Determination Of Wealth

  • Posts: 1190

Replied by FrankN on topic Determination Of Wealth

Joker wrote: A friend of mine is a millionaire on paper but his investments are heavily in property. That just means that he can be a millionaire and still have cash flow issues. Frugal Fran had it right when she said balance is the best!


That is very true as well. and in a distress situation the property may not be valued at what he/she thinks it is.
1 year 9 months ago #1

Please Log in or Create an account to join the conversation.

  • Posts: 169

Replied by Joker on topic Determination Of Wealth

A friend of mine is a millionaire on paper but his investments are heavily in property. That just means that he can be a millionaire and still have cash flow issues. Frugal Fran had it right when she said balance is the best!
1 year 9 months ago #2

Please Log in or Create an account to join the conversation.

  • Posts: 1190

Replied by FrankN on topic Determination Of Wealth

Curry wrote:

FrankN wrote: You have it exactly right James, let me know if that doesn't make sense Curry or if you have any additional questions.


What he said makes sense, but not the opinion he has that some people do not look past income alone when determining their wealth. I could be wrong, but that's them impression I got from his post.


That makes sense I was referring to only that you should look at your assets in determining your wealth.
2 years 3 months ago #3

Please Log in or Create an account to join the conversation.

  • Curry
  • Curry's Avatar Topic Author
  • Offline
  • Junior Member
  • Junior Member
  • Posts: 75

Replied by Curry on topic Determination Of Wealth

FrankN wrote: You have it exactly right James, let me know if that doesn't make sense Curry or if you have any additional questions.


What he said makes sense, but not the opinion he has that some people do not look past income alone when determining their wealth. I could be wrong, but that's them impression I got from his post.
2 years 4 months ago #4

Please Log in or Create an account to join the conversation.

  • Curry
  • Curry's Avatar Topic Author
  • Offline
  • Junior Member
  • Junior Member
  • Posts: 75

Replied by Curry on topic Determination Of Wealth

djames wrote: I've never seen anyone determine wealth by income alone so not sure where you heard this.


From the people who have just as many assets as they do debts, because they used credit to acquire the assets......credit they acquired due to their income. These people don't seem to care about the debt incurred and how it effects their actual worth.
2 years 4 months ago #5

Please Log in or Create an account to join the conversation.

  • Posts: 1190

Replied by FrankN on topic Determination Of Wealth

FrugalFran wrote: I think what was meant here regarding living within a person's means is that people typically don't have a huge income and have little of that going out to spending and overhead. As Egghead said, people adjust their spending habits to match the income they have, so more money usually means more spending. If someone was making $200,000 a year and had very few bills, that would seem odd.


I would generally agree with that, but there are people who grow their income, but keep their spending habits constant so they are able to accumulate wealth very quickly.
2 years 4 months ago #6

Please Log in or Create an account to join the conversation.

  • Posts: 364

Replied by FrugalFran on topic Determination Of Wealth

I think what was meant here regarding living within a person's means is that people typically don't have a huge income and have little of that going out to spending and overhead. As Egghead said, people adjust their spending habits to match the income they have, so more money usually means more spending. If someone was making $200,000 a year and had very few bills, that would seem odd.
2 years 5 months ago #7

Please Log in or Create an account to join the conversation.

  • Posts: 103

Replied by Goldbug on topic Determination Of Wealth

Moneyes wrote:

Cents wrote: That's true, Egghead. It's human nature to live within one's means. I'm sure it happens, but it's probably a rare occurrence. It would probably seem like a red flag to a lender, too.


Then why are so many people up to their eyeballs in debt? Most people I have run across don't really care about their credit to income ratio.

I think it's become cultural. People start their working lives in huge amount of debt due to student loans. Mortgages are well over several years' salary, even not allowing for living expenses that people accrue over that time. The idea of "Why wait" has been pushed so hard for so long it would take a major change in finance and culture to make it possible for people to live within their means.
2 years 5 months ago #8

Please Log in or Create an account to join the conversation.

  • Posts: 261

Replied by Moneyes on topic Determination Of Wealth

Cents wrote: That's true, Egghead. It's human nature to live within one's means. I'm sure it happens, but it's probably a rare occurrence. It would probably seem like a red flag to a lender, too.


Then why are so many people up to their eyeballs in debt? Most people I have run across don't really care about their credit to income ratio.
2 years 5 months ago #9

Please Log in or Create an account to join the conversation.

  • Posts: 73

Replied by Cents on topic Determination Of Wealth

That's true, Egghead. It's human nature to live within one's means. I'm sure it happens, but it's probably a rare occurrence. It would probably seem like a red flag to a lender, too.
3 years 5 months ago #10

Please Log in or Create an account to join the conversation.

  • Posts: 112

Replied by Egghead on topic Determination Of Wealth

If I was responsible for making the decision to lend money I would be wary of someone with a huge income who declared very low outgoings. In my experience such a situation is rare, as people tend to adjust their spending habits in line with a rising income.
3 years 5 months ago #11

Please Log in or Create an account to join the conversation.

  • Posts: 364

Replied by FrugalFran on topic Determination Of Wealth

Like most other things in life, I think it's about balance. Earn the best income you can, live frugally, save as much as you can, and keep debt under control.
3 years 5 months ago #12

Please Log in or Create an account to join the conversation.

  • Posts: 1190

Replied by FrankN on topic Determination Of Wealth

I am not sure I agree with that. Lenders and banks really do look at ratios as compared to total income. Someone with earns a $100K per year with no debt will be a much better lender candidate than a person who makes $500K a year, but has $250K of student debt, $100K of credit card debt, and $150K of other debt. High income levels can take on more debt, but banks and lenders look at their capacity to get repaid.
3 years 6 months ago #13

Please Log in or Create an account to join the conversation.

  • Posts: 217

Replied by Breakinger on topic Determination Of Wealth

Interesting concept and I completely agree with this. I think that the determination of wealth should be based on a person's income and expense ratio. I believe there are some banks that treat it this way because I know when I have tried to apply for a loan they determine the approval or disapproval based on your debt-to-income ratio. I think more credit card companies should treat it this way too.
3 years 7 months ago #14

Please Log in or Create an account to join the conversation.

  • Posts: 112

Replied by Egghead on topic Determination Of Wealth

In terms of credit ratings I'd say that the higher earner would always be seen as the better risk, despite the plausible scenario of them having less disposable income than someone earning less. Money attracts money at the end of the day.
3 years 8 months ago #15

Please Log in or Create an account to join the conversation.