A colleague asked me today what amount of money I would need to earn each year in order to feel like I was wealthy. However, I am not sure that for me, that is the right way to frame the question, because if I am earning it as a salary (which is what he meant), the amount required would need to be substantially higher, because it is unsecured.
The average salary in Finland is 45,000€, but that really doesn't cover that much. It is possible to live an average life of course, but using my age as an example, I would need to be able to ensure that I can earn that for the next 25 years until retirement and, it doesn't provide a very good retirement package. However, if I was for instance earning €90,000 a year, that would provide a better life and a better retirement package, but it would still be far from wealthy, and still reliant on being able to maintain that "double average" until retirement. Again, there are no guarantees.
There are no guarantees. Ever.
However, investing is essentially risk mitigation, even though most see it as a risk position. For instance, if I was earning that 90K figure and was able to live on a 45K lifestyle for a decade, investing the rest, I would have essentially invested €500,000 capital in that time. Assuming sound investments and a modest gain of 5% a year, it would mean that I would have around a 750K portfolio.
However, what that 750K offers at 5% would be around 37K in investment growth a year, if I don't add anything else to it. That means that if I did lose my "double average" (assuming all things equal for ease of calculations) job after a decade, I would need a slightly better than average job at around 55K to keep my 90K income. But if you remember, I was living on a 45K salary and investing half, so essentially, I would only need a job that gives about 30K to keep the same lifestyle, investing nothing more. And, I would still of course have the 750K capital still sitting there.
Obviously, I haven't factored in the tax calculations, but that actually works in favor of the investments, because for instance, on the 90K it would be about a third in tax, so it would mean that it is actually living off 30K and investing 30K. 30K invested a year would amount to about 450K in capital. That capital at 5% would return about 22K with 15% tax exempt and 30% paid on the rest, leaving about 12K in earning after tax. S but capital gains has a lower tax rate, so it would mean the job that I would need to maintain my lifestyle at 30K and have 450K in capital, is still about a 30K job.
There are a lot of assumptions in this, but I think a lot of people psychologically frame wealth incorrectly, as they see it as what someone earns. However, that is a projected income, not a reality. Wealth has to be what we currently hold, so for me to be "wealthy" I would have to have enough invested that I could rely on it to bring me an income, without needing to rely heavily on the work I do.
So, for me as a slightly above average earner currently, I would need to have something like a million in capital investments working for me, while I am working my current job, because that would allow me to cover my salary, should I lose my job and can't find another. However, what I would want to be able to do is keep earning and adding to the capital investment, so that I don't run the risk of eating into it. So, if I was able to cover my salary and have a job that allowed me to keep adding 15K into the investment (a well below average job), that would mean that after another decade, the capital investment would have shifted to a value of 1.8M.
Let's say it is at that point I am able to retire, I would have some kind of pension from my working life, but on top of that, my capital investments would be returning 90K of capital earnings, whilst still keeping the capital intact. At near 70, I would have hopefully already paid off my house, own my car and have few overheads. That 90K after tax would be around 60K plus pension, so it would still be earning over the average salary.
I think that would be wealthy.
When we are able to work and increase our investments, but not have to work to increase the investments. Most of us will probably not get there, which is because most of us will never be wealthy. But, understanding this position means that we could at least recognize that getting a better salary doesn't make us wealthy without investing into having capital that works for us.
No matter what we are earning, if we are living hand to mouth, we aren't wealthy and the only way to be wealthy, is to multiply our current earning through investments into the future. As what we invest compounds, it means that putting a euro into an investment today at 5% yearly gain, will mean we will have doubled that euro in about 14 years. However, with a little thought and a bit of luck, it won't be earning 5%, it will be earning 10%, cutting that down to 7 years and beating (hopefully) the average inflation.
The numbers don't matter much as they have to be applied locally, but at least for me, "wealth" seems a long way off. However, it is all about being able to multiply the value of the work done now, so there is a chance that the additional work I do in crypto on top of my salary, will earn significantly more than 5% and if things go really well, having a million dollars invested will be irrelevant, because I will have a few hundred thousand HIVE, a bit of bitcoin, some Eth or whatever invested - and that will be good enough - if not better.
If wealth is about being able to have the option to do what we want with our lives,
How many are truly wealthy?
Taraz
[ Gen1: Hive ]
Posted Using LeoFinance Alpha
At 5% 1.5 Mil would give me just about what my annual salary is. Of course I would like to earn more than that so I can do some fun things on the side, but some years it might be 6 or 7 percent and some years it might be 4. I don't think I am in an "oh crap" position by any means for my age, but my wife and I keep talking about the fact that we need to meet with someone to talk about where we are and what we need to do to be where we want to be. I have a feeling they are just going to tell us to keep doing what we are doing.
And charge you for the advice.
It will still give us some peace of mind.
Would be nice to have enough to earn and then, be able to live off "odd jobs" while travelling around the world. Work in a cafe for a month or two in Spain, another in France... keep getting to know new places. Or, even do it domestically and see all of the US.
My wife wants to get a school bus and turn it into a mobile office so she can do private practice counseling and we can drive to the people instead of making them come to us.
Mr. Taraz I believe that everyone makes his choice with the power and dignity that riches provide, which for me are a simple illusion; I believe that everything is found in the strength and eagerness of millions of people who with effort, discipline, patience achieve it with trabajo...al less I feel lucky every day with my personal wealth " my life experience" the rest comes in addition with work and more work.
work and more work, that seems all there really is out there to do :)
If you are healthy, then you are wealthy.
I know some healthy people who don't seem very wealthy! Though, does health include mental health? ;D
Any part of body. It is because we understand its value after losing it.
The question you ask at the end of your post is golden. No matter how much money we have, is it enough to buy freedom? That's something that everybody will answer differently.
For me making 2k a month would be plenty to live decently in rural Vietnam with my wife and have plenty of money to spare, but I don't need air conditioning, refrigeration or many modern amenities to be content.
Perhaps it can buy slices of freedom, but once a slice is had, the next desire arrives and a new slice must be chased.
A simple life doesn't take much, but it is similar to having enough money - is simple enough for us?
I would feel wealthy if I could live of curation. So maybe around 50-100k HP(?)
Curation is a bit like having a job, it isn't steady in value - because it depends on the price of HIVE. I am not sure at what point it would be high enough to rely on! :D
You are absolutely right but each person lives a different reality, financial freedom more than a dream is the desire of all but those who get freedom are those who are willing to sacrifice and invest when all seems lost, the rest of us will simply remain part of the system depending on a salary.
I would feel rich at HIVE = $1.
feel rich, but would it last?
Hope so.
That is a good way to look at it and answer their question. If it was just small talk, I would have just said 5 million USD a year, is when I will consider myself wealthy. I know it is a lot of money, but answering this question immediately is difficult. There are a lot of considerations and computations to think about. I think earning an amount of money where I don't have to worry about anything is when I'll consider myself wealthy.
Everyone is different and I think it also depends on where they live. In my case, I would want my capital investments to pay off my entire lifestyle now without working with some leeway incase the market turns bad or if one of my investment doesn't go well. It's hard to really predict what is a great number to use though.
As a single person yet so many past debt from family side and the expenses to live for me however 50K a year is good enough for me to live comfortable. I feel anything more than that is a bonus. 5 years of 50K can even wipe out the financial crunch too.I guess a lot of times we can think of comfortable money changes with the amount of money we owed. Once everything is cleared, I suppose money less than 50k would make comfortable to not worry.
Hmm
That's so much money and it is not impossible because a lot of people are making that amount of money daily
I wish you well
Just like an article I read days ago that says, saving alone cannot make you rich, but to invest to yield more income for you. Being wealthy doesn't mean when one is working and earning salary alone but when you are able to have investments to accrue more money for you. You don't rely on a 9-5 job and conclude you are wealthy, diversify your income on different investments plans.
Being wealthy for me is rewarding myself back the time ive used for working. Well i cant really get back the time ive spent. So the next best thing is to have that liberty to not rely on work the soonest possible time. I want to retire in the next 12 years if i reach my target goal assuming 5% apr in ivestments. The numbers im targeting isnt gonna put me on luxury scale but rather on a free enough lifestyle to not worry about tomorrow.
Yeah, all this wealth & investments math sound accurate, good and dandy. As long as no unforeseen life events are included in the formula. Isn't it?
This is a lot of math that I'm just not able to commit the brain power to worth thru tbh. I'm going to settle on health is wealth for now and focus on working out daily again.
How is your gym commitment going? I hope you've been able to find that consistency this fall!