Judging Your Income Abilities In Private: A Quick Reference Guide

by Paul Kindzia in Happiness, Personal Finance

June 5, 2020

You say you want financial freedom.  You say you want a comfortable retirement.  You say you want to experience the finer things in life.  So you want to be a wealth builder do you?  Well let me remind you that “wealth” is relative to yourself and your own expectations.  What a business titan determines wealth to be and what you need to live a life of financial freedom can mean two totally different things.

Wealth is simply having enough money to Control Your Time And Freedom and Live A Lifestyle That Is Appropriate To Your Own Desires.  That means different things to different people.  And as general rule, we know we are in the ballpark of reaching that when we have accomplished three main goals financially;

1. Accumulated capital at a level that is about 20 times your annual earnings needs (so you could just live off of your money).
2. Established a robust emergency fund
3. Eliminated all of your debt.

One of the quickest ways to increased wealth is to have strong earnings.  When we have strong earnings and live below our means, we can accumulate excess capital that is geared towards our long term financial freedom.  We also know that a savings rate that gives us a reasonable shot at solid wealth accumulation is about 20% per year of our earnings.  So let me ask you this, which do you think is easier to do, save 20% when you make $75,000 a year or save 20% when you make $300,000 a year?

It should be easier to save more when we make more (not that all big earners do, because they don’t).  It’s just that at least we have a lot of financial resources to make decisions upon.  So if we want to accumulate the most capital, it only makes sense that we work hard to drive up our earnings which is one thing that is in your control (even though many don’t want to acknowledge that).  High earners have figured out how to become high earners (as they didn’t get randomly selected out of the phone book).  Somehow they figured out how to get promoted, or start a company, or participate in a higher paying profession, or obtain a high paying skill/talent more than others have.

So, if you want to take an honest look and judge your own income abilities in private (with nobody looking or judging you), then use the following as a rough estimate of your abilities to earn money compared to others.  These numbers have been accumulated from estimates based upon IRS Data, US Census Bureau data and the Economic Policy Institute through 2013/2014 data periods;

This is based upon household income

• Income < $12,401, Bottom 10%
• Income > $20,900, 20^th Percentile or top 80%
• Income > $40,187, 40^th Percentile or top 60%
• Income of $51,939, 50^th Percentile or top 50%
• Income > $65,501, 60^th Percentile or top 40%
• Income > $105,910, 80^th Percentile or top 20%
• Income > $150,000, 90^th Percentile or top 10%
• Income > $159,200, 91^st Percentile or top 9%
• Income > $168,400, 92^nd Percentile or top 8%
• Income > $177,600, 93^rd Percentile or top 7%
• Income > $186,800, 94^th Percentile or top 6%
• Income > $196,000, 95^th Percentile or top 5%
• Income > $243,300, 96^th Percentile or top 4%
• Income > $290,600, 97^th Percentile or top 3%
• Income > $337,900, 98^th Percentile or top 2%
• Income > $385,195, 99^th Percentile or top 1%
• Income > $34,739,488, 99.99^th Percentile or top .01%

Now I’d like to caution you against comparing yourself too much to others.  Life is not a contest of how much you rank against a neighbor.  Life is about the pursuit of happiness and living a fulfilling and joyful life on your own terms.  It just so happens that many people desire more financial wealth as they pursue happiness and fulfillment during their life journey.

Thus, this exercise is one that should be done as an honesty check to see if we are maximizing our abilities or at least aligning our behaviors with our real goals and objectives that we selected.  It’s one thing to say (or dream) about being wealthy.  But then we need to move past saying and dreaming about it and move on to the steps necessary to make our dreams and goals a reality.  One critical step to that objective is to achieve the resources necessary to make that happen.

What we also know is that things are a trade-off.  If you are working “only for the money”  still may end up in a happy place if you obtained financial freedom and were able to tell the rest of the world to “kiss off” (or something like that).  But more work only done to chase more earnings may also keep you on a treadmill that moves you no closer to happiness and fulfillment.

This leads to a paradox because it reminds me of the old saying, “There is a lot of leisure at both ends of the social spectrum.”

Good habits lead to good behaviors.  Good behaviors lead to good decisions.  Good decisions lead to a good life.  Live by principles and choose wisely.