How to determine if you are wealthy!

[Ima saver]

According to the millionaire next door book, this is how you determine if you are wealthy.
Multiply your age times your pretx annual household income from all sources except inheritances.
Divide by 10
This (less any inherited wealth) is what your net worth should be.

How do you measure up?

[LuxLiving]

: Wealthy x 2. :

I guess washing out those ziplocks really helps after all!

[DivaJen]

Does the equity in one's home count?

What about for a one-income family? Is the net worth that is being calculated for the couple?

Gong by my meager upcoming salary I'm beyond wealthy, but that doesn't really seem like an accurate assessment given that I couldn't live on my salary. Combining with DH's income creates a calculation for a couple, and hence my question.

[Ima saver]

The equity in your home certainly does count!

[Ima saver]

Oh, and we are a one income family, so i used my husband's income plus interest in banks, and first, I used his age, then I used mine.

[Bookie]

Hmmm. By that formula I fall a little short of wealth.

Why does this not surprise me?

[Ima saver]

The other rule they give: to be a PAW , you should be worth twice the level of wealth expected. PAW is prodigious accumulator of wealth.

[Snoopy2645]

well by income we are wealthy when you count equity in the house by dh's income we fall a little short but not by much my excuse for that is raising 3 kids they are for sure eating us out of house & home!!!

[DivaJen]

Originally Posted by Ima saver

The equity in your home certainly does count!

In that case we are doing just fine. If not, we are at least on our way.

[Ima saver]

I am a PAW!! The other terms are UAW and AAW!! (under and average)

[rusty@saving]

there are other ways to determine wealth than $ in my opinion. family, a good job, happiness, a great woman in my life, being able to treat her good, ect ect.
wealth of knowledge is big too...if you keep yourself in line, everything else will fall into place.

[Bluezy]

Definately not wealthy.....yet

[pearlieq]

I think their formula is nice as one way to measure wealth, but I think there are some serious flaws, especially for younger folks.

When you are young, your income flucutates and can grow quite rapidly--the formula really doesn't account for that.

For example, say you're 25 and make 100k per year. According to the formula, your net worth should be $250,000 (interesting, since when you were 20 you were probably making 10k a year at a part-time job). However, say in the next year you got a nice raise and your spouse began working. Now you're 26 and your income is 150k. All of the sudden your net worth is supposed to be $390,000.

I don't think even the most prodigious of PAW's could parlay an extra 50k a year in income into another 140k in net worth in just a year in any kind of "normal" context.

I find the formula interesting, but I won't be paying too much attention to it until I hit my late 30's or so.

[Ima saver]

pearl, I think you are exactly right. I think it is a lot more accurate for people in their 40's and 50's! ( I also can't imagine making $100,000 in one year)

[lrjohnson]

I'm an under accumalator of wealth. A combination of having low earnings years and not having good savings habits. I'm not too far behind though.

[Ima saver]

lrjohnson, that surprises me. You manage to live on such a small income. I can relate because my husband and I did too, for many years.

[lrjohnson]

Originally Posted by Ima saver

lrjohnson, that surprises me. You manage to live on such a small income. I can relate because my husband and I did too, for many years.

Thanks for the confidence you have in me. But when I was earning $700 a month, even though I wasn't getting into debt, I wasn't really putting much away either!

[creditcardfree]

Looks like we are considered PAW's!!! It sure helps not to have much debt!

[Ima saver]

lrjohnson, I guess you are right, you can't save much. I always put away 10% even when that 10% was only $2 for my $20 tips night!!

[Snoopy2645]

I agree I also wondered about that in the last few years our income has went up & down I stayed at home with the kids the last 6 yrs so it went down & dh went to college & just graduated & got a different job he took a huge jump in pay just last month so its hard for me to tell now ya know