Each of us here at the REHP are either "financially free" or are working diligently to get there in short order. In this regard, I wonder about the influence of non-income producing assets versus income producing assets and one's ability to in fact become financially free.

Let me be a little more specific. We have all seen the proverbial Bob who has a big house/condo, a couple of expensive cars, fully stocked wine cellar, maybe a boat & is generally well stocked in the toy department. Bob is trapped twice: once, in that he is almost certainly not living below his means or not by enough; two, in that all of his toys & life style need maintenance, periodic replacement, etc. just to stay even much less create a life style enhancement in Bob's eyes.

Thus, I wonder about the ratio of one's invested / investable assets to total assets. Mine was just about 6% as of 1/31/00 meaning that of my total net worth 6% is devoted to: investment in home, cars, collectibles, etc. Therefore, 94% of my net worth is out there in the markets creating additional wealth and income. Bob up above might be 30% or 50% or 80% in personal assets compared to invested assets and can clearly not be financially free simply because his ratio is way too high --- his invested assets can not possibly create enough income to support & maintain his non-invested asset base.

In a way, I am implicitly suggesting that there might be more than one test in order to retire and stay retired. Test one we regularly beat to death, e.g. somewhere between 3% & 5% of investable assets can be consumed each year and one can remain highly confident to certain of dying before becoming broke. I am suggesting that test two is some relationship between non-income producing assets & income producing assets, but I don't know where the frontier is.

Thus, I wonder if there is an obvious right answer here or a maximum we should all stay below? Is 6% okay? Well it works for me. Is 12% okay? Is 20% okay? At what percentage does the house collapse?

TheBadger