What Should Your Net Worth Be?

scrooge-mcduck-wealthA problem I struggle with, especially as someone that’s a long way from retirement. I’m sure I’m doing better than most people at my age. I have no debt and have a decent amount invested, too. But comparing myself to others seems like such a poor yardstick to use, especially when so many people aren’t ready or on track to retire with enough money.

So what should I have saved? And how do I stay on track? Here’s some of what I dug up.


A general rule I’ve heard a few places is this one, which I found published on The Simple Dollar:

Multiple your age times your realized pretax annual household income from all sources except inheritances. Divide by 10. This, less any inherited wealth, is what your net worth should be.

According to this calculation, I’m actually pretty far behind. But looking at the number, I’d be surprised if many people my age have actually hit this goal.

Other goals

As I wrote about before, investing in retirement isn’t my top goal right now. If I was, I’d probably have an engineering job where I could sock away half my salary or so.

It sounds crazy, but I’m more focused on building a business. I know this will have to change at some point, but I feel like I’m doing well enough right now that it’s okay.

While this may sound irresponsible, I’m always focused on living a good life now AND in the future. I don’t really believe in big sacrifices just to be happy later. Don’t get me wrong, I’m far from a “YOLO”-type and I don’t make dumb decisions. I’m just trying to stay balanced.

I’m still depending on this paying off in the long run. Of course, I’m hoping to see changes come sooner rather than later.

Key areas of focus

I know some action needs to be taken. This problem isn’t going to solve itself on its own. Here are some areas I’m going to start working on:

  • Save some money, no matter what. There’s really just no substitute to saving and investing money for retirement. Even if I just put aside $1 a day, that’s much better than nothing, especially if my investments can grow for close to 40 years.
  • Check back on investments. I look at the bottom line on my investments a lot, but I don’t do much when it comes to adjusting my portfolio. I know I need to check in more often. Perhaps I need to move more money to lifecycle funds if I don’t want to actively manage my money.
  • Keep going. It’s a little disconcerting to feel like I’m so far behind. But rather than throw in the towel, I know I just need to keep going.It’s certainly possible for me to make it, I just need to put in the effort to make it happen.
  • Get help. I don’t really use any professional help yet other than an accountant, which is mostly because I run a business. Listen to the experts from time to time – Michael Derin from Azure Group regularly gives out genuinely insightful tips for entrepreneurs and people like myself to plan their finances better.

Aside from what I’m focusing on, I’m also wondering if net worth is the best metric I should be using. Should I consider something else instead?

Do you look at your net worth? How do you feel about it?

(image: Sam Howzit)

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