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A score above 80 indicates excellent financial health with strong liquidity, low debt, and solid wealth accumulation. Scores between 60-80 are good but have room for improvement. Below 60 suggests you should focus on building emergency savings or reducing high-interest debt.
Net worth is calculated as: (Cash + Investments + Home Equity) - (Consumer Debt). It represents your total wealth after subtracting all debts. Your score compares this to age-based benchmarks to determine if you're on track for your stage in life.
High-interest consumer debt (credit cards, personal loans) typically costs 15-25% per year, while average investment returns are 8-10%. Mathematically, you gain more by eliminating debt first. Once consumer debt is cleared, shift aggressively to investing.
The standard recommendation is 6 months of expenses in liquid cash. This provides a safety net for job loss, medical emergencies, or unexpected expenses without forcing you to go into debt or liquidate investments at a loss.