February 2009 Financial Ratios
Another month has passed and I finally feel like our ratios are closer to what we will normally see. Here are a few of the highlights.
Debt Ratio: This is the first month that we actually have a debt ratio that means anything. We’ve finally put the house and mortgage on the balance sheet and now we can see that effect on the debt ratio. A .70 debt ratio basically tells us that 70% of our assets are financed with debt…aka, 70% of our total assets are made up of our home.
Overtime we hope to see this ratio get to zero. When it reaches zero it will signify we are debt free. One of the dilemmas that I am now facing is how to value our home on the balance sheet. I am not sure if I should use the purchase price, the appraisal value, Zillow, our property tax estimations, or perhaps a combination of them all. I think I will be using the appraised value this month, but I’m sure I’ll be making adjustments in the coming months.
MTD% Networth Growth: I wish I could attribute the double digit networth gain this month to something more than our tax return, but unfortunately, that was it. We received a massive tax return, including last year’s stimulus money that we now qualify for as well as the the first-time homebuyers credit. I am a little disappointed that we got such a big tax return because that meant I was basically giving the feds an interest free loan all year long. I am going to be more cognizant of this during 2009 and try to plan it so my return is no where near 2008 levels.
*For an explanation of my ratios and how they are calculated check out my 3 Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios, & Networth Ratios).
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