AAR21 - 5 Ratios to Understand Your Financial Situation
The Investing for Beginners Podcast - Your Path to Financial Freedom
Defining Cost of Needs and Keeping It Under 50%
Evan defines needs, recommends keeping needs under 50% of net income, and argues for using total needs over just housing.
You can find Evan's custom home buying spreadsheet by going to http://Einvestingforbeginners.com/homebuying
In this episode, Evan Raidt and returning guest Dave Ahern dive deep into essential financial ratios crucial for maintaining and tracking your financial well-being.
They discuss various topics, including savings rate, cost of needs ratio, the importance of emergency funds, net investment ratio, debt to income ratio, and a bonus segment on partner income ratio for couples.
The discussion emphasizes the importance of using these ratios as guidelines for personal financial improvement rather than strict benchmarks and advises against comparing oneself to others.
The episode also touches on the practical aspects of managing these ratios, including setting up automated savings and handling joint finances responsibly. 00:00 Introduction and Guest Welcome 00:31 Understanding Financial Ratios 01:49 The Danger of Comparisons 04:59 Calculating Your Savings Rate 06:18 Gross vs. Net Income 09:03 Cost of Needs Ratio 16:32 Emergency Fund Ratio 21:32 The Importance of an Emergency Fund 22:59 Understanding the Net Investment Ratio 25:16 Calculating Your Net Worth 30:08 Debt to Income Ratio Explained 37:14 The Dangers of Buy Now, Pay Later 39:53 Partner Income Ratio in Relationships 43:18 Final Thoughts and Practical Tips
Timestamps are generated by artificial intelligence, and are not 100% accurate depending on the platform used for listening.
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Have questions? Send them to Evan at evan@einvestingforbeginners.com
If you’d like to discuss sponsorship or advertising opportunities, shoot us an email at equity@einvestingforbeginners.com.
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