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While doing keyword research earlier today, I came across these interesting numbers:

From these numbers, it’s easy to conclude that the phrase “Debt to Equity Ratio” is being searched 500 times more than the phrase “Wealth Ratio” and that there are at least 4 times as much online information on “Debt to Equity Ratio” than “Wealth Ratio”. Does this show that currently, more people are concerned about debt than they are about wealth?

If you are nearing 50, as I am, you probably are beginning to think about retirement within the next ten years or so. With retirement looming closely, you have probably asked yourself, “Will I have enough wealth to retire on?” and “How much wealth do I really need to retire comfortably?” This is where “Wealth Ratio” is most significant.

In his book Rich Dad's Retire Young, Retire Rich, Robert “Rich Dad” Kiyosaki defined “Wealth Ratio” as your total Passive and Portfolio Incomes divided by your total expenses:

(Passive Income + Portfolio Income) / Total Expenses = Wealth Ratio

Note that computing for Wealth Ratio does not include your Salary (Earned Income). The goal of calculating for Wealth Ratio is to have your Passive and Portfolio Incomes equal or surpass your total expenses such that even if you retire from your job (earned income), you can still maintain your lifestyle. When Passive and Portfolio Incomes surpass total expenses, your Wealth Ratio would be 1 or higher. At this point, you can look forward to a comfortable retirement.

If you plan your retirement with nothing but your earned income to retire on, this will not be viable as your earned income stops as soon as you retire while your expenses continue on. To score high on your Wealth Ratio, you really need to build up your Passive and Portfolio Incomes. While this may sound obvious enough, the problem is NOT TOO MANY PEOPLE REALIZE THIS. The numbers on the table above attest to this. Only 36 people a month bother to search about “Wealth Ratio”. And the vast majority realize too late that they will not have enough wealth upon retirement.

Determining your Wealth Ratio on a regular basis can give you an idea how near or far you are from your ideal retirement. Computing it NOW gives you enough time to react and catch up. I have tried computing mine and I sincerely hope your Wealth Ratio today will be much better than mine.