Here's the fun formula you can use to find out if you are wealthy:
Take your age and multiply it by your before tax total yearly income, this would include income from investments. Then you divide that number by ten. The example, "a 41 year old makes $143,000 a year, and has investments that return another $12,000 a year. He would multiply 41x155000 and then divide by 10. This 41 year old SHOULD have a net worth of $635,500. That net worth would classify him as an "average accumulator of wealth." A greater net worth would classify him as a "prodigious accumulator of wealth," WEALTHY! And a smaller net worth would classify him as an "under accumulator of wealth."
You may ask, how can someone be considered wealthy if, for example he is only worth $460,000? After all, he's not a millionaire. Charles Bobbins is a forty-one-year-old fireman. His wife is a secretary. They have a combined annual income of $55,000. According to our research findings, Mr. Bobbins should have a net worth of approximately $225,000. But he is worth much more than others in his income/ age category. Mr. and Mrs. Bobbins have been able to accumulate an above average amount of net worth. Thus, they apparently know how to live on a fireman's and secretary's income an still save and invest a good bit. They likely have a low-consumption lifestyle. And given this lifestyle, Mr. Bobbins could sustain himself and his family for ten years without working. Within their income and age categories the Bobbinses are wealthy [at $460,000 net worth].
The Bobbinses are quite different from John J. Ashton, M.D., age fifty-six, who has an annual income of approximately $560,000. How much is Dr. Ashton worth? Is he wealthy? According to one definition, he is, since his net worth is $1.1 million. But he is not wealthy according to our other definition. Given his age and income, he should be worth more than $3 million. With his high-consumption lifestyle, how long do you think Dr. Ashton could sustain himself and his family if he were no longer employed? Perhaps for two, at most three, years.
-excerpt from The Millionaire Next Door
So maybe you don't have $1 million or $3 million in net worth (maybe you do), are you a prodigious accumulator, an average accumulator, or an under accumulator of wealth? Are you wealthy?
We are very much "under accumulators of wealth." We are in debt and our net worth is very low, although it has just recently rose from a negative amount. I read these past few pages in this book though and I have to be slightly impressed not only with the progress we've made in getting out of debt but the fact that I've learned to live such a very low consumption level lifestyle. We ARE on the right track! This is the exact sort of lifestyle that it takes to become wealthy; living within your means and saving a great deal along the way. It will take awhile to get there but we ARE on track! Yay!
Spending rundown today: $1.68 on lunch. $15.01 on groceries.
My budget for the month is $513.62 which leaves $203.92
Average daily spending for 2015: $18.00