How to check it: Get a snapshot of the proportion of stocks, bonds and cash in your portfolio with Morningstar.com's free Instant X-Ray tool. A pie chart will show your asset allocation.
Where you should be: Start with a 50% allocation to stocks, and raise or lower that percentage depending on your age, goals and tolerance for risk. An aggressive portfolio with a goal that's ten years or more away might have 80% in stocks, 15% in bonds and the rest in alternative investments, such as real estate investment trusts and commodities. Spread your investments among large and small companies, U.S. and international firms, and growth and value strategies. See our sample portfolios that combine Kiplinger's favorite 25 mutual funds to suit a range of needs.
How to improve: At least once a year, rebalance -- sell winners and buy more of your holdings that are lagging. Or use target-date mutual funds, which adjust the asset mix as you approach your goal.
Credit report and score
How to check it: At AnnualCreditReport.com, you can get your credit report free once a year from each of the three major credit bureaus -- Equifax, Experian and TransUnion. You can purchase your FICO credit score for $19.95.
Where you should be: FICO scores range from 300 to 850. Generally, a score above 700 is a sign that you're managing your credit well. A really high score could save you a pile of cash in the long run. According to Informa Research Services, a borrower with a credit score of 760 would qualify for an average rate of 4.1% on a 30-year mortgage. A score in the range of 620 to 639 would lift the average rate to 5.7% -- a difference of about $1,750 a year on a $150,000 loan.
How to improve: Pay your bills on time, even if you can muster only the minimum payment. Keep the total balance on all of your cards low -- preferably 30% or less of your overall credit limits. Opening new accounts can decrease your score. And if you spot any errors on your credit report, dispute them right away.
How to check it: Add up your recurring monthly debt expenses, such as payments on your mortgage, credit cards, and student and car loans. Divide the sum by your monthly gross income, and multiply that amount by 100 to find your debt as a percentage of income (or use this calculator).
Where you should be: Start with some typical guidelines for qualifying for a mortgage: Your housing payment should equal 28% or less of your gross income, and your overall debt should be 36% or less. Paula Hogan, founder of financial-advisory firm Paula Hogan, in Milwaukee, recommends debt levels of no more than 25% for housing and 30% overall to be comfortable and prepared for emergencies.
How to improve: First tackle the debt with the steepest interest rate, such as high-rate credit-card balances. Then focus on debts with lower interest rates. Transferring the balance on a high-rate credit card to one with a low rate may be worthwhile if you'll save money after paying the transaction fees.
How to check it: Track your cash flow for at least a few months to see where your money is going. Use this worksheet or sign up to use a free budgeting Web site, such as Mint.com or MoneyStrands.com.
Where you should be: Lots of so-called experts offer prescriptions for how much you should allot to housing expenses, debt payments, groceries and so on. But the best budget breakdown for you depends on several factors, including the cost of living in your area, your stage of life and your goals. Once you take care of the necessities -- and that should include saving for retirement and college for the kids -- you'll have more freedom to divvy up discretionary income.
How to improve: People can often find wiggle room in their grocery bills by skipping the gourmet grocers. And you may want to review your expenses for cable, Internet and cell-phone service (see Stretch Your Paycheck, Oct.). Try setting a target budget on Mint.com and using its new "Goals" feature to help you save for large future expenses.
How to check it: Dig out your auto, homeowners and life-insurance policies to see how much coverage you have.
Where you should be: Be sure your auto policy has bodily-injury coverage of at least $100,000 per person and $300,000 per accident, plus property-damage coverage of $50,000. For cars more than ten years old, consider dropping comprehensive and collision coverage because you may pay more in premiums than you could get back in claims. Your homeowners policy should provide coverage for at least 80% of the insurer's estimated cost to rebuild the home (you can use the calculator at AccuCoverage.com for $7.95 per report). Estimate how much life insurance you should have by adding up the cost of funeral-related expenses, your debts, your kids' future education expenses and, especially, how much of your income your family would need to replace.
Personal rate of return
How to check it: Your personal rate of return reflects your gain or loss for an asset over a given period -- including the initial purchase, subsequent buying and selling, dividends, and compounding -- and expresses it as an annualized percentage. Use the free Portfolio Manager tool at Morningstar.com to calculate it on all investments devoted to a particular goal. For example, when totting up retirement investing performance, include accounts in your spouse's name.
Where you should be: Aim to earn 8% a year with a portfolio for a long-term goal, such as retirement. That assumes that the majority of the portfolio is invested in stocks. Stocks are riskier and experience more ups and downs than fixed-income investments, such as bonds, but they return more over long periods. As you get closer to your goal and dial down the risk by adding more fixed-income investments, you might earn closer to 6%.
How to improve: If you put your money in index funds and exchange-traded funds, your returns will be about the same as those of the funds' underlying indexes -- without much effort.
Personal savings rate
How to check it: Tally all of your after-tax monthly income, including salary, government benefits (such as Social Security), and interest and dividend income. That's your disposable income. Subtract from that number all of your expenditures -- housing payments, utilities, food, entertainment and so on -- to find out how much money you have left at the end of the month. Divide that number by your disposable income and multiply by 100 to find your personal savings rate.
Where you should be: Your target rate depends on your income and your needs and goals, but even the old guideline of saving 10% of disposable income is probably outdated. Ideally, you'll save 10% to 15% just for retirement. Plus, you should have an emergency fund that can cover six to 12 months of living expenses.
How to improve: Instead of hoping that you'll have cash in your bank account at the end of the month, pay yourself first. Set up automatic monthly withdrawals from your checking account to a mutual fund or a high-yielding online savings account.
How to check it: Start with statements from your retirement accounts to see how much you've saved so far. Then use the calculator at www.aarp.org/retirementcalculator to estimate how much money you'll have in retirement.
Where you should be: For many people, funding a retirement that could last 30 years or more means living on about 85% of preretirement income. During your working years, aim to save 15% of gross income, including any employer match for your work-based account. Younger people have a big advantage: time. The earlier you start saving, the more time you'll have for interest and returns to compound. (For more strategies, see The New Look of Retirement.)
How to improve: Take manageable steps toward your goal, such as increasing the percentage of salary you contribute to retirement with each raise and trimming the fat from your spending so you can save more. And enlisting the help of a financial adviser could pay off. (Get free advice.)