Comments on: Book Review & Giveaway: “Your Money Ratios”

By: Charles Farrell from "Your Money Ratios" Discusses Social Security, Taxes, and the 401k. | Financial Samurai

Thu, 09 Sep 2010 04:07:10 +0000

[...] following is the second and last part of my interview with Charles Farrell, the author of “Your Money Ratios“. We discuss the much maligned 401k, whether Social Security will survive, and crowd [...]

By: When You SHOULDN’T Worry About Money | Sweating The Big Stuff

When You SHOULDN’T Worry About Money | Sweating The Big Stuff — Tue, 06 Apr 2010 10:10:13 +0000

[...] ago, Financial Samurai reviewed Charles Farrell’s “Your Money Ratios,” a book detailing the different ratios we should pay attention to and how these ratios are [...]

By: Charles Farrell, author of Your Money Ratios, on tour January 2010 | TLC Book Tours

Tue, 19 Jan 2010 19:50:50 +0000

[...] Thursday, January 7th: Financial Samurai [...]

By: admin

admin — Sat, 16 Jan 2010 04:10:44 +0000

Roger – Thanks for your comment. Unfortunately, you’re a week too late as the contest winners were announced in the last Katana! You would have been a perfect candidate for the book. Seriously, I loved the book and that’s why I told you when the contest was open to stop by! lol.

If you’d like, I can speak to Charles (author), who we are e-mailing back and forth, and see if he can send you a book for free, if you provide a review? You do good ones, so maybe he’ll say yes.

By: Roger

Roger — Sat, 16 Jan 2010 03:20:43 +0000

Interesting sounding book, FS. My CIR depends on whether we’re using my current unemployment income (in which case it’s somewhere in the 0.8 range) or the income I was making at my last job (in which case it comes in at 0.4). I think I’ll be able to reach a ratio of 12 by retirement age; contributing according to this book’s guidelines, I’ll be at a ratio of 13 by age 65 (making conservative estimates of growth and liberal estimates of inflation). I do think it’s better to assume that Social Security won’t be able to provide anything by the time I retire, and a more appropriate CIR ratio to shoot for is 20 (which, at a four percent safe withdraw rate will give us the desired 80% of our income). (That require a more robust saving rate, in the twenty percent range, but better to save too much than too little, right?)

I do like the idea of using expenses rather than income for this and other similar calculations; it tells you much more about whether your investments (and the income you can derive from them) are sufficient to cover you needs. With that ratio, assuming withdrawing four percent of your total investment to cover your expenses, you’ll need a CER of 25 to meet your investment needs. (So, Mike Hunt, you are way ahead of the game!)

I appreciate your challenge, FS, but for those of us who aren’t making six figures, it’s a bit unrealistic to max out our 401(k)s AND then save an additional 12-15%. If you’re making $50,000, for instance, contributing $16,500 means 33% of your income. Add in 12% to 15% contributions, and your paycheck is almost cut in half before you even get a dollar to spend. With taxes on top, you’d be lucky to have one third of your gross income left for living expenses. (Although, if you can survive on that, your CER ratio will be increasing by 1.5 or more each year; that’s the way to do it if you want to retire REALLY early.)

I also think the 50%/50% stock-bond mix is a bit too conservative; if you’re going for a permanent ratio, 60%/40% or 70%/30% seems more reasonable. That said, I do like making your investments become more conservative over the course of your life; that’s the best way to do it, I think.

So, commented, tweeted (as amateurfinancier), and I’m already following your RSS feed; where’s my book already? ;)
.-= Roger´s last blog ..Fifteen Things to Tell A Younger Me =-.

By: Mike Hunt

Mike Hunt — Wed, 13 Jan 2010 16:48:13 +0000

Should the CIR be replaced by CER or Capital to Expense ratio? The reason being if I use CIR I’m at about 5-6 at age mid-thirties but since we have such a high savings rate if we use CER the ratio climbs up to be about 30 or so!

It would be great to get a copy of that book…

-Mike

By: David @ MBA briefs

David @ MBA briefs — Sat, 09 Jan 2010 03:36:46 +0000

I didn’t consider the value of my employer’s pension which I would think would change the CIR. I should also get something from the military when I’m 60, not sure what that value is either. Maybe I sure read the book…
.-= David @ MBA briefs´s last blog ..Business Wisdom from Aesop’s Fables: 3 ways to deal with difficult people =-.

By: George

George — Fri, 08 Jan 2010 18:14:23 +0000

1. My CIR is about 1.7 right now if I include the value of my employer pension (I’m 32). I think I should easily be able to hit a CIR of 12 by age 65, but my goal is to hit that point sooner and have the possibility of retiring early.

2) I’ve retweeted the link.

3) Signed up for the RSS feed. Didn’t know this blog existed until I found it via a search for the book. I really would like to have a read through it – I’ve always thought the idea of ratios made sense to determine financial goals, and getting a free copy in a contest is a frugal way to read! :-)