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Re: How to determine if you are wealthy!
Did you marry a younger man?
Did you marry a younger man?
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Re: How to determine if you are wealthy!
Nope. I'm 29, he's 43. Everyone always thinks we're the same age--both in our mid thirties. It's annoying now, but it will be worse when I'm in my late thirties and he's fifty and everyone thinks we're both 45.Originally posted by Ima saverComment
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Re: How to determine if you are wealthy!
There is a formula here that seems to cover a much wider age range:
So if you are 30 years old, then you should be worth 1.42 times your annual salary. This formula compensates for the curve that your Net Worth progress will start off slow & gain momentum.Code:((Age - 20) / 240 + .1) x (Age - 20)
Age - Net Worth divided by Annual Income
20 - 0.00
30 - 1.42
40 - 3.67
50 - 6.75
60 - 10.67
70 - 15.42
72 - 16.47
There is also an interesting comment on that page about basing your retirement estimations on your annual spending, instead of your annual salary. So if you get a big raise, that doesn't automatically change what your net worth should be, unless you plan on raising your standard of living as much as your raise.Comment
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Re: How to determine if you are wealthy!
Thanks for the link. I like that formula and discussion.Originally posted by autoxer
Another thing stood out to me. They base their retirement planning on a retirement age of 72! I think we are going to read more and more projections based on ages over 65 since fewer and fewer people are going to be able to afford to retire at the traditional age of 65 due to inadequate savings during their lifetimes.Steve
* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.Comment
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Re: How to determine if you are wealthy!
well that makes me feel better by my income & my husbands we are at about 1.5 our annual income for savings with the house & banking stuff. And I am 29 & he is 31 so I averaged us to be 30 guess we are doing ok for our age but I know we could be doing a heck of alot better I am working on that I havent ate out at all this week & have limited my trips to the grocery store so we shall see!!!Comment
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Re: How to determine if you are wealthy!
I don't think a person who retires at 72 would need need to have savings equalling 16.47 times his annual income. Even if that person put all the money in his checking account which doesn't earn any interest, he would be able to live 16 more years spending the amount equal to his yearly income before he retired, which puts him at 88. Now if he just draws the money out of his checking account, he won't be paying any taxes, unlike when he was still working, so essentially his income during retirement will be 35%+ higher, considering all the taxes. In addition, if he keeps his money in a high-interest savings account earning 5% APY, that would increase his income substantially. For example, assuming his salary in the last year before retirement was $60K, so if we multiply it by 16.47 we get $988K -- that's how much that person had saved. $988K * 5% = $49.4K -- that's how much interest he would earn every year. That means that in order to maintain $60K income a year, his savings would only decrease by $10.6K each year, so he can live off his money a lot longer than 16 years. Of course, nobody in their right mind would keep a million $$ in a savings account. A large portion of his savings would be invested in bonds/mutual funds, etc., which would give him a much better yearly return than 5%. So those of you who are afraid they won't be able to catch up, don't panic, just save as much as you can and you won't have to work until 72.Comment
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Re: How to determine if you are wealthy!
Like the previous posters have said, the (age)*(annual salary)/10 formula does not work if you're young.
I'm 21, three months out of college, $22K in debt (student loans), and working a job that pays $32K. The formula thinks I should be worth nearly $70K. They are bloody dreaming. Even using my college work-study salary, I'm still way under.
According to the formula posted by autoxer, though, I'm only slightly under the $7K that I should be worth, and this is based on my current salary. (I'm worth not-quite $5K.)
Give me a few more years. Or (ahem) decades. I'll catch up.
~mimiComment
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Re: How to determine if you are wealthy!
greedy4chips formulas are much more accurate for those of us in our twenties. According to that formula, hubby and are almost exactly on target.Comment
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Re: How to determine if you are wealthy!
According to the first formula I am 72K behind, and I turn 31 soon....
According to the greedy4chips I am 2K ahead of the game...
Whatever formula you use I know I need to do better and get I'm trying hard to do so...that' why I am here...I guess that's why we are all here.
Ask most people and I bet they couldn't even tell you their net worth...so I guess the first step is to know what it is...Comment
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Re: How to determine if you are wealthy!
Well, using the new formula I am only five digits behind not six.
However it's still very close to six.Comment
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Re: How to determine if you are wealthy!
Are you serious that you don't make more than 100k/year. I always thought you were a high-income earner. Either way your ability to save & how you handle money is absolutely inspiring to me as a younger saver. Thank you for your posts it is very motivating to meOriginally posted by Ima saverComment
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Re: How to determine if you are wealthy!
Well,
any way you look at it,
or push it all about,
the outcome of my income is
my incomes all gone out!
Last time I added it up my net worth was somewhere between +$1000 and -$1000. It probably still is, so the formula doesn't apply to me at all. Still, I'm a lot better off than I was five years ago. So let's hear it for the PRoD (Prodigious Reducers of Debt)
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Re: How to determine if you are wealthy!
HAHAHAHAHA!!!!!!
LMAO!!
According to this my new worth should be $84,000
I am NEGATIVE net worth right now!!!
HAHAHA!
I have to laugh or I'd jump opff a bridge!
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Re: How to determine if you are wealthy!
Originally posted by rusty@saving
That was so sweet! Sound just like my husband lol.Comment
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Re: How to determine if you are wealthy!
The book authors claim this formula will determine how "wealthy" you are, but it doesn't do any such thing. Take Koppur's post as an example. The formula says he should have $84,000 net worth. Would anyone here consider that "wealthy" within the normal meaning of the word? I sure wouldn't!Originally posted by Ima saver
Or take a 55 year old worker who makes $20,000/year. The formula says: Age 55 times $20,000 divided by 10 = $110,000 net worth. Figure this worker has lived in the same house for 30 or 40 years, has long since paid off the mortgage, and the house is now worth $74,000. Also figure their car and other possessions are worth $6,000. That leaves $30,000 invested in savings, 401K, mutual funds, or whatever. Is this person "wealthy"? I think not!
What the formula actually measures is how successful you've been at accumulating net worth in relation to your age and income. But it doesn't even do that properly. Several other posters have given examples involving young workers, but there's also the problem of older workers who used to make $75k but got tired of the rat race and now make $25k doing something they love. Clearly their net worth is mostly a product of what they used to earn, not their current income.
But beyond all that, the formula doesn't even work! The authors wanted to do this:- Multiply your age times your pretax annual household income from all sources except inheritances.
- Divide by 10.
- This should equal your net worth (less any inherited wealth).
Pay close attention to number three. What they really want you to do is subtract money you inherited from your net worth, but the formula says to subtract it from Age*Income/10.
Still want to take money advice from these guys?Comment
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