Reply to At what net worth are you considered wealthy ?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]It depends on the assets. Net worth doesn’t make you wealthy. Cash flow makes you wealthy. Cash flow is more important than net worth. [/quote]

You sound like someone who lives above your means.  NW always connotes wealth....not how much you earn and spend.  I know plenty who earn over $500K but have little to show for it....others earn far less and have a health NW[/quote]

It's your ability to generate cash flow that makes you wealthy, not your net worth. 
Person 1: [b]No debt but only $10 in their account and no source of income. Positive net worth of $10. Can't pay rent and end up on the street and homeless.[/b]
Person 2: Owe $2M to a bank. Has assets that are valued at $1.5M. Has a job making $300k a year. Negative net worth -$500k. Live a good life in a nice house.

I'm sure you would rather be Person 1 because they have a positive net worth. lol
Net worth isn't everything.

If your net worth can't generate cash flow, it means nothing.

[/quote]

This is an extreme example.  Unless it's stolen bitcoin on an USB or a rare diamond/art that cannot be sold your Person 1 scenario is unrealistic.  While I get that a $10M business may not generate as much cash as, say, a stock portfolio, the owner will still be able to extract some cashflow out of it to sustain themselves.  It would be a pointless business otherwise and not something I've encountered.[/quote]

This example isn’t as extreme as you think. Do you know that many poor people have no debt? Because they can’t even borrow money. They live in poor condition with very little. Their net worth is positive though but insignificant. Go in poor communities and you’ll see many. 
Why are they poor? Because they can’t earn or generate enough income to even start building wealth net worth.
Nobody in these communities thinks that they are better off than the millionaires across the river who are living large and have a lower net worth because they aren’t saving.

This “net worth” theory no longer works when you are talking about people of very different social classes.[/quote]

No one is talking about people with a net worth of $10. We're talking about people with a net worth of multiple millions, [b]at which point your money is typically working for you (interest, dividends, rental income, business income, etc). With enough millions working for you[/b], you don't need wage income to live a nice life.[/quote]

The net worth itself is just a mean to generate money and cash flow. That's why generating money and cash flow is always the most important thing.

If you have $10m invested in low performing stocks or investments that don't generate enough return, your net worth is high.
If I have $5m invested in investments that consistently generate huge profits, my net worth half yours but I'm actually better off than you.

A high net worth means nothing if it can't generate income and cash flow. If you can continuously generate income and cash flow, your net worth doesn't matter much. It only matters if your goal is to leave a fortune to your heirs.
[/quote]

DP.  Do you actually believe what you are saying or just being obtuse?  Which idiot is capable of accumulating $10M do you know of that's sleeping on the streets or going hungry because his assets are not generating enough cashflow?  :roll:   Assume for a minute it's all in Amazon stock, no dividend - sure, but definitely you can sell a few shares to buy bread, can't you?   The smart move would be maximize net worth over the long haul while generating just enough income/liquidating just enough equity to keep up your lifestyle.  And NO.  If you have $5M and I have $10, I'm better off than you.  Twice as much.  5 times two = 10.[/quote]

You would be surprised at the number of people that are squandering millions because they are inept at generating income. 
Having assets doesn’t necessarily means they automatically generate income. Generating cash flow doesn’t happen magically. It’s a skillset. The most important one. It’s what enables you to grow your net worth. That’s why cash flow is always more important than et worth.
You inherit $10m and inherit $5m. You have double my net worth.
You are inept and make bad investments that only give you a 3% yearly ROI
I’m more savvy and make investments that give me a 20% yearly ROI
Your net worth is higher but sorry but I’m way better off that you.

It’s always your ability to generate cash flow that is more important.[/quote]

PP here. And before you come here saying that the example above is unrealistic, know that it is happening a million time in life. People starting in life with less and surpassing those that had a higher net worth. They do this with their superior ability to generate income and cash flow, which in turn boosts their net worth. Cash flow is king.
[/quote]

You've turned this into a completely different discussion - Can someone with a lower net worth generate more cash than someone with higher net worth?.  That was not the point of the OP or even your your original post. $10M net worth at 3% is 300K.  99.9% of people ANYWHERE would call that person wealthy.  Will the $5M person generating 20% overtake the first guy at some point? of course.  He will just become MORE WEALTHY.  Happens all the time.  There will always be someone richer than me (more cashflow and/or more wealth than me) but that doesn't make me 'not wealthy'. It just makes the others more wealthy.

I'd change 'Cash flow is king' to 'optimal cash flow is king'. The $10M dude can afford to not aim for more than 3%. He can generate that 3% in any market condition with close to zero loss of capital/zero risk. The $5M guy generating 20% is taking on a a lot of extra risk and runs the risk of capital loss.  They are both wealthy, one is more wealthy than the other and one sleeps better at night.[/quote]

Interesting.......I think most posters would take the $10M and earn 3% for perpetuity vs the $5M and can invest anywhere.   [b]I know at 63 I would, but  would a 25yo??[/b][/quote]

They should, but won't and may or may not be better off than you when they hit 63.

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