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Odd, skewed numbers

April 7th, 2008 at 03:12 pm

Based on Merch's post (http://merch.savingadvice.com/2008/04/07/ratios-for-retirement_37526/) about financial ratios, I've tried to figure out those of my household. The numbers come out pretty skewed.

I figured in the value of our rental place as "savings" but not the value of our residence. I did include the mortgages on both in "debt." I figured for where we should be at age 35, since that's our oldest age. I worked with our net (take-home) income, because I assume that's what matters for these equations.

Savings: $323,186
Income: $90,070
Debt: $433,780

Savings-to-income ratio
Should be: 1.2 to 1 ($108,084 to $90,070)
Actual: 3.6 to 1 ($323,186 to $90,070)

Debt-to-income ratio
Should be: 1.5 to 1 ($135,105 to $90,070)
Actual: 4.8 to 1 ($433,780 to $90,070)

Savings rate
Should be: 19%
Actual: about 4%
(This is chilling, unless you figure that I'm putting 17.3% of our net income toward extra debt repayment and 16.6% toward payment of regular credit-card and student-loan bills. A portion of this will be redirected in less than 2 years.)

So are we doing well? Really hard to tell from these skewed numbers. All I know is, in the spirit of today's SA blog entry (http://www.savingadvice.com/blog/2008/04/07/102086_getting-past-impossible.html), at least dealing with it will put me in a better position than not dealing with it at all.

PS: Ugh, I tried doing hyperlinks and failed, so I had to post the yucky URLs instead!

2 Responses to “Odd, skewed numbers”

  1. disneysteve Says:

    I think extra debt repayment counts as savings. It is essentially the fixed-income portion of your portfolio. Prepay a 6% loan and it is equivalent to earning 6%.

  2. Broken Arrow Says:

    Well, merch's ratios are simple and fun to play with, like many other measuring sticks out there, but... it's just another simple indicator to look at. I wouldn't take it too literally....

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