Navigating high income, high debt challenges.
With a combined income of $450,000, the Johnsons have amassed $1.2 million in debt, including a mortgage, student loans, and a business loan related to Mrs. Johnson's consulting practice. They are concerned about their ability to service this debt while simultaneously funding their children’s college education and securing a comfortable retirement with their current $2.1M retirement accounts.
By utilizing the Times Interest Earned Ratio Calculator, Golden Door Asset helped the Johnsons understand their ability to cover their interest expenses with their operating income. The calculator revealed a TIE ratio of 2.5, indicating manageable but not ideal coverage. We then used the Debt Service Coverage Ratio Calculator to model different debt repayment strategies. For example, refinancing the business loan could improve their TIE ratio to 3.1 and free up $4,000/month.
The calculators allowed for easy input of the Johnsons' financial data, providing immediate insights into key financial ratios and enabling scenario planning with different interest rates and debt repayment schedules.
$48,000 annual cash flow improvement and increased peace of mind regarding debt sustainability.
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