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Author: SirNeo Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308688  
Subject: Credit Card Millionaires Date: 11/16/1999 2:22 PM
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One of the posters in the "millionaire next door" thread here suggested using a calculation of your total gross income * %20 to determine if you're an under accumulator of wealth. This is an excellent idea!

I think everyone on this board should do this calculation (or the other one: Salary / 10 * Age -- this number should be your net worth)

Are you saving %20 of your gross income? Could credit card debt be part of the problem?

One of the problems with credit cards is that they give you no yardstick to measure against- except for your credit limit! Talk about a bad goal!

If you're making savings/investment goals and using credit cards, you don't have a problem. But if you are not achieving the net worth calculated by one of the two formulas above, you do have a problem. (And for the record, I am an "under acumulator of wealth" by those yardsticks, but I intend to fix that!)

So, do those calculations and see if you in good shape or not-- you might find that while you thought you were saving a lot, you are really selling yourself short. Its a long way to a $million. $10,000 in a stock portfolio seems like a lot, but theres a lot of $10,000 chunks between there and $1,000,000.

Neo
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Author: EricEdelman Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19911 of 308688
Subject: Re: Credit Card Millionaires Date: 11/16/1999 4:14 PM
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I read (and enjoyed) "The Millionaire Next Door". Good book, bad yardsticks.
These calculations are a little misleading, particularly if you're young.
For example, a 25 year old who earns $50,000 a year should have a net worth of $125,000 by this calculation.
A 30 year old, who earns $50,000 a year should have a net worth of $150,000.
So we expect someone to accumulate $125,000 by the time they're 25, but the 30 year old is only expected to have $150,000? Are we looking for consistent earnings since age 12?

Eric


One of the posters in the "millionaire next door" thread here suggested using a calculation of your total gross income * %20 to determine if you're an under accumulator of wealth. This is an excellent idea!
I think everyone on this board should do this calculation (or the other one: Salary / 10 * Age -- this number should be your net worth)
Are you saving %20 of your gross income? Could credit card debt be part of the problem?


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Author: Odin42 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19926 of 308688
Subject: Re: Credit Card Millionaires Date: 11/16/1999 5:33 PM
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<<I think everyone on this board should do this calculation (or the other one: Salary / 10 * Age -- this number should be your net worth)>>

I have a serious problem with this calculation method.

Last year I was 23 making 24.5K I should have a net worth of $56,350. This year i'm 24 and my income is now 35K so i should have a net worth of $84,000 I am two years out of school and working to build my net worth. The problem is that most people don't start building a net worth until they start working full time.

As of today I am about $88,000 short of my target net worth but on july 1 I was $95,000 short of this number. I have reduced my debt by about $7,000 in four and a half month but I am still an under accumulator of wealth. At present rate I should put almost 19K in to net worth of my 35K that about 54%. Am I still a UAW?

Odin




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Author: jthrelkeld Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19927 of 308688
Subject: Re: Credit Card Millionaires Date: 11/16/1999 5:41 PM
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Ignore the damned MND formulas. They're a lot like government height/weight tables. They only serve, for the most part, to make most people feel really bad about themselves.

Just as you're well aware if you're overweight or healthy, you probably have a pretty clear idea if your net worth is in good shape or not.

For what it's worth...

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Author: AliFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19929 of 308688
Subject: Re: Credit Card Millionaires Date: 11/16/1999 5:58 PM
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I'm 27 and out of school only two years but making decent money. Well, I do have those student loans -- you know, the debt that was the means to GET the advanced degree and the good jobs? : )

There is NO way I would feel bad about myself from looking at this formula!!! I think the target demographic for TMND (book) is people older than myself anyhow... so I consider myself to have a decent headstart in thinking about these issues!

--AF

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Author: SpaceEngineer Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19969 of 308688
Subject: Re: Credit Card Millionaires Date: 11/17/1999 9:00 AM
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I read (and enjoyed) "The Millionaire Next Door". Good book, bad yardsticks.
These calculations are a little misleading, particularly if you're young.
For example, a 25 year old who earns $50,000 a year should have a net worth of $125,000 by this calculation.
A 30 year old, who earns $50,000 a year should have a net worth of $150,000.
So we expect someone to accumulate $125,000 by the time they're 25, but the 30 year old is only expected to have $150,000? Are we looking for consistent
earnings since age 12?


Yeah - it's kind of depressing for me. I suspect that I'm an overaccumulator, but because I went to grad school, I didn't start a full-time career until I was 30. So my net worth is about 2/3 my salary, but the equation (Age/10*Salary < Net Worth) says I should have a net worth of 3.2 of my salary.


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Author: NaggingFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20038 of 308688
Subject: Re: Credit Card Millionaires Date: 11/17/1999 3:59 PM
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Good book, bad yardsticks.

I agree. Keep in mind that TMND doesn't say "this is the best way to become a millionaire". It says "we polled people who were and weren't millionaires, and here are the numbers."

The equation ((Age/10*Salary >= Net Worth)does not work well for people under 40.

-Megan


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Author: SirNeo Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20184 of 308688
Subject: Re: Credit Card Millionaires Date: 11/18/1999 10:04 PM
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This has been answered, and was answered in my post. If the age/10*salary formula doesn't work, use the other one:

Average salary since leaving college * .20 * Years since college.

That would be a better one for your age.

Neo

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