Part 1 of 2-Part Series
In this series we have examined a number of ratios related to your personal and business financial life. While this is not the final entry in the series, they have been in a sense, leading to this one, the Wealth Ratio. Wealth is a general term commonly used to describe how ‘rich’ someone is. However, these are dependent on what the person using them thinks makes someone wealthy. There are many people that do not define the wealth or richness in their lives by the traditional metrics of currency or money. This ultimately is linked with one’s happiness. For the purpose of this article, we will use the traditional metrics because after all, it is about your financial journey!
Most of the ratios and articles have been related to income in some shape or form. Income is a flow of money which feeds into your wealth and is dealing with the future. Wealth is what you actually have right now which can be measured and counted. Your net worth is the measurement of your wealth after debts, which is usually expressed in a dollar amount. While it is expressed in dollars, it is not only your money, but every single one of your assets that have a dollar value. This ranges from cash to real estate to stocks imagining they were liquidated and put in front of you in cash.
All of the things which were discussed previously factor into your wealth, and your wealth is ultimately the total package which we are all trying to build in order to live the life we want in all stages of our life. We quantify this into the Wealth Ratio, defined as: