What should a "typical" middle class couple "have" by age 40?

[Squeezing Pennies]

Yes there are a TON of variables. No way to account for them all. Too many income amounts, bills, COL, etc... to account for.



What types of savings/investments/property, etc... would you GENERALLY say a couple with kids should have or strive for by age 40?


Dont need a solid $$$ as everyone is different. But what is a good "goal"?



This will ofcourse be "flavored" by your own situations.

[maat55]

The Millionaire Next Door has a formula:

Multiply your annual income by your age and divide by 10.

If you make 50,000 at forty, 50,000 x 40 = 2,000,000.00 divided by 10 = 200,000 is what you should have.

[project15]

My personal goals are property owner and at least $100k in savings (retirement or other). I will be a property owner in less than a month at 24 and will be working toward the $100k after that. Of course, the $100k should probably be $250k, but you have to start small ;-)

[MonkeyMama]

I like David Marotta's advice on the subject:

http://www.savingadvice.com/blog/200...net-worth.html

Which would say, at 40, you should have 3-4 years of annual "expenses" saved up.

I like thinking in savings in terms of "annual expenses" instead of "annual income."

Likewise, if you are ahead or behind, it gives you a good guideline of a direction to move towards.

Of course I think this is rather vague as it focuses more on retirement savings than anything else. Refers to savings/investments.

(I think it is largely similar to the MMND formula, except it accounts for you would have way less early on and way more later on...)

[maat55]

Originally Posted by project15

My personal goals are property owner and at least $100k in savings (retirement or other). I will be a property owner in less than a month at 24 and will be working toward the $100k after that. Of course, the $100k should probably be $250k, but you have to start small ;-)

250k at 40 will be pretty good, go for that number.

[Exile]

IMHO having anything at age 40 is what you should have by age 33 or age 51: Assets that exceed your liabilities, a long range plan to keep things that way, and the will to follow through.

After all, what is "40" but an artificial number anyway?

[disneysteve]

I think both Money and Kiplinger have done articles about "how do you stack up?" in the past year where they give guidelines for how much you should have saved based on your age and income. If you search their sites, you may be able to find it. I'll post it if I come across it.

[ea1776]

Originally Posted by maat55

The Millionaire Next Door has a formula:

Multiply your annual income by your age and divide by 10.

If you make 50,000 at forty, 50,000 x 40 = 2,000,000.00 divided by 10 = 200,000 is what you should have.

I like that formula too, but keep in mind, that this is how they define "P.A.W."s in the book (Prodigious Accumulator of Wealth), or wealthy individuals.

Here is more information on that excellent book:
The Millionaire Next Door - Wikipedia, the free encyclopedia

Here is a calculator for that equation, with more info on how you stack up:
http://www.banksite.com/calc/wealth

I'm 25, and according to the equation, I am not a P.A.W.....

YET!

A really cool equation would be to figure out what percentage of your income you would need to save, at what rate-of-return, and for how long... to "catch up" with the Millionaire Next Door P.A.W. equation. Any takers?

[stressedmama]

maat55 - The calculation you mentioned from the Millionaire Next Door... the amount one is suppose to have after doing the computation you provided, does that include home equity?

[ea1776]

Originally Posted by stressedmama

maat55 - The calculation you mentioned from the Millionaire Next Door... the amount one is suppose to have after doing the computation you provided, does that include home equity?

Yes. Non-liquidable assets, like home equity / 401(k) / etc. count towards total net worth.

[safari]

My assets are at $530,000 (if I count the equity, which is about $300,000), so I guess I am doing pretty good for a 32-year old.

[Snave]

Originally Posted by ea1776

I like that formula too, but keep in mind, that this is how they define "P.A.W."s in the book (Prodigious Accumulator of Wealth), or wealthy individuals.

Here is more information on that excellent book:
The Millionaire Next Door - Wikipedia, the free encyclopedia

Here is a calculator for that equation, with more info on how you stack up:
http://www.banksite.com/calc/wealth

I'm 25, and according to the equation, I am not a P.A.W.....

YET!

A really cool equation would be to figure out what percentage of your income you would need to save, at what rate-of-return, and for how long... to "catch up" with the Millionaire Next Door P.A.W. equation. Any takers?

Do not use this formula if you are young like you are. It makes no sense at all. Let's say you are 22 years old and just got out of college and got a job making 35K a year. By this formula, you should have over 77k. That is ridiculuos.

[maat55]

Originally Posted by ea1776

I like that formula too, but keep in mind, that this is how they define "P.A.W."s in the book (Prodigious Accumulator of Wealth), or wealthy individuals.

Here is more information on that excellent book:
The Millionaire Next Door - Wikipedia, the free encyclopedia

Here is a calculator for that equation, with more info on how you stack up:
http://www.banksite.com/calc/wealth

I'm 25, and according to the equation, I am not a P.A.W.....

YET!

A really cool equation would be to figure out what percentage of your income you would need to save, at what rate-of-return, and for how long... to "catch up" with the Millionaire Next Door P.A.W. equation. Any takers?

I'm not sure I will reach PAW status, but I've got a reachable goal that I can live with. It should be close.

[maat55]

Originally Posted by Snave

Do not use this formula if you are young like you are. It makes no sense at all. Let's say you are 22 years old and just got out of college and got a job making 35K a year. By this formula, you should have over 77k. That is ridiculuos.

I wonder what year is a good year to use the formula.

[noppenbd]

Originally Posted by maat55

I wonder what year is a good year to use the formula.

I think it is more of a rule of thumb/guideline than a "pass/fail" criterion. The MND formula is a linear approximation of a curve that is exponential (the more wealth you accumulate the faster it grows). So, back of the envelope I would say if you are destined to be a PAW you should be targeting the halfway point of your asset accumulation years to meet the guideline. My own projections show somewhere around age 40 to be a PAW.

[tifnglen]

Yes the formula is skewed. At 18, I moved out of the house and went to college. I made about 10000/year. I was supposed to have 9000 saved JUST to be an AAW. For PAW, I would have had to have 36000 saved.

[aida2003]

Gee, we're only Average Accumulators and I thought we're doing great . Well, I'm fine because if we were more aggressive savers and investors than we're now, we'd deprive ourselves of some small indulgences and/or I would worry more about the stock market and not sleep well at night.

[Ima saver]

Here I thought I was just a grandma, but I am also a PAW!!

[gamecock43]

deleted

[aida2003]

Originally Posted by MonkeyMama

I like David Marotta's advice on the subject:

http://www.savingadvice.com/blog/200...net-worth.html

I found this interesting, but I missed a little bit more of elaborate explanation about annual spending. Does he refer to 'this number' times your CURRENT spending? E.g. we invest in taxable accounts + save. It seems like a cash out as if spending. What about mortgage payments and childcare costs? Then there will be healthcare insurance costs once retired.

I like the concept though.