Are You a Super Accumulator of Wealth?
Let’s talk about your wealth status today.
First of all please do understand that the basis of this calculation takes into consideration a person’s age and current annual income.
Therefore this calculation of your wealth status works regardless of the huge or small paycheck you are earning, consistent with what you might be told before that how rich a person is not determined by how much he or she earns but how much he or she saves. Let’s not dwell into an argument of the importance of savings. We’ll leave that to another day, shall we?
Here’s the formula to calculate your Benchmark Net Worth or Target Net Worth:
Benchmark Net Worth = ( Age / 10 ) x Current Total Yearly Income
From this benchmark you can then calculate your Wealth Score using the formula below:
Wealth Score = Actual Net Worth / Benchmark Net Worth
There are 3 categories of Wealth Accumulators financial planners generally grade you into:
1. Under Accumulator of Wealth (UAW)
2. Average Accumulator of Wealth (AAW)
3. Super Accumulator of Wealth (SAW)
UAW is the result of your Wealth Score < 1.0
AAW is the result when your Wealth Score ranges from 1.0 – 2.0
SAW is the result of your Wealth Score > 2.0
So what’s your Wealth Score?
Have I gotten you worried or have I woken you up from your financial reality?
Congrats to those of you who achieved above 2. You deserve a pat on your shoulder. You have done a good job in accumulating wealth. Even some financial people are not aware of their own critical wealth status. Be mindful when you see financial planners who drive big cars and desperately imposing on you to purchase his or her plans for you, observe his options in life. A real rich person is one who has options to how he or she lives, not one that is tied up with little options and plenty obligations. Check out Rich Kid Poor Kid. Think.
Salary is not a reflection of your net worth, lifestyle is! Check out The New Frugality.
You might notice by now that the longer you saved, or the more years you have been in work, the higher the chances you’ll achieve the status of SAW. True. You have just gotten one step ahead of the rest by thinking.
And yes, if you are in your early twenties, before age 28, or more accurately defined as in your early stages of employment or business, you are likely to be rated UAW. No fret! That’s normal. It’s what we call process of life. People usually successfully accumulate their wealth in their 30’s to mid 50’s. It takes time for you to build your career from 20’s to mid 50’s.
As for those of you who outperformed your peers as an SAW especially in your 20’s, you deserve recognition award from your financial advisors. But please counter check your Actual Net Worth value if it includes inheritance from your beloved parents.
Wealth Score = (Actual Net Worth – Inheritance)/Benchmark Net Worth
How do you calculate your Actual Net Worth?
That’s when you do your Personal Balance Sheet. We’ll discuss about your Personal Balance Sheet next round. If you like what you learned here, please do follow our updates. Thanks and good luck in accumulating your wealth! =)
Reference from Millionaire Next Door.