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June 11, 2009


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This is a good reminder that my wife and I still have a long way to go with emergency and retirement savings. We got 50 points for the two income ratio questions and that's it. Not enough emergency savings or total spend down money to even get five points. We feel too comfortable now that we've beaten our credit card debt but we still have a ways to go with emergency spending. I'd like to make it to that magic 6 month mark and maybe increase it to a year after that. I'm not beating myself up too much about the total spend down part though, we don't have much in our 401ks yet but we're contributing and we just bought our house so not much equity there either.

From what I see, I too get 100 points but that is after I do some adjustments. My emergency fund should last 19 months if I take into effect the other income that continues to come in if I loose my job. The calculation doesn't really take this into consideration. Also, I end up with 12% total debt to income with only the mortgage so I don't know if that means 25 points or 20 points in that category. I assumed 25 points as this is not unsecured debt. Otherwise, an interesting exercise.

The way they calculate "debt-to-income ratio" is wrong. They define it as the total unsecured debt divided by annual gross income. I'm a banker and I've never seen any version of this used. "Debt-to-income ratio" is supposed to be the ratio between debt payments required on ALL debt (secured and unsecured) divided by gross income.

I noticed that too Meg. It's also possible though that they meant the calculation that they used. If that's the case, they probably shouldn't call it "debt to income ratio" because that term is pretty much reserved for the calculation that you're talking about.

I scored 100 too, but I'm still stressed about money...

My ratios are 0, 0, 0, and (student loans) 65%.

Can I get a bailout?

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