Expanding on TheBacon's thoughts
G'day TheBacon,
Would I be right in saying then that you would prefer to see net worth to debt ratios (possibly excluding PPOR and personal items, e.g. car) instead of savings to debt ratios?
That's an interesting point - you moved me to "chip in" here. I would've thought that the TOTAL funds would need to come into the equation somewhere.
And, using your idea of NOT including PPOR, cars, furniture, etc. then you sound like you're talking of Jan's "Nest Egg" value (i.e. your Nett Worth, MINUS what you would need to exist - home, transport, furniture, etc)
So, if we use "Nest Egg" here (rather than "Nett Worth")
e.g. If we purely use "Nest Egg/Debt" as a ratio, it doesn't include the TOTAL $$ involved. At one end, we could have a Nest Egg of $200k, but owe $160k - which gives a 1.25 ratio. (or Nest Egg Worth of $40k) Also, in reverse, an 80% LVR....
But, if we had $2.0m in IP's, but IP debt of $1.6m, then we still have a 1.25 ratio, BUT a "Nest Egg" of $400k instead of $40k.
So, somewhere along the line, we do need to consider the total amount involved. Seems to me the ratio itself is of limited value (except, perhaps, as a guideline figure - e.g. "DON'T go less than 1.25, otherwise you might be too "highly geared" kind of thing).
Regards,