But part of what you’re tracking is market performance, which is not within your control (and thanks to the power of compounding, will become a larger part of the equation as time goes on). If your focus is on reinforcing “disciplined financial decisions”, I suggest you instead track savings rate, as it’s a metric entirely within your control, regardless of what the market gives (or takes). Knowing your savings rate has other benefits, too, for example as part of first-pass estimate of expenses in retirement (i.e., Expenses = Income - Taxes - Savings).I’ve personally found it valuable at every stage, as it consistently reveals how well I’m converting my earnings into lasting wealth. It also reinforces disciplined financial decisions. a lot of metrics focus on process, but this one measures true effectiveness (for almost any income level).It’s a useful metric to keep an eye on early in one’s career, or if there was a dramatic change in pay scale (like physicians), but once a career and savings habits are established, I don’t see much value to tracking it.
None of the three metrics you’re tracking (net worth, total returns, wealth ratio) is truly reflective of your financial discipline; all have market performance rolled in.
Statistics: Posted by DIYtrixie — Sun Nov 10, 2024 4:29 am