Determination Of Wealth

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Replied by FrankN on topic Determination Of Wealth

You have it exactly right James, let me know if that doesn't make sense Curry or if you have any additional questions.
8 years 4 months ago #16
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Replied by djames on topic Determination Of Wealth

I've never seen anyone determine wealth by income alone so not sure where you heard this. Income is only a very small part of the determination. As Frank says, a person making $100K could have very little actual wealth compared to someone making $50K. It's how you manage your money, really, and if you build assets along the way.
8 years 4 months ago #17
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Replied by FrankN on topic Determination Of Wealth

My opinion is I agree with you that income alone does not determine one’s worth, but I probably would disagree with you on your approach of using the earnings/expenditure ratio to measure wealth.

While I agree you should give credit for someone who has a lower earnings/expenditure ratio as that person is more fiscally responsible, measuring wealth is measuring someone’s net worth or savings. If you compare the 2 people in your example, Person 1 saved $45,000 while Person 2 saved $75,000. Person 2 is wealthier as his net worth is higher than Person 1. Now changing your example a little bit, if Person 1 saved the same $45,000 while person 2 still made $100,000 but spent $60,000 a year, I would agree with you Person 1 is wealthier as he saved $5,000 more than Person 2.
8 years 4 months ago #18
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Determination Of Wealth was created by Curry

I would like to know if others agree with this idea. For as long as I can remember, a person's determination of wealth is based on income alone and how it compares to the income of everyone else in the nation. This process is how, in part, we get the terms "middle class", "upper class", etc....

I think there should be a more stress free yet accurate system in place. If a person makes $50,000 a year and spends $5,000 total per year on all living expenses, they have an earnings/expenditure ratio of 10%. They only spend 10% of what they earn. If a person makes $100,000 per year and spends $25,000 per year, their ratio is at 25%. The person whose ratio is only 10% should be considered wealthier and given more and better credit, even though the other person has more "actual" wealth.

What do you think?
8 years 4 months ago #19