Age and financial position calculation?

[Delilah]

I'm hoping someone can help me or steer me in the right direction.

A while back I read in a book or online somewhere an easy calculation that you can do to show where you should be financially by a specific age. So you work out your net value then compare it to this other calcultion to see if you are in a good position or need to put in some more work.

Now I know it really all depends on what you want for retirement etc etc but it was just a good little calc to show people who have nfi and put their position into perspective to get their **** into gear.

Any ideas?

 

[Dazz]

Net worth = Age x Income x 0.112


This was the refined formula from the Millionaire Next Door authors.


The factor used to be 0.1, but after about 10 years of tweaking, they arrived at 0.112


So, as an example, if you are 30, and on an income of 100K pa, to be "average", you should be worth ;

30 * 100 * 0.112 = 336K


If you are worth more than that, at that age and that income, apparently you are doing well. If less than that, you need to pull yer finger out.

 

[Rolf Latham]

Net worth = Age x Income x 0.112


This was the refined formula from the Millionaire Next Door authors.


The factor used to be 0.1, but after about 10 years of tweaking, they arrived at 0.112


So, as an example, if you are 30, and on an income of 100K pa, to be "average", you should be worth ;

30 * 100 * 0.112 = 336K


If you are worth more than that, at that age and that income, apparently you are doing well. If less than that, you need to pull yer finger out.

so I guess youd better get moving then

ta
rolf

 

[Delilah]

Ah great thank you Dazz. Got a friend that needs some encouragement to pull the finger out

 

[cimbom]

By "worth", is it assets minus liabilities or just assets?

 

[The Y-man]

By "worth", is it assets minus liabilities or just assets?

Net worth - so less liabilities.

No point having assets of $6m if you owe $7m.

The Y-man

 

[cimbom]

The results seem a bit high to be the "average" - it seems like more of an ideal.

At 26, I should apparently have a net worth of $169k. We have a PPOR, although it doesn't exist yet, and are buying IP1 soon, but our equity won't be that high.

 

[Rob Williams]

But who would settle for just being "average"?
Like the big man says, if you're going to be thinking anyway, might as well think BIG!

 

[Dazz]

The results seem a bit high to be the "average" - it seems like more of an ideal.

At 26, I should apparently have a net worth of $169k....our equity won't be that high.

Don't wish that the bar was lower.....work on jumping higher.

 

[cimbom]

That's our aim

 

[HotRod]

Net worth = Age x Income x 0.112


This was the refined formula from the Millionaire Next Door authors.


The factor used to be 0.1, but after about 10 years of tweaking, they arrived at 0.112


So, as an example, if you are 30, and on an income of 100K pa, to be "average", you should be worth ;

30 * 100 * 0.112 = 336K


If you are worth more than that, at that age and that income, apparently you are doing well. If less than that, you need to pull yer finger out.

So is this income simply salary/wage type income or inclusive off all sources?

Also, if it includes other income, is it nett income or gross before deductions?

Further to that, is it pre or post tax?

 

[Dazz]

...if you're that fascinated by it, that you have that many qualifying questions, I'm sure you'll read the book to find out....if not, you won't.

Let us all know what you find out.

 

[Rob Williams]

...if you're that fascinated by it, that you have that many qualifying questions, I'm sure you'll read the book to find out....if not, you won't.

It's a highly recommend, entertaining and though provoking read.

 

[HotRod]

...if you're that fascinated by it, that you have that many qualifying questions, I'm sure you'll read the book to find out....if not, you won't.

Let us all know what you find out.

Please do tell.

I have it, read it and just forgot about it.

I just can't remember what it included and can't wait until I get home.

The suspense is killing me.

 

[Ace in the Hole]

That formula seems quite linear.
A 30yo on 100k should have a net of 336k.
A 60yo on 100k should have a net of 672k.

Not counting inflation here, but surely you would expect a more exponential return at the top end?

 

[HotRod]

That formula seems quite linear.
A 30yo on 100k should have a net of 336k.
A 60yo on 100k should have a net of 672k.

Not counting inflation here, but surely you would expect a more exponential return at the top end?

I don't think it's a return. It's just a generalisation.

I guess it tries to say that a 60yo close to retirement, needs about 672K to be able to retire and then spend that 672K on his retirement.

A 30yo is nowhere near retirement and has other things to buy etc between then and when he turns 60 where he should have 672K.

Don't think it works for some PI who end up with a CF+ portfolio that will continue to increase in net worth and increase in CF as time goes on, compares to the 60yo on 672K in an annuity which decreases in time and CF growth stays relatively flat.

 

[Ace in the Hole]

Ok, still a bit confusing though.
I did not realise that retirement was determined by age, or financial standing.

 

[tobe]

By that formula I either need a payrise or an elixar to make me older, or simply stop comparing myself to averages......

 

[Dazz]

That formula seems quite linear.
A 30yo on 100k should have a net of 336k.
A 60yo on 100k should have a net of 672k.

Not counting inflation here, but surely you would expect a more exponential return at the top end?

Yes it is 100% linear, and no, you wouldn't expect exponential.

Why ?? Cos they refined the formulae over studying tens of thousands of individuals, mostly millionaires, over a decade or more.

Obviously, the 60 yo on 100K now hasn't always been on that wage. When he was 20 or 25, he was probably earning $ 100 per week.

 

[moyjos]

How do you deal with this formula as a couple?

By the raw formula ...I need to pull my finger out. But hubby is waaaaay ahead. pfft. Like he would be there without me