We have been working hard all our lives making money. Have you ever wondered how strong is your current wealth? We have used ES Ratio to do a quick summary of how our wealth can last during our retirement years.

The following information are being used in this article.
Working Age : 25 to 60 (35 years of Working)
Retirement Years : 60 to 85 (25 years of Retirement)

We have used the ES Ratio to aid us in stress testing our wealth.

Early Retirement

ES Ratio is a calculation on how  fast your wealth is depleting and how fast it is being consumed by your expenses.

A high ES Ratio is not good. An ES Ratio of 1.5 and below is preferred.

Scenario 1 (John and Family with earnings of $6,000 and savings of $1,200)
John works as an medical executive and earns an income of $3,500. His wife earns $2,500.
They have a net household income of $6,000. They have a Savings of $1,200 which is 20% of their total income.
As seen from the ES Ratio Table, their ES Ratio is 4.
Their expenses are 4 times greater than their Savings. Their wealth will be depleted in no time.

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Scenario 2 (Peter and Family with earnings of $10,000 and savings of $2,000)
Peter works as an Sales manager and earns an income of $8,000. His wife earns $2,000.
They have a net household income of $10,000. They have a Savings of $2,000 which is 20% of their total income.
As seen from the ES Ratio Table, their ES Ratio is also 4.
Their expenses are 4 times greater than their Savings. Their wealth will be depleted in no time.

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Scenario 3 (Alexander and Family with earnings of $4,000 and with savings of $2,000)
Alexander works as an Storeman and earns an income of $2,500. His wife earns $1,500.
They have a net household income of $4,000. They have a Savings of $2,000 which is 50% of their total income.
As seen from the ES Ratio Table, their ES Ratio is 1.

They will have no issue during their retirement period.
Assumption : The expenses incurred during the retirement period is the same as during the working period.

Something to think about : Is it possible to save 50% of you income every month?

 

HARD TO ACCUMULATE SAVINGS
Most people have barely enough for themselves and their family. Thus savings is out of the question. In certain months, if they have some money left, they will just keep it.  It is high chance that this extra money will end up in some fanciful gadgets or luxury items. The money will be gone before you even realised it.

How many people have the habit or ability
of saving at least 20% of their income?

If you are one, Good Work!!
if you are not, it is time to wake up!!

Cheers!!