The 10 Numbers That Rule Your Wallet

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We’re celebrating Financial Literacy month in numeric style. Follow our crash course on maximizing your portfolio and finances with The 10 Essential Money Lessons.

Investing and personal finance is all numbers. Need to calculate something? The mathletes among us love it. Everyone else, however, reverts to their 15-year-old selves, scrambling for any excuse to ditch first-period algebra class. 

For those who preferred playing hooky over crunching numbers, this crash course is for you. It's a rundown of the 10 wallet-swelling (or depleting) numbers you'll be glad you finally stuck around to learn.

That's the maximum FICO score (aka, credit score) on a scale of 300-850. Per our personal finance and VH1-reruns guru, Dayana Yochim, here's how your credit score stacks up:

  • 750 and up: Good job. At this level you'll likely qualify for some of the best interest rates on loans.
  • 710-750: Though you're not quite a VIP, you're still in the running to qualify for competitive offers.
  • 650-710: Approval for credit is likely, but don't count on platinum status or top-tier rates.
  • 580-650: You can still get credit, but rates will be subpar, and terms (such as credit limits and fees) will be so-so at best.
  • 580 and below: Brace for denial and/or loan-shark rates.

Source: John Ulzheimer, President, Educational Services. Based on FICO scoring range 300-850. A higher score indicates lower credit risk.

Get your credit score up now, or pay for it later when lenders (or future spouses) penalize you. Keep in mind that this scale is only approximate, and your credit score doesn't factor in other considerations that come up when you're shopping for a loan (e.g. your savings or your income). So, your mileage may vary, especially when credit is tight -- like now. 

Remember, you can get your credit report for free each year from the three major credit-reporting bureaus at (The actual credit scores from each bureau will cost you a few bucks.)

40 Years
That's how long it'll take you to amass a million dollars (an arbitrary number) if you save $25,000 a year (another arbitrary number) and put it under your mattress (aka a no-interest checking account).

If you can earn just 5% a year on it, you get to a million dollars in just 22 years.

At the lower end of the market's historical average of 8%-10%, it's just 18 years.

It also works the other way. If you can earn 8% on your money, you'd only have to save $3,600 a year to reach a million dollars in 40 years.

Compounding interest is a beautiful thing. It's the engine that fuels a comfortable retirement. But one caution: The historical stock market average is not necessarily the average going forward. Choose an asset allocation between stocks and bonds that will let you sleep at night. 

Average credit card APR rates are roughly 14% as I write this, which are high enough, but they can easily jump much higher -- to the mid-twenties -- if you miss a payment or break any other rule your lender comes up with. Remember the beauty of compound interest we were talking about before? Well, credit card debt is the ugly flip side.

Why you care: On the "penny saved is a penny earned" principle, paying off your debt gives you a guaranteed 14% return (or thereabouts, depending on your actual rate) on your investment. Sure, Warren Buffett's achieved those kinds of book value returns (and then some) at Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) , but when the market has only averaged 8%-10% returns, 14% returns seem a bit unrealistic. So, unless you're the greatest investor in the world, pay down your MasterCards (NYSE: MA  ) and Visas (NYSE: V  ) !

The average American household has just over $8,000 in revolving debt (mostly credit card debt). That's a mountain of financial stress. Yes, our economy is 70% consumer spending, but (Nasdaq: AMZN  ) , Tiffany (NYSE: TIF  ) , and Apple (Nasdaq: AAPL  ) will still be around for future consumption if you decide to slow your spending a bit in the here and now. Seriously, make a plan to start paying down your credit card debt today.

6 months
Once again, I turn to fellow Fool Dayana Yochim for an explanation: "On emergency savings, I recommend socking away enough to cover three to six months of your essential living expenses if you're able-bodied and don't have any dependents (e.g. a spouse that works and no kids). Shoot for more than six months of savings if you are the sole breadwinner and work in a shaky industry, don't interview well, or if you are the Octomom." As with insurance, you won't appreciate it on the sunny days, but you'll be grateful when it rains.

5 years
Only long-term money should be a candidate for the stock market. Money you'll need in the next five to seven years should be in safer instruments because the stock market is just too volatile in the short term. Click here for the asset allocation basics.

Speaking of long-term thinking … investments held for a year or less are taxed at ordinary income tax rates (up to 35%). However, long-term capital gains are taxed a maximum of 15%. Yet another reason to be a long-term buy and hold investor …  

This is the 401k contribution maximum for 2009. Tax benefits from the government and perhaps a match from your employer make saving for retirement that much more beneficial.

As of today, that's the number of CAPS members who are sharing their stock-picking insights. Each member makes his or her stock picks and is ranked against all the other members. As Fool co-founder David Gardner likes to say, this is your chance to "back it up." It's also a great source for Foolish stock research. It's 100% free, and there's no shame in just reading what fellow Fools are predicting before you take the plunge by making your own calls. Start here.

After you've mastered the nine numbers above, you can shift your mind back to more important matters … like listening to guilty-pleasure '80s music.

If you're in the mood for more financial lessons, click here for the rest of The 10 Essential Money Lessons in honor of Financial Literacy month.

Anand Chokkavelu can look up pi to 10 decimal places: 3.1415926535. He owns shares of Berkshire Hathaway and Apple. Berkshire Hathaway and is an Inside Value recommendation. Apple,, and Berkshire Hathaway are Motley Fool Stock Advisor picks. The Fool owns shares of Berkshire Hathaway. The Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (34)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 16, 2009, at 4:46 PM, outoffocus wrote:

    How are there 123000 people rating stocks if there are only 66000 accounts?

  • Report this Comment On April 16, 2009, at 5:42 PM, TMFBomb wrote:

    The 132,000 figure is the total number of CAPS members. The 66,000 figure is the total number of rated CAPS members -- those who have made at least 7 stock picks.

  • Report this Comment On April 16, 2009, at 11:54 PM, djveed wrote:

    It kills me that everyone at the Fool is an 80s fan. I sincerely question your judgment given the amount of times an 80s song is mentioned here. Please stick to Mariah Carey and perhaps Ted Nugent.

  • Report this Comment On April 17, 2009, at 2:07 AM, go4buffs wrote:

    As with the most important lessons in life, these must be learned at home. Parents need to take a very active role in the lives of their children. Basic financial education in the school system should be compulsory, but it has the chances of being a 'blow off class' taught by some football coach who is only thinking of which cheerleader to flirt with next.

    Like the Gardner's father, my father (and mother) taught me to respect (and not covet) money, the value of money, the dangers of debt and living above your means, and planning for the future. Both my wife and I were blessed with parents that taught us these lessons, and we're passing these along to our children.

    Parents: wake up! You can cry all you want about the financial mess, the lack of financial education in the school system. If you are learning by the school of hard knocks, then take your lessons to your kiddos!

    They will one day be very grateful for this...just as my wife and I are grateful to our parents for this very important 'Life Lesson'.

  • Report this Comment On April 17, 2009, at 2:50 AM, mrarmalivia wrote:

    "Remember, you can get your credit score for free each year from the three major credit reporting bureaus at"

    This is partly incorrect. You are entitled to a free credit report, but not a score.

    Additionally, each bureau offers its own score. Be sure to get he FICO score which is on the 300-850 scale.

  • Report this Comment On April 17, 2009, at 4:58 AM, rajeevsingh111 wrote:

    Superb way of explaining the nuances of finances.. Some more lessons are

    2 : No of cards one must have . One for offilne shopping (of higher credit limit) and one for online shopping(of very small limit) so as to avoid the chances of misuse due to hacking.

    100-X=equity portion of your investments. where x is your age.

    72/x=no of years reqd for your money to double

    for more check out

  • Report this Comment On April 17, 2009, at 11:11 AM, TMFBomb wrote:


    Thanks for the catch...we corrected the report/score mixup in the article.


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