Defining wealth is pretty tricky.
A guy with a hundred goats in Morocco, who leases his land, could be considered wealthy. But if you bought 100 goats in Canada and leased land for them to graze on, you’d be a pauper, if you didn’t have (another) day job.
Thomas Stanley, author of The Millionaire Next Door, takes a crack at determining a couple of things:
- How much wealth you should have
- How much wealth you should have… to be considered wealthy
This is how he calculates it: Multiply your age by your pre-tax household income. Divide it by ten, and that’s what Stanley figures your net worth should be.
For example, if you’re 40 years old, with annual, household pre-tax income of $100,000 per year, you should have a net worth of $400,000.
To be considered “wealthy” according to Stanley, you’d need double the expected net worth level. And when you’re counting your income, you have to include everything. If you get bonuses, include them. If you get money for housing (as an overseas employee) then you have to include that too. You might be off the scale below, but I hope it gives you a rough idea.
Again:
Expected Wealth = Age X total household pre-tax income divided by 10. Canadians in Canada, add about 15% to your net worth to equalize the tax issue.
You’re wealthy if your net worth is double the expected level.
|
Your Age |
Pre-Tax Household income |
Expected Net Worth |
You’re considered wealthy if you have at least… |
|
30 |
$30,000 |
$90,000 |
$180,000 |
|
30 |
$50,000 |
$150,000 |
$300,000 |
|
30 |
$70,000 |
$210,000 |
$420,000 |
|
30 |
$100,000 |
$300,000 |
$600,000 |
|
35 |
$35,000 |
$122,500 |
$245,000 |
|
35 |
$55,000 |
$192,500 |
$385,000 |
|
35 |
$75,000 |
$262,500 |
$525,000 |
|
35 |
$110,000 |
$385,000 |
$770,000 |
|
40 |
$55,000 |
$220,000 |
$440,000 |
|
40 |
$80,000 |
$320,000 |
$640,000 |
|
40 |
$140,000 |
$560,000 |
$1,112,000 |
|
45 |
$70,000 |
$315,000 |
$630,000 |
|
45 |
$90,000 |
$405,000 |
$810,000 |
|
45 |
$150,000 |
$675,000 |
$1,350,000 |
|
50 |
$90,000 |
$450,000 |
$900,000 |
|
50 |
$120,000 |
$600,000 |
$1,200,000 |
|
50 |
$180,000 |
$900,000 |
$1,800,000 |
|
55 |
$120,000 |
$660,000 |
$1,320,000 |
|
55 |
$160,000 |
$880,000 |
$1,760,000 |
|
55 |
$200,000 |
$1,100,000 |
$2,200,000 |
I have four main questions:
But let me preface them by suggesting that I recommend anonymity here. If you have your own blog, and you’re anonymous, like my friend Young and Thrifty, then go ahead and answer these questions as you normally would.
But if your identity is obvious (as mine is, or Mark and Kevin’s are ….thanks to The Globe and Mail’s profiles this summer) then perhaps you could go incognito for this.
It would be interesting to see where finance bloggers/readers rate, financially.
So……
- Do you meet your expected level of net worth?
- Are you below it?
- Would you be considered “wealthy” by this definition?
- And what do you think of Stanley’s calculation? Valid, or not?
