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The value of money and what it means to you

Creator: Meiyjhe July 6, 2017 3:25am
Meiyjhe
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Hello everyone,

I'll start off with a little story. My father works at a shop and he often liked to remind me the value of money. He told me that money should be compared with how long you would have to work for it in order to get it. Each time a fantastical number would pop up during a movie or a show he wanted to remind me how much this number truly means and how many months you would have to work for it. During my childhood, of course, I was naive enough to believe that I would be the exceptions; I would be one of the few that manage to get rich at the age of 18. I was a big fan of gameshows and always hoped that I would be able to win one and be settled for life. The funny thing is however, is that I found the prizes very weak. 1k to 10k seemed like low numbers to me.

Recently I had my first job that was in my potential future field of work. It was paid like an internship, but it still made me think about how I wish to live in the future. This gave a rise to a question I have had in the past as well, and that is: What is the economical value of a human life?

As I am a statistics nerd and love calculating things like these, I was doing my best to figure out how much the average person would earn a year and how much they earn in their entire life, compared to what I would likely get as I will have completed a master in 2 years. For this I used to averages: a human life lasts 80 years and the average net paycheck (in the Netherlands) is about 1.666,- a month. So I wanted to calculate how much an entire life would be worth, so I assumed that 1.666,- would be earned every year in their life. In the early years in materialistic value from others as well as some bonuses that would be earned later to compensate for the lower 'income' in the pre-working phase of life.

Even though the calculation is a very simple one, the end result was very surprising to me: The average Dutch person earns 1.6 million euros in their entire life. This was surprisingly low to me as millions of euros are often talked about lightly in media, let alone anything below that.

So I went a step further and wanted to investigate how much in our lives we spend on necessities and how much we can potentially spend on leisure. Thus I started off with the biggest investment anyone will have in their lives and that is the roof above our heads. The average person will pay about 200k for a household in the Netherlands. For convenience let's double this to include furniture, interest, any changes/reparations that need to be done to the household as well as the potential investment in a second household. Thus in the end about 400k in their entire life.

Then I wondered how expensive food is as well as other basic necessities such as electricity, water, clothing and such. Although there are no hard numbers on this, I live on my own with a student loan, So I made an estimate on how much the basics would cost. The conclusion I came up with was that it would be safe to say 12 euros is spent for basic necessities every day. Resulting in 350k in their entire lives. Of course some pay more for clothes, food or other things, but this I would consider leisure rather than necessity.

Finally standard societal investments I thought should also make part of the calculation. These things include a car (+driving license), education (+college) and insurance. Most of these had very clear numbers on how much it would cost in their entire life, just that it differed a lot per education and the activity of traveling. Insurance was consistent at an average of 200 euros a month however, the rest I assumed would be about 100k in their entire life. This costs a total of 292k in an entire lifetime.

All in all with the bare minimum costs and a salary that is calculated as a high average, an average Dutch person would have about 557.000 euros in their entire life to spend as leisure.

I found this revelation very interesting and many others I shared this with agreed that they expected this number to be much higher. So I am curious, how much does money mean to you? Is the situation different in your country? Do you think some key component is missing from the calculation?

Please let me know and I hope that you have a wonderful day!
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Foxy Riven
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Fun stuff, love these kind of reasonings :)

Good to put this in perspective, precisely what everyone should be wary of.
If not, they fall in the "living from paycheck to paycheck"-trap, ending up with indeed as little as 550K for leisure.
Instead, people should focus on getting a higher income and turning it into even more. But that takes discipline and lowering living standards at the start.




For analytics' sake:

Dont know if you have taken it into account but:

- People work only about 45 years, retirement starting at 65/67from now on. Work starts, averagely, at about 21?
- 2100 is more like the average income, 1200 for retirement (800 independent, 1200/1400 employees, 1600 officials)
- You should take inflation into account(ECB aims for "close to, but not 2%)
- Also, income rises, depending on your income class. (0%-2% for the 99-percentile)
- Last but not least, what are you doing with your savings? Put them on a savings-account and earn 0.11%?
Buy shares of a fund and earn 3%-4% (beating inflation)?
- Oh yes, and pension savings, making sure you have like 70-80K extra when you retire (but meaning you have to save for +40 years for it, and miss out on that extra funcoupons until then)

Following the above,you should come to higher/more accurate calculation. Might do this myself but I'm off to sleep :p goodnight
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Meiyjhe
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Yeah what I did in my calculation was a high estimate. It assumes you work for your whole life including your premature days, which is of course not the case. This was to wave away possible income increase in the future as well as inflation.

2100 is the bruto income I believe and for my own calculations I excluded the tax part of the income.

Savings would be a nice touch but it is completely dependent on the person and the market, making for a complex addition.

The calculation was incredibly simplified of course so the true average result would vary. If I have the time and energy I might go deeper into it, although this is not likely lal. Have a late good night back!
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It is a very interesting subject touching several philosophic questions beyond the value answer.

Can't really bring extra info as it is highly different in our country (+ even more specific as I am in a capital city where rents are insane) but thanks for sharing your thoughts and data about this.

An extra interesting thinking could be the changing country before the end where the "relative" money value rise a lot because life costs are ridiculously low. (in fact some retired people already do that)
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Money is the key factor to get love, affection, respect, and value... Sad but it is the reality nowadays. So, yes to me it means a lot to earn money and I thing for everyone if they want to get above mentioned attributes in life.
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money rule the world.

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