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Calculating Your Income And Wealth Potential

    Over your lifetime you will earn a great deal of money. You may be surprised when you look at just how much you will earn over a lifetime. Your wealth and income potential is a combination of not only the amount you will earn over your lifetime, but what you would have if you could save and invest everything you make. Obviously that is not possible, but it does give you a different perspective.

    Here is a hypothetical example of what I am talking about:

    This individual is currently earning $50,000 a year and is 35 years old, his income is increasing at 3% and the potential investment rate of return is estimated at 6%. Taxes are not considered. He plans to work until he is 65.

    This individual will earn about $2,378,771 during his working years. This number represents the “income potential”. Had he been able to invest every dollar he made during that time at 6% he would have about $5,858,671. This number represents the “wealth potential”.

    Wealth potential may be one way to calculate damages in wrongful death cases relative to human life value. This calculation simply applies a given rate of return or opportunity cost to the amount that would have been earned had the person survived. While you most likely cannot afford to invest everything you earn it is an interesting way to look at your money. After you determine your income and wealth potential ask yourself if the money you expect to have at retirement makes sense compared to how much will actually go through your hands.

    If you would like for me to calculate your income and wealth potential for you please give me a call and I can do it over the phone in less than one minute. Your income potential is simply inflating your current income by the amount your income has been increasing from year to year.