Deviation in Wealth v Income Rank

[Michael792]

Rather than attempting to hijack this thread: http://forum.mrmoneymustache.com/welcome-to-the-forum/i%27m-a-normal-guy-living-a-normal-life-help-me-blow-it-up/?topicseen, I figured I'd start a new one. In the previous thread, AverageMarriedDad mentioned wealth. He also linked to here: http://www.globalrichlist.com/. I went over there and did both income and wealth calculations. While I'm in the top 2.97% by income (21,600 USD p.a.), I'm only in the top 64.59% by wealth (I used my net worth in the possessions selection: no investment accounts at this time. I assume this would increase percentage.).

What is y'all's deviation? Apparently mine is still quite large, though I'm working to increase my wealth.

[meadow lark]

About 2% difference between salary and net worth.  I put our household #'s, not individual. And before taxes.   Not sure if that was right.

[beltim]

Yeah, that calculator is way off.  As a simple test, $50,000 is about the 75th percentile in the US.  That means there's at least 50 million people in the US alone who make that much.  That's about 0.8% of the world population.  Put $50,000 in the calculator, and it says $50,000 is the top 0.31% of income.

And that doesn't include any other country!

I don't know what numbers the web site is using, except that they're wrong.

[Michael792]

Yeah, that calculator is way off.  As a simple test, $50,000 is about the 75th percentile in the US.  That means there's at least 50 million people in the US alone who make that much.  That's about 0.8% of the world population.  Put $50,000 in the calculator, and it says $50,000 is the top 0.31% of income.

And that doesn't include any other country!

I don't know what numbers the web site is using, except that they're wrong.

Well that's interesting. Still, my net worth is pretty far behind my salary, even though that's still so little. I'm worth about 6.88% of my salary. Working hard to change that though!

Meadow Lark, that's pretty cool! I used after tax info

[beltim]

On the plus side, it's probably only off on the wealth scale by 20-40% (http://www.cnbc.com/id/101099732#.)

[Al1961]

I don't know what numbers the web site is using, except that they're wrong.

it's a UK Charitable website for CARE.

They couldn't possibly be inflating the rankings to try to loosen peoples grips on their wallets now, could they?

[MsRichLife]

Using household figures (in Australia)

0.05% for income

0.47% for wealth

[Michael792]

Ok, so even if they are inflating the rankings, theoretically they'd do it according to the same rubric for both wealth and income. So, then, would the ratios you see between the two still be valid? As in, could you still use that ranking system as a quick way to guestimate the ratio of your wealth to income on a global scale?

[G-dog]

US
Income 0.08 (after tax as they said net income)
Wealth 0.69

[Michael792]

MsRichLife and G-dog, y'all seem to be doing well in the income part! We all have a good bit of work to do in the wealth department, though. Bet y'all can beat me!

[wtjbatman]

I don't want to hurt anyone's feelings, so I won't mention my income rank. But needless to say, I can afford to wear two monocles at the same time.

On the same eye.

[Michael792]

I don't want to hurt anyone's feelings, so I won't mention my income rank. But needless to say, I can afford to wear two monocles at the same time.

On the same eye.

I was about to say...I wear contacts. Those are kind of monocles, right?

[Dicey]

Would someone please explain to me, using small words, why I should care about this? What real difference does it make?

[Michael792]

For me it's a measure of how much I make versus how much I'm worth. It also allows me to get a (rough) idea of where I stand compared to the rest of the world. I've been to some very poor places in this world, but seeing numbers like this calculator shows helps me put it a bit more in perspective. So, I feel sometimes that I make hardly anything and that I'll never make it to this goal we're all pursuing, that is, financial independence. And yet, when I look at what I make and have compared to what a majority of the world does in actual numbers (even if they are inflated a bit), it helps me to be more grateful for my situation. On the comparing income v wealth, it's just a personal measure of progress along the route to FIRE. You don't need the calculator for that, but the rest of it is what matters the most to me.

[G-dog]

MsRichLife and G-dog, y'all seem to be doing well in the income part! We all have a good bit of work to do in the wealth department, though. Bet y'all can beat me!

It's (the income) not that impressive from a US perspective, but globally it obviously reminds me how lucky I am.  When I started working, I never imagined I'd make as much as I do now - but lots of changes in economy, a few lucky options, etc. and here I am. 

[G-dog]

I don't want to hurt anyone's feelings, so I won't mention my income rank. But needless to say, I can afford to wear two monocles at the same time.

On the same eye.

Hah! And I love your avatar.

[Michael792]

haha It's kinda impressive to me! I've never made more than about ten grand in a year until this year. I'll still probably make less than or just over twenty this year.

[Dicey]

Dunno, it sorta feels like a keeping up with the Joneses kind of thing to me. The only thing that matters is how you are doing against your own goals.

[wtjbatman]

I don't want to hurt anyone's feelings, so I won't mention my income rank. But needless to say, I can afford to wear two monocles at the same time.

On the same eye.

Hah! And I love your avatar.

Thank you kind sir

[Michael792]

Dunno, it sorta feels like a keeping up with the Joneses kind of thing to me. The only thing that matters is how you are doing against your own goals.

I guess it could be used that way, but I'm looking at all the people worse off than me as a way to say "Hey, Michael, quit feeling bad. Be happy that you are as fortunate as you are. Look at all the people that do not have the opportunity you do right now." Hopefully later in life I can make a difference for them, but for now I need to make a difference for me. I don't care about appearances or trying to get as good as the next guy.

[ArbitraryGuy]

One of the many issues with this calculator is that it makes an apples-to-oranges comparison.  It purports to find your income percentile in the whole world population of 6.7 billion, which includes many, many people without an income.  You should be comparing your income to other people with income not to children (around 1/6th of the world's population is < 10 years old), prisoners, debutantes, the disabled, stay-at-home-parents, etc.  Otherwise, the percentiles are greatly inflated by the inclusion of so many non-income earners.

[SnackDog]

Wealth and income don't always correlate, particularly at the high end of the scale.  Inherited wealth, business  or real estate ownership impact wealth a great deal more than income.  On the other hand, celebrities and athletes can have enormous income but fail to build wealth and, in fact, not infrequently go bankrupt altogether. 

Keep in mind, however, the "lifestyle wealth" of spending rapidly which many people find more appealing and enriching in the long run than putting it in the bank.   Would you rather live the life of a miser like Warren Buffet, living in the same tiny Omaha house 50 years while amassing a fortune (for charity, it seems), or die bankrupt like Sammy Davis Jr, singing, dancing, laughing and partying until 7 am most nights?