Neat net worth formula - are you on track?

[Ima saver]

I agree, I think the older you are, the closer you come.

[JanH]

Originally Posted by Ima saver

I agree, I think the older you are, the closer you come.

Rats. I've got a lot of work to do on this.....lol.

[Ima saver]

You can do it. My savings have really improved the last 6 or 7 years! I usually use my husband's age when I figure these things out, since he is the one that "might" retire someday.

[disneysteve]

Originally Posted by meaghanchan

As a linear equation, it assumes you will save 40% (yes, 40%!!) of your gross income every year, year in and year out, and then put it under your mattress, or a savings account earning 0.

Most retirement calculators take into account that you're putting your money into investments, and with compound interest and a decent return, you don't need to save anywhere close to 40%.

I think you are absolutely right. Savings grow exponentially (assuming the market cooperates). In 2006, our net worth increased by 48%. The amount of the increase was equal to about 58% of our income for the year.

So looking at that formula now as compared to just one year ago, we get a very different answer.

[dvcgirl]

Interesting, but I agree that it's definitely not going to be truly accurate for those with large expected income increases up the road. We came out ahead of what it said, but we've had some large infusions of cash along the way to bolster our net worth. If we hadn't had those big bumps, based on this formula I'm not sure we'd be considered "on track". And the way that we save (we'll save 42% of our gross this year)....if we're considered in trouble, there isn't much hope for anyone else.

So, I say take it with a grain of salt.....

But thanks for passing it along Steve.