Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I think net worth to annual expenses is indeed a much better figure than NW to annual income. Think about it - getting a raise decreases NW/AI even though it's a strictly better financial position. NW/expenses is what will count in retirement; your former AI won't matter. NW/expenses of 20 directly means that you can be retired for 20 years without running out of money.

I agree! And as you get older, if you continue to live frugally, your NW/expenses ratio will tend to go lower as kids are raised, mortgage is paid off etc.. It may not always be the case for everyone, but it has been that way for DW and I.

Another % that I pay attention to is my investment contribution/gross income. If you are increasing income each year, hopefully, you are increasing your investment contributions as well.

As DW and have seen our expenses go down (2 of 3 kids gone now) and our income go up, we've tried to strike a balance between increasing the investment contributions and having more fun, travel and entertainment.

decath
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement