Curious what your thoughts are on Net Worth by the age of 30. There's obviously a big range here so I'll ask it this way:

1) Avg net worth for college educated 30 year old
2) Above avg net worth for college educated 30 year old
3) Exceptionally above avg net worth for college educated 30 year old (realistic though. .. not counting outliers that have already made millions by 30)

*caveat* i realize that mortgages also play a big role in skewing down this number, so feel free to answer it in terms of total assets. . .

TIA

1. 35k
2. 100k
3. 500k

quote:

---

*caveat* i realize that mortgages also play a big role in skewing down this number, so feel free to answer it in terms of total assets.

---

Mortgages would play a role in total assets but not net worth (unless the property substantially appreciated or depreciated since purchase). Anybody can accumulate a lot of assets by taking on debt.

[This message has been edited by Fightin_Farmer (edited 4/10/2012 1:04a).]

quote:

---

quote:

---

*caveat* i realize that mortgages also play a big role in skewing down this number, so feel free to answer it in terms of total assets.

---

Mortgages would play a role in total assets but not net worth (unless the property substantially appreciated or depreciated since purchase). Anybody can accumulate a lot of assets by taking on debt.

---

Wait, what?

quote:

---

Wait, what?

---

If the asset equals the liability for that asset, then there is no gain in net worth.

Student loans are an interesting factor as there is no offsetting "asset".

Do you include retirement accounts in your net worth calculation?

imho when calc your net worth you take what you owe on your house and a VERY conservative estimate on what your house is worth. If you want extra accuracy, you can subtract 6-10% for likely closing costs... but I just take a conservative estimate.

why wouldn't you take student loans (DEBTS/LIABILITIES) and retirement accounts (ASSETS).

sometimes people over think things....

Total Assets (Conservative home value, conservative car value, retirement account, savings, checking, any other investment account balances)

-

Total Liabilities (Mortgage, car loans, credit card balances, student loans, any other loans)

=

Net Worth

[This message has been edited by OldArmy07 (edited 4/10/2012 9:51a).]

Mint.com has me at about 89k at age 26..... Which makes me think Derek's numbers are low.

Here's a couple of formulas I found a while back that work for any age but use income as the primary factor:

For those without student loans:

quote:

---

Age * Pre-tax income / 10

---

For those with student loans:

quote:

---

(Age - 27) * Pre-tax income /10

---

OldArmy07 + 1

Ragoo - unfortunately most aren't as diligent as those on this board...

I would think most college educated 30 year olds have above a 35k net worth, but maybe i am wrong.

Must be a lot of credit card millionaires out there.

Agstudent - those formulas don't work for young people with accelerating incomes.

quote:

---

Age * Pre-tax income / 10

---

This is what I use as a goal... sizable raises or a spouse going back to work makes it hard to achieve instantly, but keeping it as a target and always trying to attain it within 1-2 years (after a major income increase) is a good rule of thumb in my honest opinion.

BTW - I have a small student loan, but don't do the "- 27" variable....



Compared to the OPs numbers:
I'd say more like
~75K
~250K
500K+

but I could be too generous


[This message has been edited by edwardsk2003 (edited 4/10/2012 9:47a).]

Ok, so theoretically, lets say theres a married couple at 30 where both make 50k/year.

(30*100k)/10= Net worth of 300k?

[This message has been edited by Wrec86 Ag (edited 4/10/2012 10:06a).]

yes... why the 'WTF face icon' ?

The first time I saw it was in The Millionaire Next Door... it describes AAW (Average Accumulators of Wealth) vs UAW (Under Accumulators of Wealth)

No idea when the equation first came about, but it seems to me to be a good rule of thumb.

[This message has been edited by edwardsk2003 (edited 4/10/2012 10:22a).]

^^
ha, you must be kidding. I dont think that is possible unless you enjoy being frugal and miserable.

I don't know... in my situation it seems pretty lofty, but I'm 25 and I feel like it's more applicable to 30+

but I could be way behind trying to play catch up.

The age x income /10 formula comes from the Millionare Next Door. It's something nice to strive for as you get older, but its very unrealistic for someone 5-10 years out of school.

Depends a lot on the market. You are looking at people who are only about five years out of college.

If you turned 30 this year, you've seen most of the money that you've invested in that 401k give pretty good returns.

If you had turned 30 in 2009, not so much.

Grad school loans can greatly skew results as many 30 year olds aren't far removed from grad school (my wife falls into this).

Ragoo - I'm ahead of you at age 25, but unfortunately I would say I overestimated if anything.

[This message has been edited by OldArmy07 (edited 4/10/2012 7:19p).]

I am just surprised. I don't feel 'wealthy' at all and couldn't imagine being only at 35K.

quote:

---

Total Assets (Conservative home value, conservative car value, retirement account, savings, checking, any other investment account balances)

-

Total Liabilities (Mortgage, car loans, credit card balances, student loans, any other loans)

=

Net Worth

---

Basically, yes.

Avg college educated person isn't saying much. He didn't say Harvard, Texas A&M, Texas Tech etc.

Lots of people are renting and still paying off debt (non car payments/mortgages) when they are 30.

and lots are:
-purchasing too much for their house
-partying a lot
-leasing or changing cars every few years
-not putting money away for retirement
-using credit cards for shopping (clothes for girls electronics/hobbies/etc for boys)
-spending a fortune on their kids (on credit?)


According to cab above, not doing those things, makes you "frugile" which equals miserable


[This message has been edited by edwardsk2003 (edited 4/10/2012 11:32a).]

quote:

---

According to cab above, not doing those things, makes you "frugile" which equals miserable

---

You are right, that is exactly what I said. I was merely stating that it was almost imposible for a couple with $100k income (pre-tax) to have a net worth of $300k at the age of 30. Don't confuse not being frugal with being financially irresponsible.

[This message has been edited by cab595 (edited 4/10/2012 11:42a).]

my apologies, i was a little harsh and sarcastic.

Case Study:
Let's say a person and his/her spouse are 25.

In 2007 both make 45k

let's say 8-10% of salary 1 goes into 401k (4k) and 100% of salary 2 goes into roths and savings (40k post taxes)

after year one - you're at ~44k

year 2 (2008)
44k + 4k(9%) + 40k + 2k(5% growth) - 90k

year 3 (2009) maybe a raise, so 47k each.
90k + 4k(9%) + 42k + 4.5k(5% growth)= 141k

year 4 (2010 - 47k each)
141k + 4k(9%) + 42k + 7k(5% growth) = 194k

year 5 (2011, 50k each)
194k + 5k(10%) + 44k + 10k(growth) = 253k

~253k - probably off a bit b/c of fast math...

If those two individuals are teachers, they are only working ~10 months a year. So either you have to put a monetary value to that vacation time OR they need to get jobs for 2 months to make up for the lost income. It hurts to say it, but teachers mostly work about 9.5-10 months and get paid accordingly.


MGS's comment + 1 - market is a key factor. After 5 years and assuming only 5% return each year, the above example gets 23k from market equating to almost 10% of the accumulated wealth. Not surprising, compounding interest/return is powerful.


This also assumes:
No company matching for 401k contributions...
No bonuses
No financial gifts from family/grandparents


[This message has been edited by edwardsk2003 (edited 4/10/2012 12:47p).]

quote:

---

I was merely stating that it was almost imposible for a couple with $100k income (pre-tax) to have a net worth of $300k at the age of 30.

---

Assuming graduation at the age of 22, they would need $37500 in wealth accumulation each year. Not really that hard to do if you are making $100k. Now realistically, they wouldn't be making that $100k right out of school and still making it at age 30, but they could easily save more than 37500 closer to 30 to make up for saving less right out of school.

quote:

---

In 2007 both make 45k

let's say 8-10% of salary 1 goes into 401k (4k) and 100% of salary 2 goes into roths and savings (40k post taxes)

---

Two 25-year-old living off of $40k is not even remotely feasible.

Rent: $1200 bare minimum.
Util/Cable/Internet: $225 minimum
2 cell phones: $150
Monthly Gas: $350
Monthly Groceries: $250
Lunch @ $7/day each: $420/month
Car Ins for 2: $180 assuming clean record

That's $33,300 in BARE MIMIMUM expenses.

Hopefully you own both cars free & clear, don't play golf, buy clothes, go on vacations, buy christmas/birthday gifts, like to go out to dinner, go on dates, go to concerts, go to sporting events, meet friends at happy hour, etc.

I'd save 300-400 by living somewhere cheaper and save 325 by taking my lunch 4 days a week. That's ~675 for dates (eating out), clothes, and vacations.

I think many people get out of college a lot don't have car payments. They get their first job, buy a car, tying 300-500 bucks up a month.

Case in Point: http://texags.com/main/forum.reply.asp?topic_id=2271594&forum_id=57&page=last#r34891968

quote:

---

Car: 3.69%, Owe ~35K, payments at $635 (72 month loan)
Yes I was REALLY stupid and bought an expensive car even though I had student loans, I regret this. I have come a long away and getting smarter with my $ (IRA, mutual funds, etc)

---

If i was making < 50k / year I wouldn't play golf, it's a relatively expensive luxury (as is hunting, fishing, shooting guns, and all the other 'hobbies' we have).

There is no right answer, but we live in a society of consumption and instant gratification. It's all about when/where you want to spend your money. Spend today or spend tomorrow.




[This message has been edited by edwardsk2003 (edited 2/18/2013 5:08p).]

quote:

---

Two 25-year-old living off of $40k is not even remotely feasible.

Rent: $1200 bare minimum.
Util/Cable/Internet: $225 minimum
2 cell phones: $150
Monthly Gas: $350
Monthly Groceries: $250
Lunch @ $7/day each: $420/month
Car Ins for 2: $180 assuming clean record

---

Yes, if you're ok with spending too much on a lot of things.

If you're two 25-year-olds stuck on $40k/year, it's time to cut back the expenses big time. I'd even drop cable for awhile.

Rent - depending on the area, you can do WAY better
Get cheaper phones - $150/month is crazy
Live closer to work - $350/month on gas is crazy
Take your lunch to work
Get liability only on car insurance