Wednesday, February 1, 2017

What Stages

                                              Good Morning My Cheap Cheetah Family!!

What stage are you at on the path to wealth
A little more details on each poll option:

Stage 1: is someone who's just starting out on the journey of savings and wealth building.

This person must first eliminate "bad" debt, e.g. debt incurred on depreciating assets like cars, boats, and jewelry (due to our recent diamond ring thread, is included too because of the incredible mark up).

Once that's done, this person can start on her savings goal. The goal is based on the amount of money the person needs to support her lifestyle at retirement. The book counts retirement account savings; and I disagree (I'm more conservative and only count taxable savings.)

Stage 2: is someone who's been saving for a while and now her investments generate an equal amount of new wealth to her target savings. I.e. Instead of increasing her annual investment by 1x target savings; that's now increasing by 2x.

This is a critical time because compounding and the investment is beginning to take over as the main producer of new wealth.

The investments counted by the author seems to be everything but the house and other hard assets. I disagree, I believe that is should only be your taxable investable assets (don't think about your retirement accounts).

Stage 3: is what the author calls financial independence where your job becomes optional.

Here, after a few years of reaching stage 2, your investments generate enough new income to allow you to life your lifestyle. However, because the new income is used to support your lifestyle, nothing new is being invested, so your wealth is stagnant.

Stage 4: is what the author terms wealthy. This is like stage 3, except your investments generate income 2x your lifestyle spending. Here, new money is added to your investments for it to grow. I.e. you are continuing to build wealth.

Stage 5 is what the author terms rich. This is like stage 4 except investments generate 5x spend. This allows you to give generously to family, friends and charities. 
Have a great Cheap Cheetah Day And Save That $$

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