Living frugal has just been a natural way of life for me. I’ve minimized my housing expenses, buy cars with cash and only carry liability coverage, maximize my 401k and Roth contributions, etc. As such it’s been a few years since I’ve closely reviewed my finances. Everything has just kind of been on autopilot. So I recently took the time to audit my accounts. Kind of like stepping on the scale of the first time in years. I went through and conservatively estimated the value of all my assets, balanced my books, calculated my net worth, etc.
While my overall financial situation is good and improving I was a bit surprised how low my liabilities are. My asset to liability ratio is around 4:1. This is not meant to be a bragging post so I am not going to post actual numbers
Now, normally that would be a high quality problem but to me it seems suboptimial. With interest rates being so low it seems like it would make more sense to use debt to buy assets as an inflation hedge. Perhaps investment properties or undervalued stocks. Since inflation is effectively a transfer of wealth from savers to debtors those with debt will ultimately be in a strong situation.
Of course the alternative view is that debt is evil and risky and should be eliminated. There are lots of stories of individuals that went too far, too risky, and too aggressive with debt and got wiped out.
Does anyone have a target ratio that they use are using to balance their risk? I was hoping some of the longtime FWF members could share their own strategies, anecdotes, and rude remarks.