Wealth Builder Ratios - Q2 2007 Update

Here is my Q2 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 How Much Is Needed To Be Wealthy - The NUMBER.

Ratio and Target	Q1 2007	Q2 2007	Comments
Investment Income to Salary Target=0.8	0.04	0.09	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.
Savings to Salary Target>20	15.1	15.2	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 Salary Target=0	1.63	1.55	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.

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