How Much do You Worth? (Part 3)

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Do you have any idea how much of your income has been used for loan repayment? You will be able to by calculating debt servicing ratio by dividing your loan repayment with your net take home income. You should keep your debt servicing ratio below 35% of your net take home income so that you have enough cash to meet other end needs.



Life insurance is a very important protection tool. But, in view of limited financial resources you have, it is not advisable to have large allocation of your net take home income on this. As a rule of thumb, try to maintain your life insurance service ratio at maximum 10% of your net income.

Last, but not least, the Savings Ratio. We have been talking about pay yourself first. So, how much do you actually pay yourself. You will have some idea by dividing your savings over net income. The optimum ratio is subject to individual condition. But, as a general rule, a minimum of 10% shall be maintained.

There are, of course, many others ratio you can get to know more in depth about your financial health. Those listed in my post, which I believe, should be able to give you a general picture of your financial condition. After calculating all these ratios, what you need to do is to find and attack the root cause that lead you to unfavorable ratio.

Happy calculating.