Ratio and Target
Income to Salary
While our stock market and fixed income investments have done well, my company retirement plan has declined this quarter due to a 3.1% decline in our company stock this quarter. Thus, the return for this quarter was only 5% of salary.
Tracking this number is giving me an indication of what our income might be like during retirement. Obviously, with income at 9% of my salary, we would have been spending our retirement principal during Q1 and Q2 2007. I am still not comfortable with that kind of situation.
|The small investment gain and three months of savings has increases this ratio by 0.1. I had been targeting for a 0.75 increase by mid-year.|
Debt to SalaryTarget=0
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. The S&P returns through June 29, 2007, are 5.5% and the Dow is up 7.6%. The market gains have been offset by decline of company stock in our retirement plan which is down 5.1%, and is causing me some concern for this year. 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. While I still believe 2007 will be a strong finish for the market (and my company's stock), I may need to revise my investment strategies in second half to get closer to the 2007 goals.
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This is not financial advice. Please consult a professional advisor.
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