| How can I spend for tomorrow's spending when I cannot keep up with pay By: DP_gta How can I spend for tomorrow's spending when I cannot keep up with paying for yesterday's? Part 1 article.php?id=371 |
Article is located here: http://canadiandesi.com/article.php?SID=5&AID=371
A stumbled upon this interesting article about financial planning.
After reading this article I calculated my equity asset ratio. I request the author to send me the part 2 of this article.
It may make sense to invest only after meeting the minimum EA ratio suggested in this article.
Any comments from finance folks?
Regards,
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Amit Kalia, Broker, REALTOR®
RE/MAX Real Estate Centre., Brokerage
independently owned & operated
100 City Centre Dr, Unit 1-702
Mississauga, ON L5B 2C9
Phone No.: 905-339-5111
Website: https://www.realestate-ontario.com/
Condo Blog: https://condopundit.com/blog/
A Individual starting out might not have much assets and also less of liabilities. Hence would be in an advantageous position to avail the assistance from this individual. (Mathematically) Would a person in a business be able to evaluate with this tool and avail his help, if he can obtain the total net worth of his business assets? May be the second half of his article will provide me with a little more insight into his thoughts behind his workings.
With the current economic conditions and the slump in retail trade, I will think twice before I get into any Mutual Funds or the stock markets. Because the ratio will be up and down every other day.
It is a very nice concept if some has used their services and can post his report to us, if he did find it useful. I am on the side lines currently and may be for a little longer period. It is too volatile. But good for scalpers.
Thanks for sharing it with us. Please keep us posted.
Freddie.
As per the article:
Quote:
First you have to find out your equity ratio. Your equity ratio for your personal assets is a measure of the extent to which you have borrowed to finance these purchases.
Suppose Hrehan and Shannis, own a home which can sell in the market for $180,000, and a mortgage of $ 60,000 + $10,000 worth of other debts. Hrehan and Shannis's personal asset equity ratio is 61.11% calculated as ((personal assets - outstanding loans) ÷ personal assets) or (($180,000 - $70,000) ÷ $180,000).
That means they are positive financial territory. As long as they are above 40% they are just abt OK, above 60% they are good, above 80% they should begin sophisticated investment earning/ tax saving strategies.
For those below 50% equity ratio, pay off your old debts that is the best investment advise I can give you. If you score more than 50% I might be able to assist you move forward, make sense of it all.
Freddie,
I was not talking about investing at all.
As per the article if one's equity asset ratio is less than 50% then that person should not invest but try to reduce his/her debt.
Will you agree with the above statement?
Regards,
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Amit Kalia, Broker, REALTOR®
RE/MAX Real Estate Centre., Brokerage
independently owned & operated
100 City Centre Dr, Unit 1-702
Mississauga, ON L5B 2C9
Phone No.: 905-339-5111
Website: https://www.realestate-ontario.com/
Condo Blog: https://condopundit.com/blog/
Location: carl sagan's universe
Posted on: 01-12-08 19:15:51
Interesting.
I think one should save from the outset so one has the law of compounding on one's side- but this is off the cuff.
Numbers need to be crunched. But the author hasn't given any illustration either by graph or table..so for me just discount.
Quote:I would agree with that.
Originally posted by amit kalia
As per the article if one's equity asset ratio is less than 50% then that person should not invest but try to reduce his/her debt.
This figure implies that only 50% of a person's assets are "owned", rest everything else is leveraged.
The lower the figure, the less is "owned" and more is financed.
In such a case, reducing debt will offer the best savings.
Investing further will simply increase the % of the leverage.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by pratickm
Quote:I would agree with that.
Originally posted by amit kalia
As per the article if one's equity asset ratio is less than 50% then that person should not invest but try to reduce his/her debt.
This figure implies that only 50% of a person's assets are "owned", rest everything else is leveraged.
The lower the figure, the less is "owned" and more is financed.
In such a case, reducing debt will offer the best savings.
Investing further will simply increase the % of the leverage.
Well said. Look at the way the western world has unfolded. Definitely, over leveraging should be blamed in addition to the other factors.
Just the other day I was saw this hindi movie called EMI. One can see a similar leverage bubble with the middle class consumers in India too.
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Amit Kalia, Broker, REALTOR®
RE/MAX Real Estate Centre., Brokerage
independently owned & operated
100 City Centre Dr, Unit 1-702
Mississauga, ON L5B 2C9
Phone No.: 905-339-5111
Website: https://www.realestate-ontario.com/
Condo Blog: https://condopundit.com/blog/
Quote:
Originally posted by amit kalia
As per the article:
Quote:
First you have to find out your equity ratio. Your equity ratio for your personal assets is a measure of the extent to which you have borrowed to finance these purchases.
Suppose Hrehan and Shannis, own a home which can sell in the market for $180,000, and a mortgage of $ 60,000 + $10,000 worth of other debts. Hrehan and Shannis's personal asset equity ratio is 61.11% calculated as ((personal assets - outstanding loans) ÷ personal assets) or (($180,000 - $70,000) ÷ $180,000).
That means they are positive financial territory. As long as they are above 40% they are just abt OK, above 60% they are good, above 80% they should begin sophisticated investment earning/ tax saving strategies.
For those below 50% equity ratio, pay off your old debts that is the best investment advise I can give you. If you score more than 50% I might be able to assist you move forward, make sense of it all.
____________________________________________________________
Why those percentages?
A person starting out fresh in life with a small amount will have better percentages. That is what my mathematical mind says. So, according to the author he would be into sophisticated investments from the word GO. Where as a person who has 180,000 under his belt is penalized by his math. Because he has to first pay down his loans first and then move up gradually to the next level and then the next.
That is why I said that I will wait till you get to read the second half of his concept and pass it on to us to make a better study with it and an understanding of the principles he bases his study upon.
I can see it is a good set of basic principles to follow and to build upon. But what kind of advantage does his system provide to an individual who has a sum of 180,000 under his belt. Looks like he is punishing him for the home ownership. The same person could be living and saving that sum and have more cash at his disposal and get heck of a lot of advantage with 100% EA ratio, which he has anyway, from the beginning.
I want to study it deeply after reading the second half. I will also plug in a request, later, and see if I get a response too.
I got into the investment part, may be jumping one step further. May be you were also watching the markets today. What a thrashing the TSX and DOW got, and in the last 45 minutes. It is unbelievable. My sentiments were "I had it" upto my eyeballs. Hence I said that I need a break from this trading.
Wait to hear from the author for my next set of response.
Thanks.
Freddie.
