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How Rich Are You and Are You Debt Free?

Simple Living Means Solitude

How rich are you?  The second question relates to the first one, since debt reduces our net worth, but that is the measure of our propensity to spend.

Budgeting image with calculator and pen

Photo by Kellie Chasse

Here in the United States we are sort of spoiled, well actually we are very spoiled.  If you use this calculator and enter your family income you may be very surprised about the numbers you see.  By selecting the location, it takes into account the cost of living in your area by using equivalised income.

If you plug in an income of $40,000 it actually puts you in the top 2% of the world’s population for income.  How many of use feel like we are in the top 2% of income earners in the world?  I see and hear numbers about median incomes of families being around $48,000/year across most states.

Does this make us rich?  Actually it does make us quite wealthy when you compare us to the rest of the world.  The problem is we compare ourselves to other people who spend a lot of money.  Many times these people do not have high net worth, but they have a lot of debt.

Your total net worth = Assets – All of your debt

I was driving to work this week and heard a podcast by Dave Ramsey where he said if a family was making $50,000 / year and put away 15% each year, they would retire as millionaires.  Okay, so what the heck is our problem then?

  1. We need to stop spending money we do not have to get instant gratification.  Our family had this problem not all that long ago.  We bought “reliable” cars, which came with payments.  We lived in a home which had a mortgage, and we made purchases with credit cards so we could get nice things quickly.  We made the choice to modify our behavior and we started budgeting.  Every dollar had a purpose and the purposed was documented.
  2. Be grateful for what we have.  We cannot compare ourselves to others constantly.  Just because someone has new cars, a huge home, really nice things, and goes on amazing trips all the time does not mean they have more money than you.  It may actually mean they are one job loss away from bankruptcy and losing everything.
  3. Be thankful for being born in an area where you can read this blog, have money to save, Internet to access information and a lot more.  A lot of the world does not even have clean water to drink or food on the table right now.  If you are reading this, it probably means you got to eat a nice meal today and have a refrigerator with food in it.  We can also go turn on the faucet and drink the water that comes out.  I see and hear people complain about water out of the faucet and then I instantly think about people around the world who wish they had our problems.
  4. Identify what makes you happy.  Money does not really make us happy.  Think about when you are the happiest and it probably involves experiencing life either alone or with family and friends.  Having enough money is important, so we can have a shelter, food, and water, but that is where it ends.

Remember to look at this calculator if you have not done so already.  It is extremely enlightening and humbling when you see how much we make compared to others around the world.

So how rich are you?  Are you putting 15% of your income into investments for your future?  Are you paying down your debt?  Peace of mind comes from removing the debt and building a solid savings for that rainy day or just for peace of mind.

Be humble, grateful and kind.

Have a great day!

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