Consider 2 working adults – one earning $5K per month and the other earning $10K per month. It turns out that the one earning more is worst off from a financial health perspective. How did that happen?
It boils down to the age-old principal – it’s not how much you earn, but how much you spend that matters. Actually, that’s not the end of the story. Your spending may be on investments that goes awry – that can sink you as well. Hence, financial planning has many facets and never straightforward.
Nonetheless, this article provides several tests of one’s financial health. One of the very important test is “debt to asset ratio”. Essentially, this measures how much debt you have relative to the total value of your assets. In other words, how much of what you have actually really belongs to you and not leveraged. As a best practice, it is good to keep this figure below 50%.
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