Ratio and Target
Income to Salary
|The stock market dip in late February and throughout March negated the fixed income gains. At this point, I feel lucky to have passive income of 4% of my salary for the first 3 months. I was expecting a negative percentage. However, our managed accounts, and my retirement account were only down slightly and our personal accounts (invested in fixed income) were up slightly. Whew!|
Tracking this number is giving me an indication of what our income might be like during retirement. Obviously, with income at 4% of my salary, we would have been spending our retirement principal during Q1 2007. I am still not comfortable with that kind of situation.
|The stock market returns for the Q1 kept this ratio from increasing further. The growth was due entirely to savings of my salary, the 4% investment gain, and rounding up:-).|
|Debt to Salary|
|Currently, our only debt is our home mortgage. In January, we made a payment equal to 4% of our principal.|
My financial goals for 2007 are:
1. Continue to maintain an Investment Income to Salary ratio > 0.8. (off track)
2. Add 1.5 to my Savings to Salary Ratio for a year-end value of 16.5. (off track)
3. Reduce my Debt to Salary Ratio by 0.1 to 1.53. (on track)
(For reference, Salary refers to gross salary.)
Both #1 and #2 are directly correlated with how well our stock, bond, and CD investments do. If our stock investments return about 10% in 2007, I should be able to comfortably achieve these goals. However, the S&P returns to date are 0.2% and the Dow is down 0.9%, which is causing me some concern for this year so far. Number 3 is on track since we made an additional payment equal to about 4% of our mortgage principal.
When I was bullish on the market, I expected to achieve these financial goals for 2007. Since there is a strong possibility that the market could continue to be weak or turn downward, I may need to revise my investment strategies in Q2 to get closer to the 2007 goals.
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This is not financial advice. Please consult a professional advisor.
Copyright © 2007 Achievement Catalyst, LLC