Save. Spend. Splurge.

What’s your Personal Finance (PF) score and how do you calculate it?

This is a new way to score:

This is measured by taking the ratio of your net worth and dividing it by your annual expenses.

So if you have a net worth of $100,000 and your annual expenses are $25,000, your score is 4.

Alternatively you can have a negative score if you have a negative net worth, someone who owes more to others than the cumulative total of all their personal assets.


Your net worth divided by your annual expenses

Simple enough, no?


Your net worth is how much you own minus how much you owe.

If you have $10,000 in the bank and owe $15,000 your net worth is -$5,000

$10,000 – $15,000 = – $5000

You can see my net worth over the years as an example; I track it monthly and yearly.

What you own:

  • Bank account balances (your chequing, savings, cash)
  • Investment portfolio balances (market value, not book value)
  • Your home’s value (market value)
  • Your car’s value (resale/market value)

What you owe:

  • Credit card debt
  • Line of credit outstanding
  • Mortgage

What is not included in net worths:

  • Life insurance (you only get it if you die, not really part of your net worth)
  • Communal “one big citizens pot” government pensions (you don’t really know what you’ll get), like Old Age Security (OAS), Canada Pension Plan (CPP) or Social Security
  • Future amounts coming in (inheritances – don’t rely on any of this)
  • Future amounts you’ll earn (you haven’t earned them yet)
  • Future amounts you’ll owe


Depends! You tell me.

You should have a budget or at least a rough idea from tracking your expenses how much you spend each year.

My 2020 Example:

I am using my income & expenses from 2020, and my net worth from the end of 2020.


So now that you have your number, what does it all mean?

  • Anything in the negatives: You need to get out of debt now.
  • Score of 1: You have enough for one year’s worth of expenses.
  • Score of 5: You are picking up steam.
  • Score of 10: Getting better.
  • Score of 25: You are financially independent!!
  • Score of 30: Your investments are making more than you spend.
  • Anything above 30: Sit back and relax, you’re golden!

But wait!

Since I can’t sell my home easily, I can’t release that $400K to use it without doing so, I am now going to only look at my 2020 LIQUID net worth (investment portfolio + cash + bank balances) as part of my calculation:

It doesn’t look as rosy, does it? I am about 6.65 off from where I “should” be.

Liquid net worth means:

  • Cash
  • Bank balances – chequing and savings
  • Investment balances
  • Pension balances individually allocated to you, IN YOUR NAME (not in some communal government pot)
  • Anything you have in actual cash or you can sell THIS VERY MINUTE and get money for

That’s it. Everything else that is not considered liquid – your home, car(s), electronics, clothing, etc. You need time to sell them to raise money and you may not get what you expect.

If I now look at my expenses and decide that I am willing to live on my bare bones amounts, this is what I’ll get:

My bare bones amounts include:

  • Condo fees
  • Utilities
  • Cellphone / Internet bills
  • Groceries
  • Medical
  • Transportation
  • Toiletries
  • Miscellaneous
  • Other

I took out completely the following as they’re superfluous to “living” on a bare bones budget:

  • Wardrobe – Clothing, Accessories, Shoes, Jewellery
  • Gifts of any kind
  • Traveling of any kind
  • Eating Out

….basically anything “fun”, in my book.

Some other things to consider:

What the different calculations mean:

Obviously the most conservative estimate is your liquid net worth only, and then your annual expenses to be at your highest (mine would be $60K). That makes you SECURE that in your highest spending years, you are still able to live high on the hog, off just your investments.

The very least conservative estimates would be your TOTAL net worth (including fixed assets like homes or cars), and then your lowest barebones expenses.

You decide what’s best for your situation.

Bare bones expenses may not be realistic

This is where I am at. Bare bones is doable for me, but misery personified. I’d like to spend about $35K a year as my comfortable budget, but I can go as low as $22,500 if I am forced to (like if I want to truly leave a toxic work life, I end up with health problems and I CANNOT make another dollar, actively taking on contracts or working).

Some people, like my partner, are totally fine with bare bones. He retired a couple of years ago on bare bones expenses, and barely spends anything. He’s fine with it, he hated his job with a passion and want to retire ASAP. Now he’s back in school studying, and living on as little as he can.

Many financially independent people don’t retire

This is me. I could “retire” on bare bones expenses today, but again I am too bougie to do this, but also, I love my job. I enjoy working hard, using my brain, taking on contracts once in a while, and I make good money doing it. What’s not to love?

Once you reach financial independence, you don’t need to stop working. All it means is that you have a sense of security and peace of mind.

You can use your side incomes to offset costs

For me, I am okay with liquid net worth & bare bones expenses because I know I have money coming in even if I don’t actively work.

My truly, TRULY passive income from 2020 was: $23,010.62

This means, if I redid my numbers, they would look like this:

  • My liquid investments only: $621,500.68
  • My COMFORTABLE expenses at: $33,863.30

My truly passive income of $23,010.62 offsets my expenses, and drops it to $10,852.68 that needs to be covered by my investments, it would look like this:

As you can see, with side incomes, it makes it all the more possible because you only need to “find” another $11K to not have to ever work again.

What are all of these different retirement levels?

They call this “BARISTA” FIRE, and you can read all about the different versions of early retirement here.



  • Katie

    Hey there! Thanks for such an interesting metric! I’m currently at a score of .33, with a highest of .5 back in June. What I wonder is, should we include things like investments? Or just base expenses? I can understand using either way. When I’m retired or have reached financial independence, I probably won’t have the investment costs anymore (ideally, but I enjoy it so who knows). But, based on current situation, investing would count as an expense and it isn’t something that I would want to sacrifice if I lost my job… Either way, I think I’ll continue to track it to see where I’m at.

  • nicoleandmaggie

    I assume this does not include taxes?

  • Setting Saving Goals

    Great read and one must simply share this with their partners where the better half is a spender and not a saver. The economic environment across Australia and worldwide is changing so much that setting goals for a better financial future is key.

  • LAL

    With mortgage and current burn rate I have a PF number of 14.5. If I got rid of the mortgage and moved and bought a different home my PF number would be 24.4

  • Chris Grande

    cool stuff! We are at ~11-12; with a goal which works out to being about 20 in 2 years. Though we do want to spend more so those numbers might adjust a bit

  • SarahN

    INteresting (and still no post emails!?!? Are you semi through wordpress?)

    So would I take a projected price on my home into the net worth, like Cassie does, or have a -ve net worth as I have a debt?! Tough one, as markets can drop and all…

  • Cassie

    I like this concept! I don’t have a solid number on what I spent last year, so I can’t calculate an exact PF number yet (I’ll be able to this year!). If I was to ballpark it, I’d say my PF number is sitting somewhere between 2.5 and 3. If I could hit 4.5 for 2014 I’ll be stoked 😀

  • Stephanie

    Right now, I’m just over 2. Pretty good for a grad student!

    This is indeed a much better measure than net worth. The only flaw I see is that almost anyone who takes out a mortgage is headed straight to the negatives (and then told to take up more jobs) while mortgages seem to be “considered separately” from other kinds of debt (credit card debt) in our society’s financial system – taking out a mortgage is usually not “bad”, like getting into credit card debt. Whether mortgages should be considered separately the way it is right now is not something I can really comment on, though.

    • save. spend. splurge.

      @Stephanie: I personally wouldn’t consider mortgages separately.. it’s still a debt to me, and it still has an expense associated to it. Even though it is “good” debt, it’s still a debt.

      I think using BOTH numbers works — net worth and then your PF score.

  • Fig

    Mine isn’t good now but I think this is a pretty decent scoring system! I might blog about this soon. 🙂

  • Alicia @ Financial Diffraction

    I said it over on J$’s post, but I’m a little negative. There’s only up! 🙂

  • Anne @ Unique Gifter

    My super rough math says we’re around 8.5 right now and I think we’ll be around 9.5 by the end of the year, as long as all goes to plan.

  • J. Money

    Glad you liked it 🙂

  • Dear Debt

    I need to get out of debt! Working on it 🙂 This seems to make more sense to me than the credit score.

    • save. spend. splurge.

      @Dear Debt: Ditto. Credit scores are really just for companies to see who they can make the most profit off from. The ones who only pay minimum balances have high credit scores versus people like me with $0 in debt and never carry a balance.

  • jane savers @ solving the money puzzle

    Of course I have a negative number. I have debt. I can probably become a 1 in 2015 but I can’t see myself ever being more than a 10. (I had my calculator out trying all sorts of scenarios).

    This is a good gauge of financial fitness. I hope it catches on.

  • moneystepper

    Great idea.

    I’m currently in a very similar position to you, with a score of 5.11.

    The score doesn’t really work for negatives though.

    If you have net wealth of -$100k and expenses of $10k, your score is -10.
    If you have net wealth of -$50k and expenses of $10k, your score is -5, which suggest you are in a better position, which you are.

    However, if your net wealth was -$100k and your expenses were $20k, your score would be -5, which would suggest you are in a better position than the first example which isn’t true.

    That said, I really like the idea of scoring your PF rating like this.

    • save. spend. splurge.

      @moneystepper: Could argue that technically you are in a better position with a net worth that is -$50,000 rather than -$100,000 however. You’re basically $50,000 “richer”, or less in debt.

      And if your net worth was -$50k and your expenses were $20k, your number would be -2.5 which is far better than -5.

      Looks fine to me….

      • moneystepper

        @save. spend. splurge.: I agree with those two examples.

        But, you’re net wealth is -$100k. All I have to do to improve my PF score is increase my expenses from $10k (PF score of -10) to $200k (PF score of -0.5).

        I love the concept, I’m just worried that it may be misleading for people in debt (those who probably are most in need of calculating and understanding their PF score).

  • her every cent counts

    Love it! I don’t want to know what mine is though… I spend too much! 🙂

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