Are you a super accumulator of wealth? Low salaries may apply :)

[LemonSwan]

I always see on here threads about how much savings you have, how much income you have, how much mortgage you have etc, and it can be very demoralising for those on lower or even high earners on non london salaries.

I have been reading The Millionaire next door recently and he had this interesting calculation for anyone of any age and any income to assess whether they are accumulating the wealth they should to enable you to set realistic targets.

So I thought I would share the calculation:

Take your age and times it by your pretax income. Then divide by 10 = the expected value of your networth for your age/ income
*Or for a household your average age x household income
ie. 30years old x £20000 salary = 600000 / 10 = £60000 expected networth

Now to the quartiles:
Take your current networth and divide it by your expected value.
ie. £50000 networth / £60000 expected = 0.83

A number bigger than 2 you are a super accumulator of wealth
A number between 1.99 - 0.51 you are an average accumulator of wealth
A number below 0.49 you are an under accumulator of wealth

Please feel free to post your thoughts on this or share your quartile. Super accumulators please feel free to give any wisdom to the rest of us :)

That sounds like a PITA and makes me glad I didn't read it.

There's a FIRE thread in Money Matters with all sorts of scenarios. I suspect you won't get many interested in this thread but you will probably like the FIRE thread.

Luna
Yes it is the middle of the night as well haha. Probably a waste of a post.

I am enjoying the book. It made me feel much better about myself as I have been on a low income for a long time (10k) and only recently increased my salary.

Thanks for letting me know about the thread. I will try to hunt it down although I think I am still way off the FIRE capable category. Though I am conscious with my recent salary rise to make up the gap to stay at the same networth ratio so the thread may have some good tips for that.

Do you include equity or just savings?

OP it's here

www.mumsnet.com/Talk/legal_money_matters/4165470-FIRE-starter

Now it's 1am and I have a Prodigy earworm! 😂

I’m lost - what’s your current net worth?

I have a net worth of about £600 including my very ancient car and my least shit cat, so although I'm bad at doing division in my head I think I would comfortably be an underaccumulator 😂

Onedropbeat
Networth is Equity, savings - everything minus inheritance.

I've done the sums and have come out above 2 but I haven't saved anything. It's just I'm in my 50s and bought a house 25 years ago.
So there's no super-skill involved. I just got old 🤔

Thanks luna - I have posted on there to say hi :)

Anoisagusaris Current net worth is all your savings + any equity you have, value of investments or stocks etc. I am currently on 0.8 so on the lower end of average accumulator.

therocinante
Haha shh the other cats will hear and might take their revenge! :)

Not old julia :) just very wise.

Will add choosing the right house to 'important for super accumulating list'

Our household is .16 which is car plus equity in house.

I don't need to do math to know my net worth is fuck all

It doesn't take into account earning history. If you've relatively recently had large pay rises then you seem like more of an "underaccumulator" than you might otherwise have been were you still on a lower income.

@therocinante

I have a net worth of about £600 including my very ancient car and my least shit cat, so although I'm bad at doing division in my head I think I would comfortably be an underaccumulator 😂

and my least shit cat

🤣🤣

Do you add ages of household income earners and incomes? Ie, 2 30 year olds on 20k = 30 years on 40k or 60 years on 40k?

3.2...zero skill involved, just old enough to have bought property 20 years ago and had a couple of redundancy payouts.

Do you include pension pot?

I don't think that calculation is very realistic. It would expect a 30yo earning 30k to have accumulated 90k wealth? If they went to university and graduated aged 21, thats 10k per year.

ha ha ha

I'm in the FIRE club and doing well against those targets but this makes me an under achiever ... not really sure if the value of these calculations 😂

Unless I’m missing something... This calculation doesn’t work at all if you’re reasonably young so don’t have loads of equity / savings but are doing well career-wise?

So if you’re late 20’s or early 30’s, have only just bought a property / still rent but earn £40, £50k then your number looks tiny but is probably wildly unreflective of the future?

As PP said that calculation seems heavily weighted in favour of age?

@pheebumbalatti
I agree it does get kicked out if you have a recent big pay leap. I am currently in that situation but I think its still good as its giving me a target to reach of how much of my income I now need to invest rather than spend.

@Flowersandjellybeans
And yes I agree those straight out of uni dont really have a chance but after a few years in full time work I think it evens out. I am 30 and left uni late due to a long course and I think it about right considering I was on 10k for a portion of that due to a mental health crisis. Renters probably are more likely to be underaccumulating but that would be expected I think.

@stevalnamechanger
That is fascinating!
I thought FIRE would be more harsh not less.

I need to try those calculations out

@pheebumbalatti

It doesn't take into account earning history. If you've relatively recently had large pay rises then you seem like more of an "underaccumulator" than you might otherwise have been were you still on a lower income.

Agree. I doesn't work in that sense. I am a major under accumulator of wealth, but my current salary is very different to what it was 5 years ago. Although, I honestly should have much more to show for myself at this point.

Hmmm I don't know if I feel this really works, at least not for young people?

I have been out of uni for 5.5 years. It requires me to have £125k to match my "expected" net worth. To be a "super accumulator" I would have to have £250k in bet work - so would have had to save more than my entire current GROSS salary, every year, for the last 5.5 years - so never spent anything at all... And that assumes I was on my salary as soon as I left university, which I wasn't.

This is daft. Someone earning 25k and renting in London will not be saving. Someone earning 450k in Northumberland will be able to save almost everything if they want.
I don’t think it’s a helpful figure.