CAPITAL TO INCOME RATIO
Identifies how much capital (savings) you should have at your age to help you stay on track for retirement.
Identifies how much you should be saving each year so that you can reach your desired Capital to Income Ratio each year.
MORTGAGE TO INCOME RATIO
Identifies how much mortgage debt you could consider incurring and still leave enough room in the monthly budget to meet your Savings Ratio.
EDUCATION TO AVERAGE EARNINGS RATIO
Identifies how much debt you could reasonably incur to obtain a college or advanced degree. Also applies to parents who are thinking of taking on debt to educate their children.
Helps you understand how to grow and protect the capital you have accumulated.
DISABILITY INSURANCE RATIO
Helps you understand how much disability insurance you need at each age.
LIFE INSURANCE RATIO see an example
Helps you understand how much life insurance you need at each age.
LONG TERM CARE RATIO
Helps you understand whether you need long term care insurance, and if so, how much.
If the decision helps improve your ratios, then it’s probably the right decision. If the decision damages your ratios, then it’s probably the wrong decision. The ratios provide simple and clear benchmarks for you to focus on each year. If you know where you stand with your ratios each year, then you know where you’re headed with your finances.
This site will take you through an example of how the ratios work and why using ratios makes planning so easy.
If you’d like to gain a deeper understanding of the ratios and how they work, I of course recommend that you read the book.