"You get what you measure." ~ old adage
In our household, we measure three values to determine our financial health: investment income, total savings, and total debt. I believe these values will show whether we can maintain our early retirement status or not. To make the values relevant to our pre-retirement income, I divide each value by my salary prior to retirement for a ratio. Here is why these values are important to us:
For reference, we do not include the value of home, cars or other personal items in any of our financial measures, since these items do not generate income.
I track these measure on a quarterly basis to determine if we are on track and to take action when we are not meeting targets. For the latest quarterly review, see Wealth Builder Ratios - Q1 2010 Update , or check the right sidebar.
For more on The Practice of Personal Finance, check back every Wednesday for a new segment.
This is not financial advice. Please consult a professional advisor.
Copyright © 2010 Achievement Catalyst, LLC
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