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 :)

@edballsfriendlyneighbour

I've been wanting to read this book! Do you recommend it OP?

Im 33 and my number is 0.46. Thought I was doing quite well but have only been on current salary for 18 months so maybe that's why.

I wouldn't recommend. I've no idea why the book is so highly recommended it all very obvious stuff. There one section where they are negotiating on a car and it literally takes an hour for them to say that buying a second hand car will save you money over buying a new one on finance.

Over 2. Another one who benefited from buying property in London a long time ago.

Why are there only 3 quartiles? What is the missing one?

@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 😂

I recently mused to someone (in the context of dog theft and puppy prices) that I'd realised my dog was probably now worth more than my car.

"Blimey, what breed of dog do you have?"

I had to break it to him that I have an unfashionable crossbreed - but he was asking the wrong question. I have a car so old it could apply for a provisional driving test and take lessons in how to drive itself

Both DDog and DCar came free from friends and family who considered them surplus to requirements, so at least they've got that in common!

On the topic of the calculation itself, using age is a nonsense, given that for younger people they'll only have left education relatively recently and so won't have had the chance to accumulate wealth yet. For example, in my first graduate job I was 22 and earning £16500 per year. How the hell was I meant to have £36,300 in assets at that point?!

A calculation involving number of years since you left education / started work/ turned 18, not age, would make it much more sensible for younger workers.

Agree on the age point. At 30 I only had about £3k - for pension, savings, anything. At 50 it's different.

I'm not sure this works for everyone. I spent much of my life up to 28 on a very low salary, a couple of years on £26-£30k, and now I'm 31 I've had a much higher salary for 12 months. Obviously my savings power up until 12 months ago was much more limited, however about half my savings were laid down in the last year so I think in general I do pretty well at accumulating wealth. I also know how to invest for growth. In a few years I'll have caught up but I think I'm in the wrong place to use that calculator right now!

Does it include house equity?
If it does we are on 4.6 on an average/nice house (in Scotland so not exaggerated house prices) and quite badly paid jobs.
I never knew I was wealthy😂
(except if it doesnt include house equity we are skint)

Equity can also be subjective and variable