Thursday, January 4, 2018

Networth or CAGR or IRR or "Net Saving Rate"?

Over the holiday period, the most common topic among the friends is $. Whether it's Earning or Saving or Spending. One interesting topic was to measure "how good" are they with $.

The most common measure appears to be Networth (guess seedly, moneysense and other local bloggers are doing a good job). It is simple, yet a strong measure to show how good are you with net savings or investment :)

But my view is the one need to measure the Net Savings Ratio after the net worth. Calculating net worth simply doesn't mean you are doing great. For example, a 30 years old person making 50,000 per year may end up with 100K net worth while a 40 years old person making 200,000 may end up with 400K net worth. In this case, I want to be the first person rather than the latter.

So I proposed a small table which tabulates the net-worth - earnings - and ratio. Now add it over the years and you can see the cumulative savings ratio over a period


Networth Total Income Net Saving Ratio
 $10,000.00  $20,000.00 50.00%
 $50,000.00  $40,000.00 125.00%
 $150,000.00  $80,000.00 187.50%
 $140,000.00  $145,000.00 96.55%
 $200,000.00  $265,000.00 75.47%
 $250,000.00  $405,000.00 61.73%
 $300,000.00  $545,000.00 55.05%
 $320,000.00  $755,000.00 42.38%
 $485,000.00  $945,000.00 51.32%
 $653,209.15  $1,157,000.00 56.46%

This ratio can show you how good you are with Savings, Investments & overall financial situation :)

FYI, I am lookig at > 70% as "good"

No comments:

Post a Comment