SIMON CHEGWIDDEN of Avrio Wealth looks at a few key questions around wealth. How much wealth do you need? How is wealth calculated? And are wage calculators useful?
With an estimated net worth of around $200 billion, no doubt Jeff Bezos feels very wealthy! To try and put that in perspective, it would take the average person in a developed country like the US around 73,000 lifetimes to earn $200 billion. So, to most people, Jeff Bezos is perceived as unimaginably wealthy. But the key word is perceived, because the perception of wealth changes depending on who’s viewing it.
To someone who is home- and penny-less, anyone with enough money to pay for food and shelter is wealthy. To someone who has a house, food, family, car and savings, someone who has a bigger house and better car is wealthier than them. We naturally tend to focus on, and want, what we don’t have.
How wealthy are you?
So, how do you judge your own wealth? How wealthy are you and how wealthy do you need to be? It’s a question that often comes up with financial advisors, especially when focusing on retirement planning or achieving financial independence. How much wealth do you need? The answer is different for everyone, but a big part of the answer lies in understanding what you don’t need and removing it from the equation.
As financial advisors, we see clients from both sides. Some have way more wealth than they realise and fairly modest needs. Understanding this means they can take less risks with their investments and protect what they have. More importantly, they can take the pressure off themselves knowing they’re in a secure position. Other clients have expensive lifestyles and big goals for passive income, but their current level of spending means future goals are going to be hard to sustain, even though they are achievable. Knowing this means they can make a choice: adjust future goals or adjust current lifestyle. The answer usually lies somewhere in between.
Putting goals into dollars, if your goal is $6,000 passive income a month, purely from investments, assuming a 5% investment return, you will need a portfolio of around $1,440,000. You will still have to consider investment risk, so this is not guaranteed. However, the sooner you have your goal set, the quicker you can put a plan in place to achieve it.
Not knowing your goals means you are running towards an unclear finish line. You may not see it and keep running, wasting valuable energy and time, when you could be enjoying life. On the flip side, you may get there and realise you’re going to have to keep running! And, if you can’t, then you’re going to need to make some big changes. So, it comes back down to the same two simple questions. How wealthy am I? How wealthy do I need to be?
To finish, these two websites are quite eye-opening; they’ll show you where your income ranks in both Singapore and the world.
Global wage calculator: This simple tool tells how your income compares to the average income in Singapore and the rest of the world.
Global income spectrum: Another wage calculator that shows where your income ranks globally for buying power.
Set up an online consultation to see if Avrio may work out a long-term solution for you.
This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/ and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm’s ADV Part 2 Brochure, please contact us at firstname.lastname@example.org
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