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How To Measure Financial Well-Being

Much of the financial advice that I come across revolves around one number: the credit score. You’re supposed to get a credit card or a loan when you’re in high school so you can “establish your credit.” You’re admonished to prioritize payments on loans above, seemingly, everything else in order to protect your credit score. I even read one blog that said “Everyone knows the worst thing you can do is cancel a credit card.” In the mythology of modern American money the credit bureau is the king of the gods and your credit score determines whether you get into heaven.

A high credit score earns you the privilege of purchasing with debt but I've decided to make the rest of my life purchases with money. To do that, I find it helps to focus on a different number. 

I call this number your Bottom Line and it is the expression of your monthly surplus or deficit. Do you have more coming in, or going out? Is your cash flow positive or negative? Simply put, this number reveals whether or not you are spending less than you make. If you want financial stability, please do not focus on improving a number that measures how well you make debt payments and disappears when you become debt free.

Focus on improving the number that reveals whether you are living within your means.

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