Tuesday, April 8, 2008

Financial ratios

Study the following ratios to check your financial health:

Debt-to-asset ratio:

Most financial planners suggest that you keep the ratio well below 50 per cent. It means that your total debts should never be more than half of you total assets.

Debt service ratio:

According to financial planners your loan commitments should not be more than one third of your take-home pay. If your monthly take-home pay is $3,000 your total loan repayments should not be more than $1,000.

Savings ratio:

You should save at least 10% of your take-home pay. This is to ensure your financial independence upon retirement.

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