The feel-good happy-clappy quiz
Thought I'd try putting in some figures that would be typical of many financial types and see what answers we get.
My comments in italics.
Case 1. Middle aged person on $50k pa. Owns $300k home outright. With $100k super and $50k other savings. No debt. This is my guess of a conservative type who was taught to save up for a home, not take risks and stay working until 65.
Result: Wonderful
Your investing results indicate that you have done wonderfully well. Clearly your plan is working because you are accumulating a lot of wealth. Don't be ashamed to spend part of your wealth on yourself or causes that you support, as there isn't much point in having money since it exists to be used. Don't go overboard though - and use regenerating income rather than selling assets to fund your expenditure.
Not bad but not fantastic if early financial independence was an aim
Case 2. Age pensioner on $20k pa social security income. Rents. No super or investments. $20k savings are all that keep the wolf from the door. So really has to watch every dollar and have noodles & soup for dinner.
Well Done
Given most people spend more than they earn and fund the difference with debt, your modest wealth creation efforts have already proved that you have the right mindset to be an investing success. Well done! It would be a shame not to maximise your potential, and if you're interested in direct property investing then you'd make a great candidate for our where we'll put you though your paces and make you a better investor. Whatever your decision - keep up the good work.
The absence of debt is commendable but statistically this person is poor, with little to show for their work over the years.
Case 3: Young part-timer on $25k pa who loves spending. Rents. $20k car & $30k other 'stuff'. $30k debt and no savings.
Urgent Help Needed
You urgently need help to create and implement a better wealth creation plan. You're extremely dependent on employment (i.e. trading time for money) to provide for your long term needs which is dangerous because you will be in trouble if you can no longer work.
You'd be well advised to start implementing the golden rule of wealth creation which is: Spend less than you earn and invest the difference in growth and income assets. If you'd like more literature about investing success then a great book to buy and read is 'From 0 to 260+ Properties in 7 Years'
Agree there, or maybe they just have other priorities or interests.
Case 4: High income earner $100k pa, $1m house and $500k mortgage. $100k car, $100k super.
Urgent Help Needed
You urgently need help to create and implement a better wealth creation plan. You're extremely dependent on employment (i.e. trading time for money) to provide for your long term needs which is dangerous because you will be in trouble if you can no longer work.
You'd be well advised to start implementing the golden rule of wealth creation which is: Spend less than you earn and invest the difference in growth and income assets. If you'd like more literature about investing success then a great book to buy and read is 'From 0 to 260+ Properties in 7 Years'
OK the payments are a bit high relative to income, but there's good equity in own home. Apparently this doesn't count as the calculation uses the Kiyosaki definition of asset. The car is an indulgence but they're still better off than Case 3.
Case 5: As for Case 4 but the $1m house is an IP rather than a PPOR.
Top Of The Class
Success is no fluke, and clearly you've mastered the art of making money. Having done it for yourself, it's now time to prove you can do it for others too. Take some people under your wing and share your secrets. In the meantime, keep reaping the rewards from your investing but consider supporting others less fortunate as true riches is being able to joyfully use money to bless others.
Just as I thought - that did the trick! Even though Cases 4 & 5 had the same net wealth and 4 would be better off if they wanted to sell.
The above has laid bare the biases in the survey.
You don't need much wealth or a particularly good wealth to income ratio to score highly. But consumer debt is evil, as are mortgage payments but not investment debt. If all your assets are in your own home that is very bad but if they're IPs then that is very good.
I still prefer the 'Millionaire Next Door approach' which is your net wealth versus annual spending. And if there's a ratio of 20 times or more you're just about home and hosed.
