Your Household Net Worth and Rate Yourself Against the Rest!

[feh]

Yes, most people ends up with raises and promotions so average would be the best. This equation is suppose to test how well people retain their earnings and how well they invest. People are severely punished if they spend every dime they make on interest and fun.

Wife and I are both 48...I have no idea what our lifetime (and therefor average per year) earnings have been.

[dawnwes]

Curious about the house.

Did you buy it for a low amount but the area has gone up so much that it is now worth that much? That would make for going up the net worth scale quite quickly.

Our last house in SoCal was purchased in 2000 for $250K. By 2004 it was worth $600K. I guess you could call that a good investment, but it was not a planned out or smart investment choice on our part, we just needed a place to live.

Dawn

The annual net worth summary!

This year, lets add an equation in there.

This was developed by myself today due to boredom so it's not the end all be all! This is actually extremely hard to give a grade to. If your household income is too low, then you are naturally at a disadvantage(due to minimin amount of money required to live). Also if you have worked a really long time, your 401k's yearly earnings can surpass what you make by 10x..but that's why we call you the financial gods

To calculate net worth, add up: (House, Car, Jewelry, 401k, Cash, CDs, Bonds, Stocks, Business' Worth) - (Total liabilities).

Grade: Total Assets/(#years worked X gross income per year).

>100% you are a financial God!
80%-99% A+
65-79%: A
60-64%: A-
55-59%: B+
50-54%: B
45-49%: B-
40-44%: C+
35-39%: C
30-34%: C-
25-29%: D+
20-24%: D
15-19%: D-
<14%: F


Mine:
31yo

Assets

House: 670k
401k: 105k
Car: 38k

Liabilities:
80k mortgage

Income from 7 years: 850k

(813k-80k)/850k = 86%, A+

[Singuy]

Curious about the house.

Did you buy it for a low amount but the area has gone up so much that it is now worth that much? That would make for going up the net worth scale quite quickly.

Our last house in SoCal was purchased in 2000 for $250K. By 2004 it was worth $600K. I guess you could call that a good investment, but it was not a planned out or smart investment choice on our part, we just needed a place to live.

Dawn

It's about what your house is worth today. Due to the fluctuation of the housing market and the ability of it dipping down, I would say you just got lucky(and luck can be part of all this). Plus your location is ideal therefore the property value increased.

The equation is about wealth retention but also grade you on how well you make investments. The grades are curved. It is really hard for people to make their salaries and maintain a net worth over 65%(tax alone takes 20% of most household's pay). But you can have people who are smart about their 401ks, investments, businesses, houses, etc etc that can increase their net worth beyond what they make/year.

[TBH]

So your Net Worth is 507k. How long have you and your spouse worked? Maybe 45-50 years between the two of you? How much $ estimated have you guys made in your careers during that time?

Singuy's formula seems to be a grade on wealth retention.

Okay, I think we've earned around $1 million total in our lives. Spouse has been working for 29 years but earned very little for most of that time. I've been working for 17 years but earned very little for part of that time.

So that means we're at about 50% and we get a B. I'm pretty happy with that.

[rennigade]

31 years old

Score: A


I didnt include my car since I do not consider it an asset. Even if I did include it...id still be in the A%.

[scfr]

Assuming when you say gross income you are talking about earned income ... so, 75% (an A according to Singuy's chart). I had to estimate DH's pre-marriage gross income.

[TBH]

I didnt include my car since I do not consider it an asset.

Yeah, I don't include my car or any personal possessions.

[dawnwes]

I don't really know all the exact details but we are somewhere around the 50% mark....so, a B.

I am staying at home right now and we have 3 kids. Our retirement is well funded (401b for me, 401k for DH, plus various annuities and IRAs.)

However, the college years have not hit yet! Ask me then, we may sink down the rating scale!

Actually, our goal is to buy a less expensive house and have me go back to work when the middle child enters college. So, we may be ok.

Dawn

[Singuy]

@ Reggie
I'm not sure how Singuy accounts for married couples in his proposed equation. How much have you and your husband made in 42 years? Assuming you've made 3,570,000 for example you'd be in the 36.4%.

A net value of over a million with no debt in your early to mid 40's seems really good to me.

Wealth retention and sound investments are not easy. Depending on how one live their lives, 1.3 million retained in 20 some years may sound like a lot to someone making 50k/year, but may not be all that impressive to people making 300k/year.

For example, if someone makes 200k/year(before tax) but only spends 30k/year to live and the rest are invested or saved, then this individual may end up with 2.5 to 3 million after 20 years(and this is after tax money)...and with that 2.50-3million, if 1/3 of that are investment netting a good 5% return, then this person may even have MORE net worth..and eventually will hit over 100% on the rating scale.

On the flip side, if this person makes 200k/year and spends 120k/year on non-investment related things such as interests or expensive vacations..whatever it may be... , then this person may be lucky to have a net worth of 500k after 20 years.

Anyone's rating may be shifted throughout their entire life. People with student loans may have a net worth of -60k..it doesn't mean they are a failure..lol.

But if you have a net worth with <15% retained at nearing retirement age, then perhaps you need to massively change your ways ASAP.

It's about buying assets, not liabilities..and this is what my equation rewards. Of course it's all made up by myself so it's not a gold standard or anything

[disneysteve]

(#years worked X gross income per year)

I'm not sure what you mean here. I've been working since I was 28. I'm 50 now. My income has varied quite a bit during that time so what figure would you have me use here - my current income? Some type of average (which wouldn't really give you accurate info)? Or something else?

[Singuy]

I'm not sure what you mean here. I've been working since I was 28. I'm 50 now. My income has varied quite a bit during that time so what figure would you have me use here - my current income? Some type of average (which wouldn't really give you accurate info)? Or something else?

Average, basically total amount of money made since you started work.

[corn18]

Wealth retention and sound investments are not easy. Depending on how one live their lives, 1.3 million retained in 20 some years may sound like a lot to someone making 50k/year, but may not be all that impressive to people making 300k/year.

For example, if someone makes 200k/year(before tax) but only spends 30k/year to live and the rest are invested or saved, then this individual may end up with 2.5 to 3 million after 20 years(and this is after tax money)...and with that 2.50-3million, if 1/3 of that are investment netting a good 5% return, then this person may even have MORE net worth..and eventually will hit over 100% on the rating scale.

On the flip side, if this person makes 200k/year and spends 120k/year on non-investment related things such as interests or expensive vacations..whatever it may be... , then this person may be lucky to have a net worth of 500k after 20 years.

Anyone's rating may be shifted throughout their entire life. People with student loans may have a net worth of -60k..it doesn't mean they are a failure..lol.

But if you have a net worth with <15% retained at nearing retirement age, then perhaps you need to massively change your ways ASAP.

It's about buying assets, not liabilities..and this is what my equation rewards. Of course it's all made up by myself so it's not a gold standard or anything

I like your equation. And scorecard.

[scfr]

Average, basically total amount of money made since you started work.

I used "Taxed Medicare Earnings" from our Social Security Earnings Records.

[feh]

Interesting thread, although I wouldn't place too much emphasis on your "grade".

For example, for those w/ significant investments, I'm sure their grade took a major hit from mid 2007 to early 2009, and it wouldn't necessarily have had anything to do with their behavior.

There are a whole lot of things that are gonna affect that equation, many of which are not under your control.

[Singuy]

Interesting thread, although I wouldn't place too much emphasis on your "grade".

For example, for those w/ significant investments, I'm sure their grade took a major hit from mid 2007 to early 2009, and it wouldn't necessarily have had anything to do with their behavior.

There are a whole lot of things that are gonna affect that equation, many of which are not under your control.

Yup, and most people's grade can go up or down depending if they want to give their child a free ride through college or not...so the grade system is just for fun.

I think the grade system works best for people near retirement age, or for people who just started with their careers...basically times when there are no major life events that require lots and lots of money.