For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.
Ratio and Target
After two years of poor results, 2010 has started out well so far. We will have more than covered our living expenses for the year if the market stays flat If the market finished further up, we should exceed the target of o.8,
At this point, we continue to stay invested in the market for our tax advantage accounts, and still taking the opportunity to increase our cash position during rallies.
This result is encouraging since our savings are almost back to end 2008 levels, even though our savings were down from paying off our mortgage in 2009.
Debt to SalaryTarget=0
2007=1.51 2008=1.46 2009=0
We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment has reduced our expenses by 24%.
My financial goals for 2010 are:
1. Continue to maintain an Investment Income to Salary ratio > 0.8. (on track)
2. Maintain a Savings to Salary ratio of 20. (off track)
3. Maintain Debt to Salary Ratio at 0. (met final goal of 0)
(For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)
Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments returns. With the continued rebound of the market in Q1, our investments have also shown a good gain.
It has been very challenging retiring at the beginning of a bear market. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. So we can wait for the stock market to resume an upward trend, hopefully in the next 1 to 2 years. At this point, I continue to be concerned about reducing our withdrawal rate, and have taken on five seasonal part time jobs.
I continue to have the same financial goals for 2010. Hopefully, the markets will continue to rebound in 2011, and allow our retirement investments to further recover. Otherwise, it's back to full time work I go :-)
For more on Strategies and Plans, check back every Monday for a new segment.
This is not financial advice. Please consult a professional advisor.
Copyright © 2010 Achievement Catalyst, LLC