Does your net worth percentile influence your financial decisions...? (Calculator attached)

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CraigTester
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Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by CraigTester »

Does your net worth percentile influence your

1) Asset Allocation ?
2) Decision on when to retire ?
3) Decision on how much to spend ?
4) Something else about your financial life ?

There always seems to be a "Are you rich?" article percolating in the news, what do people do with this information?

Net Worth Percentile Calculator for the United States link below:

https://dqydj.com/net-worth-percentile-calculator/
Last edited by CraigTester on Mon Apr 01, 2024 3:13 pm, edited 1 time in total.
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Re: Does your net worth percentile influence your financial decisions...?

Post by sailaway »

No. I make those decisions based on how my net worth compares to my own goals.
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Re: Does your net worth percentile influence your financial decisions...?

Post by jebmke »

Nope.
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Re: Does your net worth percentile influence your financial decisions...?

Post by CuriousGeorgeTx »

CraigTester wrote: Mon Apr 01, 2024 2:59 pm Does your net worth percentile influence your

1) Asset Allocation ?
2) Decision on when to retire ?
3) Decision on how much to spend ?
4) Something else about your financial life ?

Net Worth Percentile Calculator for the United States link below:

https://dqydj.com/net-worth-percentile-calculator/
I don't know what my percentile is, I don't think that knowing it would make any difference. I suspect you can infer a lot about someone's decisions based on there they sit.
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Re: Does your net worth percentile influence your financial decisions...?

Post by mhc »

No to all.

I do not think about net worth percentile. We live our lives the way we think we should not based on net worth or net worth percentile. We live based on our beliefs and not how we compare to others.
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Johm221122
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Re: Does your net worth percentile influence your financial decisions...?

Post by Johm221122 »

No

But how come I'm around 50-75 percentile and I feel poor?
Hyperchicken
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Re: Does your net worth percentile influence your financial decisions...?

Post by Hyperchicken »

I have no material decisions driven by my net worth, therefore I don't calculate it, let alone the percentile.
Da5id
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Re: Does your net worth percentile influence your financial decisions...?

Post by Da5id »

Nope, comparison is the thief of joy. Why would where I am relative to others impact *anything* I do or spend?
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Re: Does your net worth percentile influence your financial decisions...?

Post by tibbitts »

No, although I understand the point you're getting at: if everyone's net worth drops 50% tomorrow, but you're still at say the 50th percentile, you're still sort of doing okay. But Im only interested in other people's net worth as of now, not ancient history ending 12 months ago. And I'm only interested in after-future-tax net worth, but I don't think anybody attempts to calculate that.
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Re: Does your net worth percentile influence your financial decisions...?

Post by nisiprius »

Percentile? Nope.

We did compare our estimated retirement income to the median household income for the town we lived in, when making the decision of where to retire. We already knew that our estimated retirement income seemed adequate to continue living where we were. We were not surprised that our estimated retirement income was just about the same the average for our town. However, the fact that it matched our town's median gave us confidence that we wouldn't constantly feel poor compared to our peers.

I'm not even sure what "net worth" is good for, other than bragging. Or reassuring financial salespeople that we are chickens worth the plucking.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by AnnetteLouisan »

No - occasionally I check my net worth against my age cohort but just as a matter of interest, not as a planning tool.

perhaps OP can elaborate on the reason for the question and what kind of insights OP is looking for. Does OP think we would decide to spend more or reduce our equity exposure if we are leading the class, so to speak? Or increase or equity exposure if we are “behind”? I don’t think many Bogleheads think that way, but I won’t speak for them.
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Re: Does your net worth percentile influence your financial decisions...?

Post by delamer »

nisiprius wrote: Mon Apr 01, 2024 3:14 pm Percentile? Nope.

We did compare our estimated retirement income to the median household income for the town we lived in, when making the decision of where to retire. We already knew that our estimated retirement income seemed adequate to continue living where we were. We were not surprised that our estimated retirement income was just about the same the average for our town. However, the fact that it matched our town's median gave us confidence that we wouldn't constantly feel poor compared to our peers.

I'm not even sure what "net worth" is good for, other than bragging. Or reassuring financial salespeople that we are chickens worth the plucking.
An interesting point. I don’t think I’d want to live in a neighborhood where I was much more or much less affluent than average. Speaking in generalities and anecdotally, I’ve found that housing costs are a decent predictor in that regard. Obviously, some people in a neighborhood have more (or less) income or wealth than others, depending on lifestyle choices, age, and personal circumstances. And we’ve avoided being house poor, which I think has served us well.

But I never considered my net worth percentile in my financial choices.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by rogue_economist »

It is worth noting that some economists define poverty in purely relative terms, and under such a framework it might be of interest to know where you are relative to the rest of the population as a sort of yardstick for evaluating if you need to accumulate more, etc. And arguably net worth percentile is going to be a very rough directional indicator of overall financial health.

That said, this approach seems too limited to be of much value. Without standardizing for age this calculator is not really that useful as it bakes in the effect of lifetime accumulation. Even age standardized percentiles however are going to be misleading as they don't take into account the rate at which net worth is changing, but instead represent only a static snapshot of assets in time. I suppose if I found that my age standardized net worth was on the low end I might be influenced to save more, but I wouldn't use this for any kind of precise decision making.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by upwind »

CraigTester wrote: Mon Apr 01, 2024 2:59 pm Does your net worth percentile influence your
Well since this is about household net worth, and if that be your objective, I guess the express route is to add a partner or 2 or 3 with similar assets. “Hey there, so do you dollar cost average into total market funds regularly?” :greedy
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Re: Does your net worth percentile influence your financial decisions...?

Post by MathWizard »

Johm221122 wrote: Mon Apr 01, 2024 3:06 pm No

But how come I'm around 50-75 percentile and I feel poor?
Use the by percentile by age version.

A 65 year old should have a greater net worth than a 30 year old, because the latter has much more human capital.

In my case, my net worth was negative at age 31, but at 66, I have a high net worth.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by MathWizard »

I don't use it other than to see where various age groups sit in wealth percentile.

I'm actually shocked by how small a net worth a household can have and be above the 50th percentile.

One thing that skews the results are the people who have pensions or annuities. A present value calculation would be needed to properly include these people. A 2nd factor would be those who will be getting an inheritance.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by cheese_breath »

No. I base my decisions on how much I want or need something, and whether I can afford it.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by KlangFool »

No.

I do not care how rich am I as compared to others. That is other people's problem. I only care whether I am reaching my financial goal.

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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by jebmke »

cheese_breath wrote: Mon Apr 01, 2024 4:48 pm No. I base my decisions on how much I want or need something, and whether I can afford it.
Same, although with us, there is an additional hurdle. If you buy something you have to get rid of two things. Shoes count as one. Consumables don’t count.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by LFKB »

CraigTester wrote: Mon Apr 01, 2024 2:59 pm Does your net worth percentile influence your

1) Asset Allocation ?
2) Decision on when to retire ?
3) Decision on how much to spend ?
4) Something else about your financial life ?

There always seems to be a "Are you rich?" article percolating in the news, what do people do with this information?

Net Worth Percentile Calculator for the United States link below:

https://dqydj.com/net-worth-percentile-calculator/
I don’t look at net worth percentile but for my net worth $ value:

1) Yes, higher net worth = higher propensity for equities because more tolerance to absorb losses
2) Yes, once I reach my number I’ll be out
3) Yes and no. My day to day spending mostly doesn’t change but as net worth gets higher I have more propensity to buy vacation homes, fly first class or spring for a suite while on vacation.
4) Slightly, I have invested in a PE fund as net worth increased, but it was a unique situation that I probably would have done either way
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Exchme »

I don't understand how comparing to others makes a difference, unless you are Vladimir Putin, there's always someone richer than you.

I did click through to the site and then thought better of using the tool, I do not need advertisers knowing my net worth.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by dcabler »

No - the only goals that matter are my own goals. Comparing to anybody else's portfolio, net worth or anything else is pointless. It's not a contest against other people.

Cheers.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Jack FFR1846 »

My liquid asset number is all that I've looked at. When I retired, I knew for sure that I could retire. And 9 months in, my investment return is more than I ever made in a year of working. We spend way too little. My percentile is interesting but of zero use. And I don't believe the number, either.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by lazynovice »

I once asked my grandmother about living through the Depression. She said everyone she knew was in the same situation. They helped each other as much as they could.

I don't think our percentile changes how we do things, but our absolute amount of spendable assets does, although very tempered by lifelong habits around spending.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by unwitting_gulag »

upwind wrote: Mon Apr 01, 2024 4:35 pm
CraigTester wrote: Mon Apr 01, 2024 2:59 pm Does your net worth percentile influence your
Well since this is about household net worth, and if that be your objective, I guess the express route is to add a partner or 2 or 3 with similar assets. “Hey there, so do you dollar cost average into total market funds regularly?” :greedy
That notion trips me up incessantly. Why is net worth almost always listed per-household, and not per-capita? Consider a married couple with three children, vs. a single child-free person. Two households. If they have the same wealth, then isn't the single-person substantially wealthier than the family. Doesn't that mean, that he or she has more options in life, more choices to make, more potential concerns about investments, and a starkly different approach to retirement? And yet, those two households... statistically look the same.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Regal 56 »

How much one cares about one’s net worth rank may be influenced by where one stands in the financial ranking. The higher you are, the less you’re likely to care. Above a certain level, it really doesn’t matter—you’re well off enough to not worry about it. Yes, some hyper-competitive rich people are obsessed with keeping score. But most well off people are content with knowing they won’t be on the dole any time soon.

Those lower in the financial pecking order might take their ranking more seriously. In particular, investors who start with nothing are curious to know where their effort has landed them. Seventeen years ago I began investing. At that time, my net worth was less than zero. (Student loans pulled me down there.) I don’t know what my net worth rank was back then, but it certainly wasn’t high. Fast forward to today. I just crunched my numbers through the Net Worth Percentile Calculator. To my astonishment, it says I’m at 71% compared to all households.

Holy Moly!

Regarding the OP’s question, there’s nothing actionable about this. But considering where I was, it’s nice to know that now I’m far better off.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by bradinsky »

Absolutely doesn’t mean a thing!
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by sc9182 »

Not the percentile necessarily: but we pay attention to Total networth, liquid networth, further Breakdown of liquid networth (401k, various IRAs, HSA, deferred-comp, interests, Brokerage - among others).

Why ? Umbrella limits, home-insurance/auto limits, health-care/insurance types and/or choosing HSAs and/or contributions$, indirect input into MBR and/or Roth 401k contributions, future possible college choices, charity/DAF$, whether to FIRE (when to FIRE), among multiple financial/life decisions along the way.

As for percentile - yeah, it’s a number.

Also, there is one more number that keeps popping up every now and then: ratio of networth / lifetime-earnings. This may matter slightly more - as this is more personable to your own situation. Then again, is that useful ? prolly not-much ..

Here we are ..
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by CraigTester »

Thank you for everyone's answers.

I find it calibrating to see the data, but have not quite understood what to do with it.

It "must" be important....

The Federal reserve certainly went to a lot of trouble to collect the data....I'm sure we've all seen the many articles along the way in the various news outlets/blogs discussing how to determine where you rank, etc....., Investment firms promise to raise your rankings if you buy their services/products....., Politicians speak of it frequently... etc, etc....

Yet it's interesting that nobody here seems to have any use for the information.

Not sure what to make of it, but it's interesting nonetheless....

Best to all....,
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by CyclingDuo »

CraigTester wrote: Mon Apr 01, 2024 11:30 pm Thank you for everyone's answers.

I find it calibrating to see the data, but have not quite understood what to do with it.

It "must" be important....

The Federal reserve certainly went to a lot of trouble to collect the data....I'm sure we've all seen the many articles along the way in the various news outlets/blogs discussing how to determine where you rank, etc....., Investment firms promise to raise your rankings if you buy their services/products....., Politicians speak of it frequently... etc, etc....

Yet it's interesting that nobody here seems to have any use for the information.

Not sure what to make of it, but it's interesting nonetheless....
I've always found the data interesting as well. Books like The Millionaire Next Door and Everyday Millionaires made for interesting reading and thought. There have been plenty of forum threads on the material presented in both books.

Ramsey Solutions did a well documented study on millionaires with a sample size of over 10,000 participants covering a very diverse group, and it has all of the material in it that targets net worth (and how the participants reached their level of net worth).

Image
https://www.ramseysolutions.com/retirem ... s-research

When factoring the home into net worth, it is also interesting how the square footage of homes changed since 1973. This graphic shows the data leading up to the peak average size in the US which was 2467 sq. feet. It has since tapered off to an average size of around 2300 square feet.

Image
https://www.aei.org/carpe-diem/new-us-h ... y-doubled/

Financial Samurai wrote a blog post on how much your home should be of your net worth...

"Again, the typical American homeowner has 70%+ of their net worth tied up in their primary residence. They are house rich, cash poor. Ideally, I'd like for all of us to be house rich and cash rich."
https://www.financialsamurai.com/primar ... 20age%2045.

Has the famous Texas saying "all hat, no cattle" become "all house, no cattle" for far too many in modern times?

Image
https://www.financialsamurai.com/primar ... 20age%2045.

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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Nowizard »

Absolutely not. It is clear how anyone compares to those around them by looking at obvious things like housing, cars, etc. If it exists in this area, does it exist in others, and what is the value of the comparison other than curiosity?

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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by firebirdparts »

No. The "purchasing power" of your financial investments vs. your expenses is what influences.

"net worth" is not a useful figure for determining behavior. The amount of it that is unspendable without further calculations is usually significant and varies too much from person to person. So it follows logically that other people's net worth is also not useful.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by mhc »

CraigTester wrote: Mon Apr 01, 2024 11:30 pm Thank you for everyone's answers.

I find it calibrating to see the data, but have not quite understood what to do with it.

It "must" be important....

The Federal reserve certainly went to a lot of trouble to collect the data....I'm sure we've all seen the many articles along the way in the various news outlets/blogs discussing how to determine where you rank, etc....., Investment firms promise to raise your rankings if you buy their services/products....., Politicians speak of it frequently... etc, etc....

Yet it's interesting that nobody here seems to have any use for the information.

Not sure what to make of it, but it's interesting nonetheless....

Best to all....,
There is data that is useful for populations that is not necessarily useful for individuals. I think the government can find uses for understanding net worth, but that does not mean it is useful to an individual. I think BMI is similar. I'm sure there are many more examples. After all, everyone on Bogleheads is above average. :D

Bogleheads work hard to correct behavioral errors. Comparing oneself to others can be a behavioral error. For example, "keeping up with the Joneses" mentality can bring about financial ruin. Comparison to others can also be the thief of joy.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by delamer »

firebirdparts wrote: Tue Apr 02, 2024 8:18 am No. The "purchasing power" of your financial investments vs. your expenses is what influences.

"net worth" is not a useful figure for determining behavior. The amount of it that is unspendable without further calculations is usually significant and varies too much from person to person. So it follows logically that other people's net worth is also not useful.
There are situations where net worth can determine behavior. The obvious one is when making plans for long-term care. In that case, both liquid and non-liquid assets can be factored in to figuring out what is affordable.

And from a societal perspective, the ability of seniors to afford LTC without government support is important.

For me, it is one metric that I use when making spending decisions. But those are based on my personal absolute net worth; it has nothing to do with my relative net worth.
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Re: Does your net worth percentile influence your financial decisions...?

Post by deltaneutral83 »

Johm221122 wrote: Mon Apr 01, 2024 3:06 pm No

But how come I'm around 50-75 percentile and I feel poor?
Because the neighborhood and peer group you fall in is at least "representing" that they are in the 76th and above with their visible lifestyle. John D Rockefeller, one of the richest dudes on the planet at the time, didn't have access to penicillin or sunscreen. Wealth has always been a # relative to your circle.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Grt2bOutdoors »

No. I don’t subscribe to consumerism-itis to drive my spending decisions.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Bobby206 »

For me I think I might differ on some of these:

1) Asset Allocation ? No change.
2) Decision on when to retire ? 100% YES!
3) Decision on how much to spend ? Yes, probably if I am being honest with myself.
4) Something else about your financial life ? More generous with charity and others. Don't worry about small amounts of money at all... unless it's a frequent expense.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Ron Ronnerson »

The calculator linked is too arbitrary for my liking and it’s not just because it ignores a person’s age. I do think that net worth percentile can help provide perspective but I personally wouldn’t just limit the comparison to one country at one point in time. I prefer to compare myself to all humans who have ever lived anywhere ever. While this is not easy to measure scientifically, I’d bet I am beyond the 3rd standard deviation on the bell curve, and there’s a decent chance that I’m beyond the 4th (meaning something like in the top 0.1% or thereabouts). This makes me appreciate my lot in life but is meaningless to me for stuff like asset allocation, retirement date, etc.
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Re: Does your net worth percentile influence your financial decisions...?

Post by afan »

delamer wrote: Mon Apr 01, 2024 3:30 pm
An interesting point. I don’t think I’d want to live in a neighborhood where I was much more or much less affluent than average.
Interesting. I have no idea where my networth stands compared to others in my neighborhood. I can see roughly how expensive I may think the other houses might be. I have no clue about what other assets my neighbors may hold. I have no information on their level of debt.

Do other people share networth information with their neighbors?
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by BrooklynInvest »

No.

For me there is one helpful use for this - I worry more than I should about money. Working on it. When I run the numbers it's an excellent reminder that I need to lighten the ... heck up.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Lawrence of Suburbia »

No.

I still feel low-income, and spend thusly -- despite being at '79' in the calculator result. What does that even mean? Top 21% of net worths? ...
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by case_of_ennui »

From link
Survey results collected from February, 2022 - April, 2023 from the Federal Reserve SCF.
Market was much lower when this data was collected so take the results with a grain of kosher salt
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by alfaspider »

I understand how a total net worth number could be helpful, but why would the net worth of others matter? Only I have my exact financial liabilities and desires.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Wanderingwheelz »

The percentile is of no use to me, but my net worth definitely plays(ed) a role in questions 1) and 2).

Rich is such a vague term that the articles you’re reading about it are click bait. One person’s rich is another persons middle class.
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by cchrissyy »

i am trying to think if there is anything at all that i do differently in terms of finances as my net worth has changed. i can only think of one answer for you. i tip better when i think i have more than the staff does. the thinking is basically, this extra $ means more to them then it does to me.

other than that, no, to all your questions
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Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by one_speed »

1) Asset Allocation ?
Yes, more equity
2) Decision on when to retire ?
Too soon to tell
3) Decision on how much to spend ?
No
4) Something else about your financial life ?
Serenity in face of trivialities of work life
delamer
Posts: 17581
Joined: Tue Feb 08, 2011 5:13 pm

Re: Does your net worth percentile influence your financial decisions...?

Post by delamer »

afan wrote: Tue Apr 02, 2024 11:44 am
delamer wrote: Mon Apr 01, 2024 3:30 pm
An interesting point. I don’t think I’d want to live in a neighborhood where I was much more or much less affluent than average.
Interesting. I have no idea where my networth stands compared to others in my neighborhood. I can see roughly how expensive I may think the other houses might be. I have no clue about what other assets my neighbors may hold. I have no information on their level of debt.

Do other people share networth information with their neighbors?
Not me with my neighbors. But you can pick up a lot based casual conversations and observations.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Broken Man 1999
Posts: 8645
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by Broken Man 1999 »

I'm not sure I would find any value in comparing my net worth to net worth of others.

I have what I have and I spend with that in mind.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
snowday2022
Posts: 770
Joined: Sun Jan 16, 2022 1:48 pm

Re: Does your net worth percentile influence your financial decisions...? (Calculator attached)

Post by snowday2022 »

Most research in this field suggests that almost the only thing that matters about one’s income and NW is how much it is relative to peers. So either the research is wrong or everybody posting here is fooling themselves.
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