Peter Drucker is credited with saying, “What gets measured gets improved.” I have found this quote to be true on a number of fronts both on the personal side and business side. And if it is true- "What gets measured gets improved"- it sort of begs the question, “What are you measuring?”
What Often Is Focused On?
Credit score is oftentimes a metric that many people focus on, however, it is possible to have a great credit score and yet be in a not so great financial situation. Therefore, should credit score be the metric you focus on?
Credit scores are used for a number of reasons. While a good score can help you financially (lower interest, potentially lower insurance payments, etc.), I don't believe it is the primary metric you should focus on.
What Should You Focus On?
If you want a specific financial metric for tracking how you are improving financially than I lean towards tracking net assets and maintaining a net monthly financial margin.
There are a number of ways to do this. Don’t let perfection be the enemy of good when setting a financial tracking system up. Just try something. Take a step reevaluate. Take a step reevaluate.
We first started tracking cash flow when my wife did travel nursing because we had expenses and income flowing from all over the place. I personally tried an app based option initially but found there was not enough ability to customize. I also love spreadsheets and therefore found Tiller Finance to be extremely helpful.
Back To Credit Score
I do want to mention this doesn’t mean you should completely disregard your credit score. FaithFi has a great article about how a good credit score can help.
If you haven’t checked your credit report recently, you should for sure go out and check it. This a free service. If someone is requesting you to pay, you are in the wrong place. Review your credit report to confirm there is nothing you don’t recognize. It is possible by accident or by fraud your credit is being dinged even for something that shouldn’t apply to you.
After making sure your credit report is accurate, allow consistent good financial behavior (keeping consumer debt low, paying bills on time, etc.) to improve your credit score over time and shift your focus to financial metrics that better indicate your financial health. I just don't want you to end up with a great credit score but no or negative net assets.
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