Content deleted Content added
Emparker56 (talk | contribs) |
Emparker56 (talk | contribs) |
||
Line 64:
According to [[Robert Kiyosaki]], author of ''[[Rich Dad, Poor Dad]]'', wealth is nothing more than a measurement of time. It is how long you can continue to live your lifestyle without any adjustments when you cease working. For instance if you have a burn rate of $2,000 a month in bills and expenses and $4,000 in the bank and you have no other forms of income, then you have a wealth measurement of 2 months. If however you are simply able to increase other forms of income, those which are not the result of trading time for money, to a point where they exceed your monthly burn rate, then you will effectively reach infinite wealth.
===Sustainable wealth as a measure of well-being===
According to the author of ''Wealth Odyssey'', Larry R. Frank Sr, wealth is what sustains you when you are not working. It is net worth, not income, which is important when you retire or are unable to work (premature loss of income due to injury or illness is actually a risk management issue). The key question is how long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long wealth might last, then becomes a function of how many times does the percentage withdrawal rate go into all the assets. Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4 percent equals 25 years; 8 percent equals 12.5 years, etc. This ignores any growth, which presumably would be used to offset the effects of inflation. Growth greater than the withdrawal rate would extend the time assets may last, while negative growth would reduce the time assets may last. Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much wealth you need also. Example: you know you will need $40,000 a year and use a 4 percent withdrawal rate, then you need to start with $1,000,000; using 5 percent you would need $800,000, etc. This simple “wealth rule” helps you estimate both the time and the amount.<br />▼
Sustainable wealth is defined by the author of ''Creating Sustainable Wealth'', Elizabeth M Parker, as meeting the individual’s personal, social and environmental needs without compromising the ability of future generations to meet their own needs. This definition of sustainable wealth comes from the marriage of sustainability as defined by the Brundtland Commission and wealth defined as a measure of well-being.
===Sustainable wealth===
▲According to the author of ''Wealth Odyssey'', Larry R. Frank Sr, wealth is what sustains you when you are not working. It is net worth, not income, which is important when you retire or are unable to work (premature loss of income due to injury or illness is actually a risk management issue). The key question is how long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long wealth might last, then becomes a function of how many times does the percentage withdrawal rate go into all the assets. Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4 percent equals 25 years; 8 percent equals 12.5 years, etc. This ignores any growth, which presumably would be used to offset the effects of inflation. Growth greater than the withdrawal rate would extend the time assets may last, while negative growth would reduce the time assets may last. Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much wealth you need also. Example: you know you will need $40,000 a year and use a 4 percent withdrawal rate, then you need to start with $1,000,000; using 5 percent you would need $800,000, etc. This simple “wealth rule” helps you estimate both the time and the amount.<br />
===Wealth redefined individualistically===
| |||