Retirement?

[PPBart]

...It's not about income. It's about D/I ratio!

How to determine if you are "wealthy":

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

(The Millionaire Next Door, pg. 13)

 

[Pas Tout La]

How to determine if you are "wealthy":

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

(The Millionaire Next Door, pg. 13)

What does he consider when calculating net worth? Strictly cash and investments, or other appreciable assets?

 

[madwabbit]

net worth generally takes into account property, real estate, cash and investment portfolios.

 

[Nomad.2nd]

What does he consider when calculating net worth? Strictly cash and investments, or other appreciable assets?

Assets minus liabilities.

 

[Pas Tout La]

Assets minus liabilities.

Got that part. I have an accounting degree. Just wondering if he included items such as boats and vehicles and what not that you outright own. I personally wouldn't include them because of the fact that they depreciate. But that's the conservative principles I've had drilled into my head.

 

[Nomad.2nd]

Got that part. I have an accounting degree. Just wondering if he included items such as boats and vehicles and what not that you outright own. I personally wouldn't include them because of the fact that they depreciate. But that's the conservative principles I've had drilled into my head.

If you have $5k in equidity in your _______

You don't count it?!?!?!?!

 

[PPBart]

...Just wondering if he included items such as boats and vehicles and what not that you outright own. I personally wouldn't include them because of the fact that they depreciate...

Good question... If this was a one-time calculation which I was making just to see if I qualified as "wealthy" I think I would exclude them for that same reason.

It's just another "rule of thumb", but the general discussion in the book on how people define "wealthy" is interesting.

 

[madwabbit]

property and investments that you own are always fluctuating in value... why wouldn't you count it?

 

[Jack]

How to determine if you are "wealthy":

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

(The Millionaire Next Door, pg. 13)

I can't help but feel that is an astronomical number for people fresh in the job market. According to that I should have 200k saved up.

On second thought, I can see that.

 

[Pas Tout La]

If you have $5k in equidity in your _______

You don't count it?!?!?!?!

property and investments that you own are always fluctuating in value... why wouldn't you count it?

I guess I'm thinking more along the lines of if I were to sell my boat, truck, guns, etc.... I would immediately use the proceeds to buy a new one. I don't intend on ever not having one so I would exclude it from my net worth. To me, adding it in would be overstating my net worth to an unrealistic representation of what it really is based on my intentions to never liquidate. Call it a buffer if you will

 

[olivs260]

I can't help but feel that is an astronomical number for people fresh in the job market. According to that I should have 200k saved up.

On second thought, I can see that.

It isn't as bad as you would think for when you're older. If I was 40, I should have 380k. At my age now, it should be 250k. I think it's more of a guideline for someone who is middle-aged.

 

[JadeRaven]

Got that part. I have an accounting degree. Just wondering if he included items such as boats and vehicles and what not that you outright own. I personally wouldn't include them because of the fact that they depreciate. But that's the conservative principles I've had drilled into my head.

Literally assets minus liabilities.

The calculation is present-day, i.e. a balance sheet, not a financial statement.

If you have a $1,000,000 boat that you could sell for cash, is that not an asset?

If that boat costs you $100k in maintenance over the next year and depreciates by $150k, then you run the calculation again. You still have an asset that can provide you current or future benefit.

Kiyosaki does not count things such as a house, car, etc. as "assets" but that is a different book

 

[Nomad.2nd]

I guess I'm thinking more along the lines of if I were to sell my boat, truck, guns, etc.... I would immediately use the proceeds to buy a new one. I don't intend on ever not having one so I would exclude it from my net worth. To me, adding it in would be overstating my net worth to an unrealistic representation of what it really is based on my intentions to never liquidate. Call it a buffer if you will

I always use the expression: "your going to Vegas with a suitcase full of money"
(turning all your assets into FRN's at that time)


And don't be too sure you'll ALWAYS have a boat etc. I'm currently researching the legal and tax implications of liquidating a portion of my gun collection for property.

 

[Jack]

It isn't as bad as you would think for when you're older. If I was 40, I should have 380k. At my age now, it should be 250k. I think it's more of a guideline for someone who is middle-aged.

That is what I was thinking, seems like a declining difficulty. According to the math I should be wealthy by the end of the decade. When you consider most minimum 401k contributions are 5% with employer match of 5% it really isn't that hard to save more than 10% a year(which is the increase per year the criteria requires)

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It isn't as bad as you would think for when you're older. If I was 40, I should have 380k. At my age now, it should be 250k. I think it's more of a guideline for someone who is middle-aged.

That is what I was thinking, seems like a declining difficulty. According to the math I should be wealthy by the end of the decade. When you consider most minimum 401k contributions are 5% with employer match of 5% it really isn't that hard to save more than 10% a year(which is the increase per year the criteria requires)

 

[Nomad.2nd]

That is what I was thinking, seems like a declining difficulty. According to the math I should be wealthy by the end of the decade. When you consider most minimum 401k contributions are 5% with employer match of 5% it really isn't that hard to save more than 10% a year(which is the increase per year the criteria requires)

- - - Updated - - -



That is what I was thinking, seems like a declining difficulty. According to the math I should be wealthy by the end of the decade. When you consider most minimum 401k contributions are 5% with employer match of 5% it really isn't that hard to save more than 10% a year(which is the increase per year the criteria requires)

Curious:
What's "wealthy" to you?

 

[JadeRaven]

That is what I was thinking, seems like a declining difficulty. According to the math I should be wealthy by the end of the decade. When you consider most minimum 401k contributions are 5% with employer match of 5% it really isn't that hard to save more than 10% a year(which is the increase per year the criteria requires)

Damn, where is this 5% employer IRA match dreamland that you speak of?

 

[Pas Tout La]

Damn, where is this 5% employer IRA match dreamland that you speak of?

My employer matches 5%. My wife's employer matches 4%. The majority of the companies I've audited matched 4%. There are a few that match 5%. I haven't seen one yet top 5%.

 

[Old_Demon]

The employer I retired from would contribute 10% of everyone's salary to their 401k, whether they contributed or not.

 

[noob]

Damn, where is this 5% employer IRA match dreamland that you speak of?

My employer matches 5%

 

[Jack]

My employer matches 5%. My wife's employer matches 4%. The majority of the companies I've audited matched 4%. There are a few that match 5%. I haven't seen one yet top 5%.

My previous employer matched 7.5%, it was NICE.

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Curious:
What's "wealthy" to you?

I was using the equation listed earlier in the thread.

How to determine if you are "wealthy":

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

(The Millionaire Next Door, pg. 13)