"Money is a result, wealth is a result, health is a result, illness is a result, your weight is a result. We live in a world of cause and effect"
-Harv Eker from the book Secrets of the Millionaire Mind
Money is a great lubricator. Anyone who believes that money is not important is not living in the real world. Life is not perfect when money is available BUT everything is made easier. Interestingly, there is a limit to how much is needed to make one feel fulfilled. Many studies have shown that above a certain income(usually around 75k) that happiness is not changed.
I like to offer a mathematical way of looking at the financial piece. Your earning potential is the ratio of your salary to your age.
Your Earning Potential=Salary/Age -
As an example, if you are a 20 year old making 40k your ratio would be 40k/20=2. This would not be as good as a 20 year old making 60k or 60k/20=3.
The second ratio is the retention ratio of your total net worth to your age. Total net worth would be all of your savings and value of investments if they were sold.
Your Retention Potential=Total Net Worth/Age
If you are a 40 year old and your net worth is 200k then the ratio2=200k/40=5.
There is no perfect ratios. The obvious answer is the higher both are the better off you are.
Today's question to ponder(and calculate) is:
What are your two ratios?
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