Ratio and Target
Income to Salary
|Stock investment returns (14% for S&P) and higher interest rates (5-6% on CDs) boosted this ratio. This year's result was excellent versus the abysmal 2005 ratio of 0.20.|
|The second half of the year stock market rally was the main contributor to the savings increase. We also save about 20% of our salary. The value of this ratio at beginning of 2006 was 13.3.|
Debt to SalaryTarget=0
Currently, our only debt is our home mortgage. We continued to make additional payments to reduce the mortgage principal. The value of this ratio at beginning of 2006 was 1.80.
My financial goals for next year are:
1. Continue to maintain an Investment Income to Salary ratio > 0.8.
2. Add 1.5 to my Savings to Salary Ratio for a year-end value of 16.5.
3. Reduce my Debt to Salary Ratio by 0.1 to 1.53.
(For reference, Salary refers to gross salary.)
Both #1 and #2 are directly correlated with how well my stock, bond, and CD investments do. If my investments return about 10% in 2007, I should be able to comfortably achieve these goals. To achieve #3, we'll need to make an additional payment equal to about 4% of our mortgage principal.
Since I remain bullish on the market, I expect to achieve these financial goals for 2007. If the market should become weak or turn downward, I will need to revise my investment strategies to continue to meet these goals.
This is not financial advice. Please consult a professional advisor.
Copyright © 2006 Achievement Catalyst, LLC