How do you decide how wealthy you really are?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Angelus359
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Re: How do you decide how wealthy you really are?

Post by Angelus359 » Sat Jan 27, 2018 12:45 pm

I don't determine how wealthy I am.

The concept of wealthiness as an abstract is goofy.
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andypanda
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Re: How do you decide how wealthy you really are?

Post by andypanda » Sat Jan 27, 2018 1:03 pm

A concept, being removed from its physical manifestation, could be considered goofy. Otoh, it's a simple exercise to add up your possessions and valuables and compare the total to the mean, median and mode of various populations.

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One Ping
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Re: How do you decide how wealthy you really are?

Post by One Ping » Sat Jan 27, 2018 1:31 pm

MathWizard wrote:
Thu Jan 25, 2018 1:00 pm
I discount the stock portion of my equity allocation by the amount that the P/E ratio (or you could use PE10 if you prefer)
is greater than the S&P long term average of about 16. The current PE is about 24, so 16/24 is 2/3, so I need to discount
my (US) stock allocation by 1/3
.

This is what it would be if the P/E ratio reverted to the mean.

Just a number, but it keep me from getting too excited when stocks are high.
I'll play ... If you are doing that (discounting) it appears you are looking at wealth as what you might have available in a 'bad situation'. If so, shouldn't you reduce that remaining amount (after discounting) by the taxes you'll owe when you liquidate your holdings? You really only 'have' what's left after doing that, the gov't 'owns' the rest. :twisted:

Not trying to be argumentative, ... just looking for understanding and consistency. :beer
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OnTrack
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Re: How do you decide how wealthy you really are?

Post by OnTrack » Sat Jan 27, 2018 6:38 pm

Leesbro63 wrote:
Sat Jan 27, 2018 10:58 am
OnTrack wrote:
Sat Jan 27, 2018 1:21 am
A number of responses have been along the lines of "check the values of your accounts." A few things to consider. The value of a financial asset on which taxes will be owed (e. g. In a tax deferred account or stocks/mutual funds with unrealized capital gains) is worth less than the listed value of the asset. Another consideration: for those that have a vested pension, the pension adds to a person's wealth by the amount of the cost of equivalent annuity.
This is only sorta right. Because annuity/pensions can't be passed to the next generation and generally cannot be RAPIDLY drawn down or spent as a lump sum. So it's not exactly the same type of "wealth" as $X in a bank or brokerage acct.
You have a good point. Still, I think it is useful to figure net worth both with and without the value of a pension or annuity.

RadAudit
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Re: How do you decide how wealthy you really are?

Post by RadAudit » Sat Jan 27, 2018 7:59 pm

If you have to figure out if you are wealthy, you aren't.
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wrongfunds
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Re: How do you decide how wealthy you really are?

Post by wrongfunds » Sun Jan 28, 2018 1:19 pm

CppCoder wrote:
Fri Jan 26, 2018 9:32 pm
Let net worth be defined as X. Then, wealthy is defined as 2*X, for all values of X.
+100

This is how we all view wealthy vs non-wealthy. BUT there are some exception because few of the participants here have came out and said that they are wealthy. But for everybody else, your rule applies.

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oldcomputerguy
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Re: How do you decide how wealthy you really are?

Post by oldcomputerguy » Sun Jan 28, 2018 1:56 pm

tennisplyr wrote:
Thu Jan 25, 2018 8:04 am
They say when the market goes down, you really haven't lost anything until you sell the assets. By the same token, when the market goes up, until you sell, you have nothing in your hands. On any given day, for long term planning, how do figure out or think about how much you really have?
Look at my checking account: thanks how much I really have.

Look at my Vanguard, Fidelity and Schwab accounts: that’s how much I can get my hands on if needed.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

MathWizard
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Re: How do you decide how wealthy you really are?

Post by MathWizard » Mon Jan 29, 2018 4:47 pm

One Ping wrote:
Sat Jan 27, 2018 1:31 pm
MathWizard wrote:
Thu Jan 25, 2018 1:00 pm
I discount the stock portion of my equity allocation by the amount that the P/E ratio (or you could use PE10 if you prefer)
is greater than the S&P long term average of about 16. The current PE is about 24, so 16/24 is 2/3, so I need to discount
my (US) stock allocation by 1/3
.

This is what it would be if the P/E ratio reverted to the mean.

Just a number, but it keep me from getting too excited when stocks are high.
I'll play ... If you are doing that (discounting) it appears you are looking at wealth as what you might have available in a 'bad situation'. If so, shouldn't you reduce that remaining amount (after discounting) by the taxes you'll owe when you liquidate your holdings? You really only 'have' what's left after doing that, the gov't 'owns' the rest. :twisted:

Not trying to be argumentative, ... just looking for understanding and consistency. :beer
Actually, I do account for taxes, the discounting of account balances is just one piece.
It has gotten more complicated over time.

I wrote two programs specific for my situation in which I enter my current tax deferred account balance, my ROTH balance, my current
age, and the return (real not nominal) that I expect. I have programmed in my current salary (I adjust when needed) and previous salary
with SS wage inflation adjustments, and other factors needed, and I calculate the SS benefits my spouse and I will get.

One program spits out a constant inflation adjusted withdrawal which has the final balance equal the balance at age 70.
(Drawdown will be much faster before 70 because I plan to wait until 70 to claim. I tested with various claiming strategies, and
this was the best under my assumptions.)

The 2nd does the same thing, except calculates "disposable" income by first subtracting out expected health care costs and taxes on the tax deferred + SS benefits, and keeps disposable income constant. The reasoning is that health care costs vary quite a bit over the time span
(Medicare at 65) as well as taxes (due to SS benefits being taxed). There are other factors, but these are the most important.

The tax deferred and ROTH inputs are what discount via P/E.

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Cycle
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Re: How do you decide how wealthy you really are?

Post by Cycle » Mon Jan 29, 2018 5:02 pm

When I own a gulfstream G550, I have arrived, in the meantime I'll be stuffing my clothes in my personal-item bag on Spirit airlines.

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