: Strong financial potential
You’re optimizing. Keep rebalancing, monitoring fees, and stress-testing your plan annually. Consider advanced tax strategies as appropriate and keep estate docs current.
Quick reference: 2025 limits and guidelines at a glance
Retirement plans
401(k)/403(b) employee deferral limit: $23,500; standard catch-up: $7,500.
IRAs
Traditional and Roth IRA total contribution limit: $7,000 (standard catch-up extra if eligible).
HSAs (with an HSA-eligible HDHP)
$4,300 self-only; $8,550 family; $1,000 catch-up at 55+.
Credit health
Aim for single-digit utilization; under 30% is a common upper guideline.
Debt load
Keep total DTI at or under 36% as a general rule of thumb.
FAQ
How often should I rebalance?
Once or twice a year, or when allocations drift several percentage points from target, is a practical approach to manage risk.
If I can’t reach 15% retirement savings now, what’s the best move?
Start with the full employer match, then auto-increase contributions 1%–2% with each raise until you reach your goal.
Is a target-date fund OK for most people?
For many, yes—it automates asset allocation and rebalancing along a glide path tied to your retirement date.
