How Much To Spend on a Car?

How Much To Spend on a Car?

Do you know that how much you spend on a car affects your wealth in the long run? Yes, This is true. Buying a Car is a Financial Decision and what will be your future wealth will really depends on which car you buy in the which stage of your life?

What most of the young working couple do is, they buy expensive and luxurious cars during the first 5 years of their working life. This is because they are earning a lot. But they don’t realize that this financial decision will erode their over all wealth over a period of long time.

Ideally you should buy a car which is less than 1 % of your total net worth. Rich people buy their new car in this way. While middle class people buy a car that may be worth of 30-70% of their total net worth…!!!

You will ask me than that, in my city I am seeing lots of luxurious cars. Does it mean that all of them are rich? Well, No. 95% of them are upper middle class. They just earn more and that’s why they qualify for large loans. But in reality they have a little accumulated wealth.

Remember, A Wealth is something which you accumulate. Your Income is not your wealth. Many people don’t agree with this argument. But this is the Truth. Your Bank or a Car Company will never tell you this Truth. Because they are not in the business of spreading financial awareness to the people. So if you understand the meaning of this article than never buy a car that is worth more than 1% of your total net worth.

Now, what if your current net worth is very low and it’s 1% is not sufficient to buy a new car? Well, than buy a second hand car. The people who are rich today have drive the second hand car for several years of their lives and that’s why they are rich today.

Average Wealth of Congress

Average Wealth of Congress

In the US Congress, 237 members are millionaires. This is even after declining of the wealth of all the Americans in USA.

According to Huffington Post:

According to a study of personal financial disclosure reports by the CRP, the median wealth of members of Congress dropped nearly 5 percent in 2008 compared to the previous year.

Don't feel sorry for them: Despite the drop, 237 members of Congress are still millionaires.

Senators' median worth currently stands at $1.79 million, down from $2.27 million the year before. House members' current median income is $622,254, down from $724,258 in 2007. Fifty lawmakers have an estimated wealth of at least $10 million.

"Generally speaking, members of Congress are wealthy by comparison with the vast majority of Americans. That doesn't mean they're immune to the effects of this ailing economy -- they're not," said Sheila Krumholz, the CRP's executive director, in a statement. "But they are much better positioned to withstand financial pressures than the people they represent."

Average Wealth of the World

Average Wealth of the World

The Wealth Distribution around the world is very much uneven. Just 2% people of this world own more than 50% of the world’s Total Wealth. Well, Yes. This is true. More than half of world’s total wealth is owned by 2% people of this world.

Here is a Wealth Distribution Chart on the World Map.

The Map shows the Per Capita Wealth in US $. The red area shows the Per Capita Wealth over $ 50,000. Which is highest. Countries like USA, Australia & Europe are in red. while countries like India are poorest among the wealth.

The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by UNU World Institute for Development Economics Research (UNU-WIDER).

The most comprehensive study of personal wealth ever undertaken also reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth.

One should be clear about What is “Wealth”?. Your Income is not your Wealth. In simple words, the wealth is something which you accumulate over the time. Wealth is the value of your assets minus the value of your liabilities. Say for Example if your Business Valuation is US $ 800,000 and your total debt/liabilities are US $ 200,000 than your Net Worth/Wealth is US $ 600,000. Wealth is calculated in the Net Worth in the United States means Assets – Liabilities.

According to studies, IQ and Wealth of Nations are sometimes correlated. However, there are few exceptions also.

Thus, the wealth is highly unevenly distributed in the world. And that’s why if you want to enter into the rich club than you should be the wealth creator. You should create and own Assets. You should create new wealth in the economy if you want to get rich and stay wealthy…

Average Wealth in Australia

Average Wealth of Australians

Wealth is always distributed unequally world wide. The wealth follows the principle of 80/20 means the 20% people around the world own the 80% of the total wealth in the world while the rest of the 80% in this world share just 20% of the wealth. I know that this sounds cruel but it’s true. And the logical reason behind it is The Compound Interest. The Compound Interest is so powerful over the time that rich get richer.

The first comprehensive survey of household assets, debts and savings has been released by the Reserve Bank of Australia in 2002.

The report results showed the median wealth of the average Australian household was $218,500. The most valuable non-financial asset of most households in the survey was their home.

According to the report, New South Wales and Queensland households were likely to have higher levels of wealth than other states predominately as a result of the boom in median property prices in these states.

In New South Wales the median household wealth was $265,000 in 2002, compared to a median household wealth in Queensland of $173,000 and a median household wealth in South Australia of $153,100.

Household wealth was also determined by stage of life, with households towards the end of their working life, perhaps not surprisingly, having more savings, greater equity in their homes and lower mortgages than younger families.

Other findings in the studies include:

•The average wealth of the wealthiest 10 per cent is about $1.8 million;
•The largest component of both assets and debt is property;
•Wealth is strongly associated with age. The median wealth of 55–65 year-olds was $444,000 compared to $8000 among 18–24 year-olds;
•University education is associated with substantially higher levels of wealth;
•Singles and single-parent households have the lowest levels of wealth;
•Pensioners are well short of the wealth that would enable them to live a ‘comfortable lifestyle’, as determined by the Association of Superannuation Funds of Australia;
•Even accounting for age differences, marriage and to a lesser extent de facto relationships, are associated with greater wealth;
•The affect of divorce on wealth differs between men and women;
•Children are associated with less wealth;
•Smokers are less wealthy;
•Drinkers are wealthier, unless they are heavy drinkers;
•Exercise makes no difference to levels of wealth.

Average Wealth of Canadians

Average Wealth of Canadians

According to the 2006 data,

The average Canadian is worth $142,900 — on paper, at least — as rising real estate values offset a rise in personal debt and last spring's stock market correction, Statistics Canada said Friday.

In its regular report on the national balance sheet, Statistics Canada said the nation was worth $4.7 trillion at the end of the second quarter, or $142,900 per person.

Here also the wealthiest 10% people own almost 90% of the total wealth and rest of the people share just 10% of the total wealth. This kind of un even distribution is every where. This is known as the 80/20 Principle of the Wealth means 20% people of this world own 80% of the total wealth of the world and the rest of 80% people share just 20% of the world’s total wealth.

According to the economists, the money is concentrated in fewer hands because of the compound interest. Because of the compound interest, the rich are getting richer and poor are getting poorer. Once you save & invest your money in some asset, the compound interest will start working for you and make you richer and richer day by day.

But you never save and invest your money, the compound interest will never work for you and you can never be rich. The wealthiest people own Assets like Businesses, Investments & Real Estate since generations and they pass on their assets to their following generations and that’s why they are getting richer and richer.

So now just tell me that, what is your average net worth? Is your net worth more or less than the average standards? But start acquiring assets as early as possible in your life to get rich.

Average Wealth UK

Average Wealth UK

The richest 2% of this world own more than 50% of the world’s total wealth. And the richest 10% of the world own more than 85% of the total wealth and assets of the world and the rest 90% people around the world share just 15% of the wealth in this world.

I know that it sounds cruel but it’s the sad truth.

If we discuss about the Britain Economy than in UK the average household wealth is US $ 126,832 per adult which is the third highest in the world after USA & Japan. Yes, United States has the highest net worth per adult in the world.

Those with assets of $500,000 could consider themselves to be among the richest 1 per cent in the world. Those with net assets of $2,200 per adult were in the top half of the wealth distribution.

Although global income was distributed unequally, the spread of wealth was more skewed, according to the study by the World Institute for Development Economics Research of the UN University.

“Wealth is heavily concentrated in North America, Europe and high-income AsiaPacific countries. People in these countries collectively hold almost 90 per cent of total world wealth,” the report said.

Researchers defined wealth as the value of physical and financial assets minus debts.

In India, the average wealth per adult is just US $ 1100.

However, the countries like India & China are growing very very fast since past decade and at this rate, soon they will be world’s one of the largest economies.

Average Wealth of Americans

Average Wealth of Americans

In the United States is considered as Net Worth. Net Worth is Calculated as Total number of Assets minus total number of liabilities. It means that what you own (Assets) – What you owe.

Say for Example, if you own a Car worth of US $ 300,000 and you have a car loan of $ 100,000 than your Net Worth is US $ 200,000. Thus, you have to calculate all of your assets and subtract all of yur liabilities from your assets.

The Wealth Distribution in United States is very uneven. Just 25% of the households of United States own total 87% of the Total Wealth according to 2004 data. And this is a very common phenomena worldwide.

Across all groups, the 2007 median net worth was $120,300 and the mean was $556,300 (guys like Bill Gates and Warren Buffett really mess things up).

Here are a few of the more interesting ones (2007 median data, 2007 dollars):
Current work status of head:

• Working for someone else: $350,100
• Self-employed: $1,961,300
• Retired: $543,100
• Other not working: $124,100

Race or ethnicity of respondent:

• White non-Hispanic: $692,200
• Nonwhite or Hispanic: $228,500

Housing status:

• Owner: $778,200
• Renter or other: $70,600

The easiest way to see how you stack up is by using CNN Money’s Net Worth calculator. I don’t know how fresh the data is, they only cite Nielsen Claritas as their source (with no date), but it’s good enough for our entertainment purposes. They offer two median net worth charts, one based on your income and one based on your age (the two charts are independent).

Age:

• < 25: $1,475
• 25 – 34: $8,525
• 35 – 44: $51,575
• 45 – 54: $98,350
• 55 – 64: $180,125
• 65+: $232,000

Income:

• < $25K: $1,250
• $25K – $49K: $34,375
• $50K – $74K: $168,500
• $75K – $99K: $301,475
• $100K – $124K: $301,475
• $125K – $149K: $644,100
• $150K+: $1,122,900

So now check that weather your current net worth is above the average standards or below it? Tell me that where do you stand in the above wealth averages of the Americans?