Income, Expenses and Investment. The most complex triumvirate, we deal with every day. Other day, one of my dear Friend, commented, our life is like, Matrix Revolution, we are all living in a simulation, and playing a game of Monopoly. As you know, in Monopoly, we buy, we sell, we hold on to the asset, we pay fine and ultimate goal is to have more money with you.
Today, I stumbled upon the Article, a question, probably I never asked, though, it must have been playing back of my mind all through. To put it more lucidly, the question defines very clearly, For what we were always been working for, without realising.
What Should Be My Net Worth?
The question is not what IS but what Should be?
The Author of the book Millionaire Next Door, defines it very simply.
Your total Pre-tax Income X your Age / 10 = Your Probable Net Worth Less Inheritance, if any.
The final amount is not relevant, it hardly matters, whether its X or Y but underline Idea is. By simple formula, with every passing age, our Net worth Should increase. If you are in 30’s it should be 3 times your Pre-tax earning…and in 40’s it should be 4 times….
Does it have any connotation to Learning and Growth. Or Can we define our Net worth in terms of our knowledge, skills, abilities or such other parameters?
Now, think of multiplying these with your increased age. The question could read like.
What is my level of Competence?
And the Formula would be:
Clarity in your thoughts/abilities/skills X Your age/ Years of Experience = Level of Competence. More the Better.
Philosophically, we are never happy with what we have, but by this Benchmark, If you are above the expected Net worth Criteria, you are in top 2% of the People in India. Theoretically, with qualification, a plush job/business, you are already in top 2%, but are you with in top 2% of your chosen field?
I think Answer to Financial Net-worth is irrelevant, once your attain a high level of clarity and thus competence.
So Be Happy, and Enjoy Long Weekend, Not Worrying about Triumvirate.