Monday, April 02, 2007

Wealth Builder Ratios - Q1 2007 Update

Here is my Q1 2007 Wealth Builder Ratio update. This update also represents results for the 2007 year to date. Overall, I am disappointed with this year's results so far versus 2006 results. For more details on the relevance of these ratios, please see this earlier post.

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Ratio and Target
Q1 2007

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.
to Salary


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.
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 © 2007 Achievement Catalyst, LLC

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