Posted on 01/11/2015 10:06:38 AM PST by expat_panama
Wow... That’s my profile, almost exactly...except with a bit less cash on deposit and NO bonds.
The IRS says I’m in the top 5% of wage earners....but, I don’t even feel close to being “wealthy”. I’m close enough to it to see it occasionally...enough to know that AIN’T me.
An old Persian saying: "saving money just makes your widow's new husband richer."
....”look at the cash flow statement”....
Well, as my son said...I’m in much better place then most as my cash flow is good and my debt is almost nothing.
A sensible statistician with no agenda would adjust for age of the head of household.
The person who put this together is clueless about reading financial statements.
Not adjust...they're always adjusting instead of letting anyone interpret things for themselves. You make an excellent point.....it would be meaningful to see a breakdown according to age groupings.
My wife and I are “above average” but we are a mere 20-25 years from retirement. It will take considerable capital by then to expatriate to Singapore or Costa Rica or whatever regime provides asylum to those escaping the closing world once called free.
Yes, its the leading explanatory variable in wealth variation- even more important than socioeconomic status.
Meant to write “it’s”
The Survey of Consumer Finance (SCF) data actually does have age in the raw HH data. If I have time over the next week, I’ll generate a summary and post it here.
lol...
Funny.
Your serious point is well-taken though.
So, I guess everything's relative, and perception is a lot of it all.
Well written with some excellent points. Measuring all of this is so tough to do, especially now with the growth of the black economy. Just measuring the actual GDP of cottage industries I suspect would significantly add to the overall total. Then again, we count salaries paid to ‘diversity coordinators’ & hyphenated American Studies instructors as though some economic activity, when in fact those endeavors are entirely wasteful, in my opinion.
Ed Hart (1922-1993), a credit markets reporter on the old Financial News Network used to say, “We’ll know in the fullness of time.”
He used to tell viewers not to use the term “worth.” His preferred term was “presently valued at.”
Oh, and where I am from there is no doubt in my mind real estate comprises the bulk of household wealth.
They’d have to move the decimal five spaces to the left for me.
It’s not just the value of the stocks that’s misleading, because not many owners get to sell the stock at maximum prices. It’s the tax that has to be paid to attain that value. A sensible statistic would factor that in.
Heck, you can't even take it for yourself! Lots of this so-called wealth are only numbers on paper, because once you cash in stocks, bonds, and other deferred wealth, then the taxman takes a big cut before you can spend it (and then there are sales and wealth taxes on purchases).
When a "rich" person dies the taxman takes a big cut, so even your heirs can't take it for themselves.
Indeed, I was thinking I am way below average in household wealth. Glad folks are doing well.
A good indicator of the net worth you should have is your age x your gross salary. Divided by 10.
So if you are 50 years old and earning $120,000 a year, you should have a net worth of at least $600,000. If you don't, you run the risk of having to lower your standard of living when you retire, or worse, go on some sort of government assistance (outside of Social Security).
Now a lot of people artificially inflate their net worth by including their homes or their automobiles, or they even count silly stuff as assets such as a baseball card collection or antique furniture. Those that do this are only fooling themselves.
Let's take counting your house as part of your net worth. Now most people have a mortgage (including perhaps an equity line) and also have an unrealistic assessment of what their house would be worth.
An example would be somebody calculating a $250,000 net worth on their home because they assess the value of the house at $400,000 and have $150,000 left to pay on their mortgage.
Chances are however, if they decide to sell it, they are going to have to settle for substantially less than what THEY feel their house is worth. Most people have unrealistic opinion of how much their home is worth on the open market. More likely, they will get maybe $357,000 for that house and then they have to pay realtor fees and other closing costs and taxes. So suddenly, they are only coming out of the closing with a $185,000 check instead of the $250,000 they were counting on.
Now they have to find another place to live. And chances are, unless they are moving to an area of the country where home prices are much cheaper, they are going to have to sink that $185,000 right back into another house. They might even find themselves with a bigger mortgage then they had when they started!
Ditto with a car. You can sell your car at a profit, but now you are going to have to use that profit to buy another car. Unless you are going to live in the city and take public transportation everywhere.
So if you want to be honest with yourself, you calculate your net worth without including your home and automobiles. Or your stamp collection that you got from your uncle 20 years ago and has been sitting up in the attic ever since in a box with a pile of old newspapers on top of it (because you thought those newspapers would be worth money someday too.)
Guess what, most collectibles that people think is an investment is just a pile of junk that is virtually worthless. Those Reggie Jackson or Ted Williams rookie cards that supposedly fetch thousands of dollars online, good luck with that. Unless you are a professional curator that has these cards hermetically sealed in a climate controlled room like a museum, you are only going to get pennies on the dollar.
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