Part 2 of 2-Part Series
When we said all of the previous ratios have been leading to this one, it wasn’t figuratively speaking! The wealth ratio is literally the summation and culmination of 4 of the most important ratios we have discussed. We won’t go into the details of each of these ratios as the previous articles discuss them at depth and they are calculated and used in the exact same way.
We use this ratio much in the same way the others, as a part of the overall strategy and bigger picture when planning your financial journey. Because of how it is calculated, this ratio can be considered one of the most important, giving a full snapshot picture of your financial health. By taking this metric every quarter, we are able to track the progress (or digression) over time. What this also allows after enough time has passed is to extrapolate of a projection of what your wealth will be in a set amount of years. This is extremely handy in determining when you will have enough wealth accumulated to retire and live the lifestyle of your choice without financial hardships. If the age of retirement is too late, it means that together we would need to increase your wealth at a faster rate in order for you to retire earlier.
It’s really important to understand that while the wealth ratio gives a nice easy number to understand, it is a single metric to be used in isolation as a basis for financial planning. As with the rest of the ratios it is used in conjunction with all the rest even though it is based on the other ratios. It is a single tool in a whole arsenal at Kismet Wealth Group!