UnThreaded | Threaded | Whole Thread (47) | Ignore Thread Prev | Next
Author: FoolMeOnce Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 749462  
Subject: Re: Relationship Of Non-Income Producing Assets Date: 2/6/2000 11:29 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
TheBadger wrote:
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.

When applying for mortgage loan approval, most lenders qualify applicants based on not exceeding a ratio of total housing/non-investment debt to income of 33 to 40%. So this probably represents a reasonable limit to what can be carried and still remain economically viable. This level would also represent that at which virtually nothing is being set aside for the future. I am not sure it is reasonable to prescribe a specific test for the level of noninvestment assets. Most of this will be represented by the cost of housing yourself. The ratio of housing cost to total assets will be very high when first starting out but should reduce thereafter. In order to retire early, it would appear difficult to designate a specific ratio beyond saying that noninvestment assets should be kept to a level which does not prevent set aside of at least 10% (and preferably much more) of your income for investment purposes. It is probably easier to look at this from the standpoint of percent of income invested rather than percent spent on housing and toys.


In order to stay retired .....
Test 2: Funds required to acquire and maintain noninvestment assets should not be so large as to cause Test 1 to be violated.

Regards,
FoolMeOnce



Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (47) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Apple

Wal-Mart Nixes Apple Pay
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 "#1 Media Company to Work For" (BusinessInsider 2011)! 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