Give Me Back My Five Bucks a quest for financial independence
I often find myself wondering what the benchmark is for someone my age, in terms of net worth. I’m always curious about stuff like that – how much people are saving, how much they’re making at their jobs, and how much debt they have. Call me nosy, maybe. :)
Of course, net worth is a hard thing to measure, since everybody is different and nobody is really on the same level. For example, if somebody has been working full-time since high school, they will have a much better chance of having savings and a higher net worth than somebody who spent the majority of their 20′s in post-secondary school. However, look at those same people 20 years later, and maybe the outcome is reversed.
According to CNN Money, the median net worth for someone under 25 is $1,475, and just $8,525 for those 25-34. However, if you go by income, the median net worth for people in my income bracket is over $300,000. Gulp. The numbers are from the USA, but I imagine they’d be quite similar here in Canada.
Here is a quick run down of the CNN Money chart:
Net worth by age:
< 25 $1,475
25-34 $8,525
35-44 $51,575
45-54 $98,350
55-64 $180,125
> 65 $232,000
When I was 24, I remember talking to a co-worker who said she wanted to have a $100,000 salary by the time she turned 30, or a $100,000 net worth. Although I was able to increase my net worth by almost $100,000 over that time period (I started with over $20,000 worth of debt), I’m still $25,000 away from that goal. The same goes for a conservative estimate of my salary this year.
I haven’t made a net worth goal in a really long time, and I didn’t make one this year either. However, I do hope to crack that $100,000 mark by the end of 2013. :) That’ll still leave me far behind the median net worth income for someone with my salary, but I’ll get there soon enough.
While I don’t think it’s super useful to compare ourselves to our peers, it’s in our nature to do it anyway. And I do think that looking at our net worth compared to the national averages can be helpful in seeing where we are – and where we need to be in the future.
For me personally, I think by the time we reach age 30, instead of focusing on our net worth, maybe we should focus on creating financial stability, as well as these three goals instead:
- Setting aside at least 10% of our income towards retirement. Preferably more.
- 3 to 6 months worth of living expenses saved in an easily accessible emergency fund.
- No debt – other than a mortgage or student loan.
Your net worth isn’t just a measure of your wealth, it also represents the degree of flexibility you have to respond to unexpected events, opportunities, and needs that arise. This can be anything from dealing with a job loss, sickness, starting a business, going back to school, or even taking time off to go traveling. Having money in the bank keeps more doors open.
By keeping an eye on your net worth on a monthly or annual basis, you can keep track of your growth, and use those numbers to monitor your overall financial health. I use this blog to track my monthly progress, as well as NetWorthIQ.
I set myself two net worth goals a long time ago: I wanted to be worth $100,000 by age 30, and $1,000,000 by age 40. I never had a concrete idea of how I was going to make it happen, but those were my goals. I’m 28 now, and I’m on the verge of cracking $100,000, so maybe my net worth goal by 40 isn’t quite as lofty as it feels?
“For me personally, I think by the time we reach age 30, instead of focusing on our net worth, maybe we should focus on creating financial stability, as well as these three goals instead…”
I like this way of thinking, actually. My networth is really high for my age, but not for my income – like you. Plus it’s going to go down a lot since I’ll be spending a lot of it on my honeymoon and a bit on my wedding in 2013. I don’t have any numerical net worth goals, and don’t plan to set any…
I think over $300,000 if you’re between 25-34 is not unreasonable, especially if you plan to retire a millionaire. Sam wrote an excellent article on this a while back. I constantly check it out to make sure I am on track. http://www.financialsamurai.com/2012/05/14/the-average-net-worth-for-the-above-average-person/
Like so many things, it depends… I understand the urge to compare and get a sense of where you’re at, but no one is “average”, so it’s a bit of a false benchmark in my eyes.
I was training for my profession until I was 31 (no slacking, went straight through undergrad, MA and finished my PhD right on time, unlike majority of my colleagues). I likely had a negative net worth (didn’t keep track back then!) when I finished. Though I didn’t have much debt, I didn’t have much savings either. Things are brighter now, but I know I most likely won’t be retiring at 65, because a) I need to make up for some of that “lost” time (just in terms of savings/ compounding-not lost in terms of professional or personal development) and b) I love my profession and barring serious health concerns, plan to do it as long as possible.
While I happened to do a post on Net Worth today as well – it’s not a driving force for me at all. I would rather financial stability in a well rounded way then an arbitrary marker. As long as it’s postive, and going up – I’m happy.
28 and $16K+
Krystal, you scared me!! I saw the graphic and thought that it was suggesting I had a networth of $300,000 by the time I am 30. I had a mini-panic attack for a second. On the flip side, I think that having a networth of $8000 is extremely low. That’s the problem with our society though. We’ve all become about instant gratification and not enough about saving.
I probably would have a good net worth if our home value stayed up. It was going well even up until last year, but then a lot of homes went into foreclosure. It ruined our neighborhood and now I am technically underwater based on our perceived home value. Last year, I was close to about $50k, but I don’t really have a goal for this right now.
Net worth by income is a useless metric. It reminds me of the Millionaire Next Door (are you a prodigious accumulator of wealth?). It’s not unheard of to make $80,000 to $100,000 a year by the time you’re 30, and if you do that you’ll be in a great position to grow your net worth. But you’ll need time to make your money grow by paying off debts and building assets.
Individually, these are silly charts. If they were combined, the result might be useful.
According to my age, my net worth should be $180K. According to my income my net worth should be $1,250.
HUGE difference between those two numbers.
I had a similar question recently and I wasn’t able to get an answer really –
What is a reasonable goal (% wise) to aim to increase your net worth by in one year?
I’m 29, earn about $80K/year and my net worth is currently about $30K.
Thanks
D
Instead of aiming to increase your net worth by a certain percentage each year, it might be better to aim to save a certain percentage of your income instead. For example, before I became a freelancer, I aimed to save 35% or more of my income each year. I liked that kind of goal because no matter what my income level was, my savings rate stayed consistent to that.
Thanks for rehashing your post from moneyville July 2012.
It’s so true! She writes one article and then copies and pastes it to the other site. I get bored of the same articles a few months later.
I’m happy to hear that you read both Moneyville and this blog, but the majority of people don’t. Like I’ve said before, I like using the same research and same topics that I’ve previously written about on Moneyville because it’s relevant for readers of GMBMFB (who are mostly American and don’t read MV).
If you do see a post that looks similar to something you’ve already read, it’s pretty easy just to skip past it.
I don’t have set goals in mind with regard to age, but I do have milestones to my path to financial security. As you point out, this is a far better measure. The average person is screwed when it comes to saving….so comparing yourself to them is a huge waste of time.
Thank you so much for posting this! In December I both turned 30 and got a job that allows me to start saving a little over 10% of my paycheck per month. I wrote out my first check in a loooong time to my mutual fund. Looking forward to having that money saved for the future!
I’m 6 months away from being 30 and my New Worth is 5 figures in the opposite direction. My goal is to get my New Worth to 0 by 35, and then we’ll worry about increasing it.
I hear ya sister! I’m in exactly the same position, and a month from 30. I’m always envious of Krystal’s hard work but figure we’ll get there in the end!
Well, it is good to know that my networth is above the median.
Keep in mind that the net worth for your salary includes a lot of people who are a lot older than you. So “for your salary” is really not a good comparison.
Great article – I find it difficult to benchmark when the statistics don’t combine the two key factors that you mentioned (age / income). In my case, I’m in my late 20s and at $215k (income of apx $200k all in – although that has grown dramatically in the past few years). I try to monitor a few other numbers each year to help monitor my net worth, indirectly:
- Total Savings (and as a % of income)
- Total “financial savings” (savings less mortgage reduction)… and as a % of income. I find this relevant as my emphasis has been on investing vs repaying mortgage
In addition, I look at two variables to measure the inherent risk with what is driving the net income:
- Debt to Net Worth Ratio
- Debt to Income Ratio
And finally I look at an annual donations as a % of income ratio to try to keep that consistent.
before buying the house, did you think about how much of your total net worth was tied up in a single, illiquid asset? I’m always told I should buy some real estate, but that part scares me a bit …
I am turning 22 this month and just started working part time on August. I am not paying much attention to net worth right now because I have student loans. I am focusing on saving money to move out and retirement. I do not have any major expenses since I live with my parents so I save about 50% of my income towards my savings account. When I get a full time job, my main goal will be to pay off my student loans as fast as possible.
My net worth is embarrassingly high, but that doesn’t mean that I have a great deal of flexibility. Instead, it just means that my house has appreciated/has no mortgage – that’s not exactly a meaningful source of net worth. It could go down, it’s not liquid, etc.
But in terms of stability, it’s kind of my rock. It will allow me to live on a very low income if needed because my housing costs are so low.
The numbers seem low. I wouldn’t worry too much about net worth till age 30. I have a fairly high ne tworth but most of that is equity in a house so that number can really change to be much higher or lower. I am in my early forties. I would not want to have a mortgage at retirement!
Based on age bracket, I’m way ahead of the game, but when I look at the income chart I’m way behind. I feel like a lot of the net worth comes from owning property, which isn’t a priority for me right now (and actually may not ever be a priority).
I agree that the focus should be taken off the numbers, and aimed more toward financial stability. I think we should add an increase in net worth over time as a facet of financial stability as well.
This confuses me a bit. I earn between 92- 100 k per year. Depending on whether i take unpaid leave for a month or two to enjoy some me time.. I just turned 30 days ago. How does one really calculate their networth.
They add in thier savings accounts values, rrsp values, etc against their debt.. But what about the equity in your property? Do i only include the equity ive built in my property or also the increased value of the proprty compared to what i paid and now owe?
It can be even trickier when u factor in a pension..if your job comes with one.
I have two pensionable jobs.
Rrsps 35k
House (money ive actually paid agaist the original debt/ purchase price of 282k, is 172k.)
So i equity of 172k in my house. The house is now worth 380k ( a modest estimate) that might give me an extra 100k in my networth calculation. Savings 10k., i make really high mortgage pymts as i want to reduce the interest i pay to the bankers, So 172k+ 35k + 10k = 217k networth… Plus additional increased value of house (100k) = 317k. And i contribute to 2 pension plans ( at retirement gauaranteed income) vs defined benefit pension which pays u at retirement depending on the market which is so unstable. O i also purchased physical gold and silver as you never know how governments will screw up the value of paper money…. Add that to net worth too i suppose ive met the benchmark. But it doesnt FEEL like im worth 200-300k haha! I went to 1 year of college paid osap back and have been working since 21 ish.. I am fortunate ive got 2 good employer and clearly i am willing to work hard a i decided to work a second job to allow me more financial freedom. My goal has been to pay off the mortgage in 5 yrs. i bought in toronto in 2009, now i owe 120k. And i forgot i have 40k tied up in a new build house… Planning to upgrade.. I cant help but bear in mind how different this picture would or will look once i have kids.. If i have kids yowww!
Right now I’m a bit over what I should have for my age group but I have this goal of increasing my savings account by $100 000 within 2 years and to have a house/condo (depending on where I end up) paid off by the time I’m 30
I would like to have a million bucks (as my net worth) by the time I turn 40. Based on our current income, it is actually impossible. Must increase income!
Alice
Wow, only $8k net worth by 30? That seems so, so unreasonably low. Perhaps, I assume, due to student loans? I am early thirties and my net worth is sloooowly creeping up. Currently being a stay-at-home and not having a fixed income source means I need to be impeccably careful with my investments.
I just turned thirty 2 weeks ago, so I guess I’m on the right track. I don’t have any debt (no consumer debt, no student debt) except for our mortgage. I have a 9-12 month emergency fund. I’d like to have a little more in savings, but since I started off with 30K in student loans I feel pretty good about where I am.
Turned 30 six months ago, our total net worth is right around $350k and our goal is to reach a million by age 34. It takes a lot of hard work and luck but the real advantage comes from starting young.
I’m with Robb, net worth by income is a useless metric.
That CNN Money chart is also useless. Only $200,000 or so by age 65 in net worth? That’s not very good and just around the poverty line.
Keep working (like you are) on increasing your net income and paying off debt. Net worth will take care of itself.
I’ve never had a concrete number in mind for net worth. But I’d say that by 30 I’d like to be increasing my net worth by at least $1,500 per month, and make sure that number is going up each year.
I’m 33 years old and have a net worth of $135,500. I don’t have any consumer debt, have a small car loan which I intend to pay off fully within in the next few weeks and a mortgage. I started saving young and always pay myself first when pay day comes.
27 net worth ~ $550,000
I was able to save $100k by the time I turned 25, and I’m worth about $230k now that I’m 30. I was able to do this because my parents paid for all my educational expenses (no student loans!) and by living with roommates and not caring too much about material possessions. Now I’m hoping to get to $500k by 35, and I think it will require a significant increase in income — I can’t cut back as much now that I’m older and my friends have a higher standard of living.
Maria, it won’t take any increase in income at all. Your current net worth only has to grow at just over 7% annually to get you there without any cash inflows. If you can save something each year then it seems like you would not have any issues.
I see that a lot of the people commented on this article are way ahead of the game for mid to late 20′s. Just a word of cautious, the growth of net worth during 30′s may be slow or painful due to having mortgage, kids, etc. If you think you’re ahead of the game now in your 20′s, please don’t stop working on it. 30′s is a tough decade for most of us.
Very good point! It’s definitely a lot harder to save when you’re responsible for raising another human being.