nottyboi said:
What do you define as rich? I own a house clear and free, have max RRSP's, equal amount (roughly) non reg and I am mid-40's (2 cars motorcycle and no debt) am I considered rich?
Here's a Rule of Thumb from the Millionaire next Door...
"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."
T. J. Stanley, et al, "The Millionaire Next Door," MJF Books
For instance, if you make $150,000.00 annually and are 45 years old, your net worth should be 45X150,000/10 = $675,000.00.
If you make $50,000.00 annually and are 25 years old, your net worth should be 25X50,000/10 = $125,000.00.
I would use this value to determine your personal threshold as to where you have become "wealthy."
I would, however, account for how many years you have been working as I think it is unrealistic to apply the same formula to someone 25 years old compared to 50! as they may only have started work 2 years earlier.
and in a more detailed example that inculdes a bit on 'comfort' not just dollar values as some people tend to do - am I wealthy with x$'S....
You may ask: How can someone be considered wealthy if, for example, he is worth only $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 $225,500. 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 and 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.
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.
