Most people steer away from the topic of Statistics. In this article I want to give you a set of four statistics that can act as a guideline to making sound financial decisions. These statistics are:
- Savings Rate
- Debt Servicing Ratio
- Return on Investment
- Asset Allocation
Savings Rate
The Savings Rate is the value of savings divided by after-tax income expressed as a percentage.
For example, if you save $100 a week and your after-tax income is $1,000), your Savings Rate is 10%.
A commonly quoted rule is the 50%,30%, 20%rule is a budgeting system that suggests diving your after-tax income into three categories. You should allocate 50% to needs (fixed costs), 30% to wants (discretionary expenses) and 20% to savings.
I always remind Australians that as of July 2025 your employer saves 12% of your income as the Superannuation Guarantee Levy SGL. If you include your superannuation contributions as part of your savings, then you would need to allocate only 8% of after-tax income to savings.
Debt Servicing Ratio or Debt to Income Ratio
The Debt Servicing Ratio (DSR) is the percentage of your after-tax income allocated to loan payments. A similar ratio is called the Debt-to-Income Ratio (DTI). The difference is that the Before-Tax (Gross Income) is used instead of the after-tax income.
If you have a Home Loan with monthly loan payments of $3,000 and your after-tax income is $10,000 a month, your DSR is 30%.
In simple terms, this means that of your $10,000 disposable income, $3,000 (30%) is allocated to servicing debt.
It is generally accepted that a Debt Servicing Ratio should not exceed between 30% and 32%.
Return on Investment
Return on Investment is calculated as the income on investments divided by the value of the investments.
As an example: If you have an annual investment income of $5,000 and the value of your investments are $100,000, you will have an Investment Return of 5%.
Sometimes it is prudent to consider the Real Rate of Return which discounts of effect of Inflation. It is generally accepted that a good rate of return is between 4.5% and 5% plus inflation.
Asset Allocation
Asset Allocation may be described in two formats. In Financial Mappers, these are described as:
- Investment Profile
- Risk Profile
Investment Profile allocates the assets according to the percentage of interest earning accounts using 20% allocations. (Note the DSR is displayed in this graph).
Risk Profile calculates the percentage of Growth Assets (property and shares). MoneySmart categories the percentages as:
- Growth (85%+)
- Balanced (31% – 84%)
- Conservative (0% – 30%)
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To find out more, please watch this short video Understanding Statistics.
Glenis Phillips SF Fin – Designer of Financial Mappers and Advice Online
Disclaimer: Financial Mappers does not have an Australian Services License, does not offer financial planning advice, and does not recommend financial products.
