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The truth. It's out there.

HOW TO DETERMINE IF YOU'RE WEALTHY

Whatever your age, whatever your income, how much should you be worth right now? From years of surveying various high-income/high-net worth people, we have developed several multivariate-based wealth equations. A simple rule of thumb, however, is more than adequate in computing one's expected net worth.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

A link that might be useful:

www.nytimes.com/books/first/s/stanley-millionaire.html

I'm perplexed by the Stanley/Danko team in that they even TRY to define the arbitrary term of "wealthy" as though it has any significance as a label at all (ESPECIALLY in light of the apparent message of their Millionaire Next Door book.)

After all, who gives a rat'sass if you meet their "definition" yet run out of income or spendable funds before you run out of heartbeats?

I personally prefer "financially independent" as a measuring stick, and its far more simple and intuitive to know if you make it or not;

A) How much would you need as an annual budget TODAY for your preferred lifestyle if you lived the way you wanted to from this point forward (and not the way you were "required to" in order to afford to survive)?

B) Do you have enough passive income (see "A") from your relatively safe assets so that you can live that way today? If so, congratulations, your are Financially Independent!

IF NOT;
C) Given the excess income you currently receive above your actual costs of living, how long until you DO accumulate enough to achieve #A?

D) Factor inflation into your future spending budget needs as you cast forward into the future... you'll need more spendable money tomorrow than you would have needed today, so your income-producing assets will need to be larger tomorrow than they would have needed to be today in order to give you financial Independence.

I think the Stanley/Danko formula is deceptive. In applying their "wealthy" formula to myself, as an example, I am apparently "super-DUPER wealthy".... but this is arbitrary & beyond silly, in my opinion. It doesn't determine that I have sufficient working assets to achieve independence; the ability to truly live my life in the style I have chosen without the need to be employed.

I'd hate to have people "drop their guard" based on the Stanley/Danko formula merely to "feel good" about some social label, and miserably regret it in their senior years when its far too late to achieve (and enjoy) true independence.

Maybe I'm overly sensitive about this, given I deal with people so emotionally wrapped up in it... but I *HATE* the idea of setting arbitrary social labels as financial outcomes.

Cheers,
Dave Donhoff
Leverage Planner

Using that forumula, we're 'worth' less than half the market value of our holdings.

In Summer, in this area. Sometimes in Spring and Fall ... depending on the weather.

Don't try being homeless in winter, in this area, though!

ole joyful