Financial Strength is based on two variables: Debt /Income Ratio and Market Growth. Market Growth is based on the House Price Index (HPI) which is computed by the Office of Federal Housing Enterprise Oversight.

First, let’s see what Debt/Income Ratio means. Debt/Income Ratio is calculated by dividing your amount of monthly debt by your monthly income. In plain English, this ratio shows what percent of your monthly income is spent on your debts. However, that is only the first chapter of the book. The true question you must ask yourself is, “Can I afford to live on the amount remaining each month after I pay my mortgage?”

Second, we take a look at Market Growth. How much has the market you are looking at appreciated over time? If the market trend is above the US average, it is more likely to continue to do so than one that has traditionally appreciated less than average.

How these two variables relate to each other gives you a go/no go indication for your next action. For example, a Debt/Income Ratio below 50%  and Market Growth above average converges in the B quadrant and indicates a specific strategy.