Financial Terms Pt. 2

5. Net worth Net worth as a percentage of personal disposable income 45 40 35 US 30 25- 20 15 CANADA 10 Net worth is what your total holdings are worth after subtracting all of your financial obligations. Why is it important? Your net worth will probably fund most of your retirement years. Therefore, the faster and bigger your net worth grows, the earlier and more comfortably you will be able to retire. Once retired, preserving your net worth to last through your retirement years is your goal. 6. Five C's of credit These are character, capacity, capital, collateral, and conditions. They're the primary elements lenders evaluate to determine whether to make you a loan. Why is it important? understanding of how your banker is going to view and assess your creditworthiness, you will be better prepared to deliver appropriate information to obtain the loan you want or get a better interest rate. With a better Character Capital Capacity Conditions Collateral Percentage of govement assisted enterprises in the US 2009 62% 2010 ||| I I| 71% 2011 86% US population fiancial involvment 2012 309M 71 % Involved Depending on the structure and traditions of different economies around the world, wage rates are either the product of market forces (supply and demand), as is common in the United States, or wage rates may be influenced by other factors such as tradition, social structure and seniority, as in Japan. 2009 2012 43 % High-wage companies 31 % 2009 2012 23 % Low-wage companies 44 % 7. Sustainable withdrawal rate 10% Sustainable withdrawal rate is the 29% maximum percentage that you can withdraw from an investment portfolio each year to provide income that will last, with reasonable certainty, as long as you need it. Why is it important? Your retirement lifestyle will depend not only on your assets and investment choices, but also on how quickly you draw down your retirement portfolio. 29% 25% 18%