A health check for your finances is a must in this year of the pandemic.

For financial extremes, 2020 is unparalleled. Jobs and incomes were decimated while stocks and houses soared in price. Savings were depleted to survive in some households, while others stockpiled cash because of the limitations imposed by social distancing.

A financial health check will show how you’re bearing up. Apply the five most important numbers in personal finance to your situation and make notes on how you could do better and when you’ll be in a position to make that happen. I’ll remind you in a year to retake the test and monitor your progress.

Here are the personal finance Big Five:


A similar list to this drawn up 10 years ago might not have included credit scores. But these encapsulations of your history in paying what you owe are much more important now for a few reasons. One is that we’re borrowing a lot more. That means more interactions with lenders thinking about whether we should get a loan and at what interest rate.

Two, your credit score is now used for a lot more than qualifying you to borrow. Landlords use them in selecting tenants and property insurance companies use them in setting policy premiums. Employers may check your credit report, a summary of your borrowing, in assessing you as a job candidate.

For mortgages, a credit score of 720 and higher will get you the lowest rate possible. The credit reporting company Equifax has said that 70 per cent of credit scores in this country are at 720 or higher. Just 14 per cent of credit scores are below 650, a cut-off for getting a half-decent mortgage rate.


Between high household debt levels and the economic damage done by the pandemic, having a savings rate of anything at all is a win. We’re talking here about the percentage of gross income you put into a savings account or investments every payday.

A lifetime of saving 10 per cent of gross might be all you need to retire well. If saving is a struggle at some point in your life, try to catch up later with a higher savings rate. A pandemic addendum to the savings rule: Put away 10 per cent for retirement and a little more for emergencies.

While wrecking some people’s finances, the pandemic has presented a huge opportunity for those who are financially stable to save money through physical distancing. Without much effort, you could be making up for past years of undersaving.


The real-life ratio measures your ability to afford a home while also paying costs such as daycare and car loans, and saving for the future. Try The Globe and Mail’s Real Life Ratio calculator if you’re just getting into the housing market, or if you already own and want to know how sustainable your finances are.

You’re in good shape if your housing-related cost, savings, daycare and non-mortgage debt take up 75 per cent or less of your after-tax pay.


The national inflation rate published monthly by Statistics Canada is based on a summary of how much living costs are changing for a fixed basket of goods and services relevant to consumers. Your own experience may very well differ.

For example, some condos must raise fees annually by more than the inflation rate to keep up with rising costs for things such as building insurance. Postsecondary students and their parents are well aware that college and university tuitions have for years risen more than the inflation rate.

Calculate how much your biggest expenses have risen and then compare that amount with any increases in your income. When inflation rises more than income, you’re falling behind. For now, with the economy struggling in the pandemic, cutting expenses may be your only recourse. Later, you can look at ways to increase your income.

Great, your house is increasing in value this year and your investments are up a bit, too. But it’s only when you consider your net worth that you see how you’re really doing in building wealth.

Net worth is the total dollar amount of your assets – home value, investments, cash in savings – minus the amount you owe on your mortgage and other debts. If you’re a homeowner, consider yourself on the right track if your net worth turns positive by your early 40s.

This signifies you have paid off a serious chunk of your mortgage and built savings and investments. From there, aim to boost net worth steadily by saving, investing and keeping debt in check.

The Globe and Mail, October 22, 2020