How Much Should Your Net Worth Be? (according to your age)

Hey there, real quick before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. How much should your net worth be depending on your age? Did you know? Does it matter? What is net worth anyways? Well, in this episode of the Affluent Entrepreneur Show, I'm gonna break it all down for you. We're gonna break it down by age, but we're also gonna focus on what really matters, on your path to financial freedom. I'll see you in the episode.

So where should you be on your wealth journey, depending on your age? And this is a question that actually comes up a lot because, you know, let's face it, you kind of want to know, am I, am I ahead of the game? Am I behind the eight ball? Am I on par? What do I need to do? And this is, this is kind of the age old question. So in this episode, I want to break this down for you and I just want to break down this idea of net worth. You know, what is it? Why is it important how to look at it? Well, I'm going to touch on a survey that is a new survey, a recent survey from the feds on consumer finances that breaks down where people are from a net worth standpoint, by age. So you can get an idea of where you should be. But before you get all up and down and saying, oh, I'm behind or I'm, I'm ahead or, or celebrating or beating yourself up, we'll talk about what really matters and maybe a calculation that makes it make more sense. All right, so let's just jump in. I'm going to jump to the iPad. We're going to talk about this idea of net worth. And you probably have heard this term bantered about, and if you've listened to me or watched me for any time, any, any length of time, you have, okay? And so here's, here's what we want to understand. Net worth is basically the math equation between what you own and what you owe. So you think about it this way. An asset is stuff you own, okay? And it could include, it could include, you know, Cash and stocks. This is not like everything but stocks and ETFs and autos and property and, and stuff. I mean, look, you know, clothes and, and shoes and, and stuff and furniture. That's assets. Now it is an asset that's used in the calculation of the overall net worth. Now, it's not an asset in the sense of your financial freedom. We'll talk about that in, in a moment. Now, the other side of it is what you owe, okay? And we'll do the what you owe in red, okay? And because that is a liability and this is what you owe. And what you owe could be credit card debt, it's stuff you pay, you have to pay to other people. Could be student loan debt, it could be mortgages on the properties, could be personal loans, it could be medical bills. So anything you owe, you know, that, that you owe someone money or something is a liability. And net worth is, is this minus that. So it is your what you own minus what you owe, that's your net worth. So that's, that's the basic calculation. It's, it's pretty straightforward. But when we look at it from those eyes, there are some things I want you to think about. I talk about this in, in my book Building your money Machine. If you don't have it, you should get it. All right, we talk about this because about the two kinds of net worth and what they mat, how they matter in here. What I'm talking about here, this calculation I just showed you, is your overall net worth. But what matters more is what I call your investable net worth. Now, when we talk about investable net worth, it is only, you only take into account the assets that can create cash flow for you when you retire, when you decide to, to not work, or when from, from a lifestyle. So it is, it's not going to be your clothing because there's no cash flow in it unless you're selling it. Okay? It's actually not going to be your residence because a residence actually cost you money instead of making you money unless you're renting it, selling it, house hacking. But I'm not saying it's not an asset. It's just not an asset when it comes to investable net worth. Now why is investable net worth really the more important number? It's the more important number because frankly, it's the thing that can support you when you choose to not work, when you choose to retire, when you choose to do the things. For instance, here's the deal. This is your investment net worth is what makes the money machine that I'm talking about in my book. And so we want assets that can support us. And if we have to sell assets to support us, then we no longer have the assets. So what I'm talking about are assets like rental real estate that produce, produce cash flow. Investments like stocks, ETFs, index funds that produce cash flow. It could be residual income streams that produce cash flow because it is the cash flow that allows us to live, to pay for our lifestyle, to do the things that we want to do. But too often we as, as a society don't even know what our net worth is. We don't, we don't calculate it, we don't even know how to calculate it. So this is the beginning of that journey because when we understand what our net worth is, we understand what our starting point is, then we'll need to understand where we want to go where we want. And now we know what, how to, how the big the gap is that we have to, we have to close. So where should you be on this journey? Let's, let's look at some data because I found this interesting and I'm going to talk about some data based on age and we'll break it down from 35 up to 75. You'll get a chance to see what the differences are in that. All I want you to do is to kind of get a feel for am I, am I around the average of the median or am I above it or below it? Not for any other reason than awareness. And then we'll break it down on where you should be and what to do instead. Okay, so I'm going to look at it from this way. I'm going to give you the age, I'm going to give you the median, and I'm going to give you the average. Now why am I doing both of these numbers? Because if you have some ultra wealthy people or ultra poor people, in other words, if you have extremes, the average can get skewed. But I like to use the average because it encompasses all the data, whereas the median doesn't. It finds that middle point where half the data is above it and half the data is below it. But this will give you an indication of where you're at. So under age 35, under age 35, the median. And look, 35 years old, 30 years old, that decade, the decade of the 30s we call the messy middle because this is a time where.

Our life is changing. Many, many folks are getting married, they're starting to have kids, they're starting to get homes. They're starting to do things in their life that can create chaos with their cash. And so we call it the messy middle. We all kind of, kind of go through it, but it is something where, this is the foundational place where we are starting on that financial journey to make things happen. Okay, so the median here is $39,000. But, but the average is 183,500. So the net worth at that point is 39,000 183,000. Now, mind you, I am talking about total net worth. So this would include homes, this would include vehicles, this was, would include all assets. So it's not necessarily investments, it's not your 401ks alone, it's in there, but it, it includes these other assets. All these numbers include these other assets. So it's important to understand that this is total net worth. And if you're in an environment where you have a home in a, a time frame where it has appreciated tremendously, the high, the percentage of your net worth that the home represents could be very, very high. So it doesn't necessarily mean that you've got a ton of investable net worth. It just means that you have net worth. But a lot of it is locked up in real estate, which is, which is what some people need to be, be careful of as they start to get into those, those later years. Because if the majority of their wealth is sitting in their house, they don't have the ability to access it unless they sell it, okay? Or they refinance and take the money out, or they do a reverse mortgage. And before you ever do a reverse mortgage, get in touch with me, all right? And so those kinds of things may happen or you rent it, okay? So just be aware the makeup of the net worth does impact some things. So beyond 35, so 35 to 44 years of age, it goes up, okay? Median goes to 135,600 and the average actually jumps to 549,600. So it actually jumps pretty good on an average basis. It really starts to move. And it makes sense because really the 40s become the heavy earning years for many professionals and many folks because they've, they've gotten some seasoning in their career, in their professional path to make that happen. Then we, then we go to the next decade, okay, 45 to 54. Now we start to see some things really start to move. At 45, you actually double the net worth, 247,200. And the average goes from 549,000 to 975,800. So almost a million dollars, which, when you look at the data, when you look at the data, the, the TR. Typically the millionaires reach millionaire status after 28 years of investing and around the age of 48, 49. So this, this kind of fits into that, that realm of, of hitting about the million dollar mark in that, in this, in this decade. Okay, well, let's move up, let's move up because I think this is really telling 55 to 64. At 55 to 64, the median goes up 364,500 now. So, so you've gone up another 80,000, $90,000, but the average jumps to $1,566,000 here. Now here's the interesting thing. That's 600,000, almost $600,000. Up 60% increase in the average net worth from age 54 at, into the next decade, from 55 to 64. So when I hear people that say, oh, I'm, I'm too late, I'm too late. You're not too late. We got to get in the game. We have to be on the field investing, doing the things that build net worth, that build wealth, that build the financial freedom you want. Because if you look at it here, what's happening is that this money, they're growing at a much more rapid rate in this decade and they're in their 50s. Why is this happening? And I think this is, this is something that we tend to forget too often. We think that our wealth creation, our wealth building is a linear line. We think that it's going to go like this straight. But our wealth is on a curve and it does something like this. And what happens is that we have that, that, that space down here which you've heard me talk about, which is the, the wealth flatline. These are in the early years where we're not seeing as much growth. But if we stay in the game, we reach the tipping point. And at the tipping point, we hit that acceleration zone where our money is working harder for us than we did for it. And now we're. So the data is starting to show that, that, that hey, you are actually moving into that realm. Because when you go from age 55 to 64 and you increase 60% in your average net worth on average, based on the stat, it's showing that, that what's happening is, is their earnings are going up, but also the money's working harder for them because they've, they've eaten up their wealth flatline. So I'm hoping that this brings some hope to you, no matter what your age, stage or circumstances, to, to continue the path, to stay on the path to financial freedom, no matter, no matter where you're starting, get you in the game. Let's look at, let's look at two more, two more tranches of this, and that is 65 to 74. Typically when people are starting to retire. Now, I don't know if I'm ever going to retire. I mean, truth be told, I want to keep doing what I'm doing for as long as I can, continue to do it and to serve people like you and, and out there speaking and that type of thing. Meeting goes up to 409,000, according to data, almost $410,000. Okay. The average is now approaching $1.8 million. And while we're here, let's just look at greater than 75 years of age. Now we start to see that we're starting to use the money and, and do it in that way, because what happens is the median goes down 335,600 and the average also goes down and is now down to 1 million 6 24. Okay, so this is the statistics. These are the things that, that come into play with looking at. Now here's the thing. This is just data. It's just statistics. It's to give you an idea of am I in the game, am I, you know, a little bit behind, a little bit ahead? But I don't think it's really indicative of what really matters in our world, in your world. Because if we start to use this data, we, we can tend to either beat ourselves up or celebrate. And we might be celebrating prematurely or beating ourselves up prematurely, because here's what I think is more relevant. Net worth is a very important number in your wealth journey. In your journey to financial freedom, investable net worth is even more important. And it is. And it's built on all the assets that will generate cash flow and support you in your later years. But I think what's most relevant is this, is to sit back and say.

Not what is the average? Because if I look at the averages, I might be okay if I'm living in Ohio, Idaho, Wyoming, but that average may be skewed if I'm living in California or New York or, or New Jersey or Florida. We have to look at it not from the overall data per se, but look at it from your life. I think that when we talk about wealth, when we talk about financial freedom, it always, always, always, always starts with your life vision. So what I would tell you to do is figure out your life vision. And we do this. The very first part of the book, building your money machine, the first part of the book is about life because we never ever want to look at it from the perspective of just money in the bank account. We always attach our wealth creation to the kind of life we want. And so we start with a life's vision, then we build the wealth to create the reality here. So what happens is we start with a life's vision. We allow that to then define the plan. And what I mean by that plan is this is where you're going to put the price tag on your life. This is going to define the investable net worth you need. So I'd rather you, instead of using data and averages and medians, is to look at your life and say, what do you need? You might be higher than the averages, you might be lower than the averages, but it gives you the life that you want. Okay? That plan will define the strategies that you're going to use, and the strategies will define the tactics, and the tactics will set in place the actions. This is the process you want to use. But now you get a chance to see where net worth plays in, but ties in to your life and your life's vision. Okay, So I, I look at it through that set of eyes. Now, one of the measures for understanding an, a more appropriate net worth to, to connect to could be a measure that is defined by your current income. And why I'm saying that is because your current income is giving you your current lifestyle. And if I can create a net worth that supports that current income, then at least I'm supporting that current lifestyle. But here's a caution. If I want a lifestyle bigger than what my current income can create, then I'm going to need a bigger number. All right, I want to give you a calculation that you can use that you can, you can play around. Now, this is not my calculation. This is a calculation that came out of.

The Millionaire Next Door. It's called the, the Average Accumulator of wealth calculation and the Prodigious Accumulator of wealth calculation. I'm going to walk you through it. I' done it in prior, in prior videos in prior episodes. But let's just walk you through it. Here's, here's what, what, how they, they look at it. You're going to take your age times your income, and I'm using income because I think it's representative of your current lifestyle. And we could change that or, or, or deal with that. If we, if we need to divide it by 10. Okay, divide it by 10. That's the formula. So let's just assume that you're making $100,000. Let's say you're 50 years old and you're making $100,000 divided by 10. Okay, gives me $5 million divided by 10. That means that my net worth at age 50 should be $500,000. This is what we call the average accumulator of wealth, based on the millionaire next door. Now, they have a prodigious accumulator wealth, those that are going over and above. And all you're doing is, is, is taking this and multiplying it by two. So at 50 years old, if your net worth is a million dollars or more, you're a prodigious accumulator of wealth. So you can use this calculation. And I think it's a better way to look at it for purposes of am I on? Am I behind on my head? Because of its connection to your current lifestyle, your current income streams. Your current income streams are too low for the lifestyle you want. There's some adjustments and tweaks that need to be made. Now, there is some criticism of this, especially for those folks that are younger in some dear friends of mine, some dear friends of mine in.

It called the Money Guy Show, Brian Preston and Bo Hansen, they kind of modified this calculation. And the way they modified this calculation is for those people that are under the age of 40. So if you're under the age of 40, I want you to use this calculation. And it's, it's still age times your income. But now you're going to do it from the perspective of divide it by 10 plus the number of years until 40. So if you look at it this way, let's just use the same numbers, but let's change the age. Let's say that the age is 35 years old and you're making $100,000 a year, okay? So you're going to divide it by 10 plus the number of years to 40. The number of years to 40 in this case is five years. So 10 plus five. So now you look at it and say 35 times 100,000 is 3.5 million divided by 15. That gives you $233,000. Okay? So your net worth at 35 should be about $233,000. That's average accumulator of wealth. If we want to be prodigious, we multiply it by two. So you're looking at a total of $466,000 in net worth or close to half a million dollars. So I would submit to you to use that calculation to figure out whether you're close to, at, or where you should be on this financial journey. Okay? I think that it's a way for you to look at it and get a handle on it. Now before I, before I close this out, I think it's really important for us to understand that this is just a milestone, this is just a guidepost. And what it's meant to do is not to cause you to stress, it's not to cause you to blame, it's not to cause you to beat yourself up. It's simply there to allow you and inform you and make you aware of where you might be on this journey. Look, our journey to financial freedom, it's going to go up, it's going to go down, it's going to go sideways. But we need to stay on the journey. And the only way we stay on the journey is to make sure that we have a clear understanding of the destination. That starts with the vision and the plan. And then we measure where we are on that journey without judgment so we can make some proper decisions to move us closer each day, each step of the way towards the target. Okay? And if the target moves, the target moves. But bottom line is we figure out where we are today. Your net worth. So I want you to go, I want you to calculate your net worth. Total net worth, all your assets, all your liabilities, okay? I want you to also calculate your invested net worth, okay? These are only the assets that can generate cash flow. Your 401ks, your retirement accounts, your investments, cash flowing properties, those kinds of things. It's not going to be your clothing, it's not going to be your cars, it's not going to be your residence, okay? All that type of stuff. Okay? So now you know where you are and then use the formula to calculate where you should be. Get a plan in place. If you're not sure how to do the plan, if you're not sure how to do that, do me a favor, go grab my book. Building your money machine. I walk you through it the proper way to make it happen. And at the same time, stay on this channel with me. If you haven't subscribed, do me a favor, make sure that you subscribe. Because I'm putting this content out there so I can help you, guide you on this journey to financial freedom. Because I truly believe that financial freedom is your birthright. We just got to understand how to claim it. But for some God forsaken reason, they don't want to talk about it and they don't want to teach it in schools. So we're going to teach it here. We're going to have an open dialogue because I got nothing to say. I'm not selling you investments. I'm not selling insurance, but I want to sell you on your dreams. I think they're possible. And I want to be by your side along the way to financial freedom. I'm on a crusade. I want to light the path to financial freedom for a million families. That one, one of those families be you. All right. All right, y'. All. I hope that this helps. I hope you found this of value. And I can't wait to see you in another episode or on the road or while I'm out there speaking. All right? Until then, always, always strive to live a life without losing.

Thank you for listening to the Affluent Entrepreneurship with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

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