Saving and Debt to Income Ratios

My parents mailed me this Wall Street Journal article back in 2005: Ugly Math: Soaring Housing Costs Are Jeopardizing Retirement Savings.  I found it while cleaning out some old file folders.

It talks about how rising home prices of that time were keeping people from saving as they should while also ratcheting up their debt levels.  We're dealing with other economic problems these days, but the table in the article is still a great wake up call.

So, let's say you are 30 years old and making $50,000 a year.  You should have at least $5000 in savings, preferably in a IRA or other retirement tax shelter.  Meanwhile, your debt (including credit cards, student loans, car, and mortgage) should be no higher than $85,000.




Don't get too depressed; most of your friends aren't there either.  Just think about this when you get your next bonus or other windfall.  Perhaps you should split it between savings and student loans rather than buy a new TV.