What should your net worth be at 30?

February 22, 2012 By 13 Comments

The title of this blog post is a search engine term that led to my blog. It’s a good question! And one I feel I should attempt to answer in case future googler’s are led here by the same.

Except I don’t know what your net worth “should” be at 30. I don’t even know what mine will be, only what I want it to be.

Up until this year my personal net-worth goal for 30 was $100,000. Now I’m thinking I should aim a little higher. The challenge in setting net worth goals is that it can depend on more than how much you save or how much debt you pay off. Assets like stocks or houses can fluctuate in value — sometimes in a good way, but also sometimes for the worst.

On another note, I’m not sure what net worth you should strive for because I’m generally a huge advocate of not worrying about what everyone else is doing.  If you’re looking at everyone else, you’re going to lose sight of yourself.

Finances are generally a pretty quick and easy way to pass judgement on another person’s success and values, even if some of the circumstances were out of their control. For example, it will be easier for someone whose parents paid for their university education to build net worth than it is for me, because they get to start without debt and I started down $20,000. On the other hand, it will be easier for me to build net worth than someone at a lower starting salary or raising a young family, because I’m single with a good income. But when you just take a quick glance at someone’s net worth, generally you’ll absorb only the number and not the circumstances: “wow! up $250,000 already!” or “negative $50,000? Are you kidding?” — even though the first might just be riding an inheritance and the second is a medical student.

I found the statistics of the relationship between net worth and profession in The Millionaire Next Door very interesting. I suggest you check out the book if you haven’t already. Basically it puts net worth in the context of earning power, and consequently people that society perceives as “rich” are actually usually pretty horrible at building wealth (ie. doctors) and others with average jobs can be very good at building wealth (ie. teachers).

I think long-term net worth goals have to be a mix of what’s realistic and what you’re willing to work for. At this point, I still don’t have a clear idea where my career is headed, but I do understand my spending and saving habits. I know I’ll come out on the the other side of $100,000 but by how much will depend on the decisions I make in the next 4 years:

  • when will I buy a car? What kind?
  • how many international vacations will I go on? Will they be frugal or luxurious?
  • what kind of home will I buy?
  • will I have children? If so, how many?
  • will I get married? How much will I spend on the wedding?

(answers: 2014, Mini Cooper, 10, frugal, 2 bedroom condo, yes, one, no, $0 — jk… sort of)

My advice is to not worry about what your net worth should be and just try to make it as high as you can. You’re not saving for anyone but yourself. It is your financial security, your financial future, your financial life on the line — no one else’s. Only concentrate on what you can do, and forget everyone else.

 

Filed Under: After Grad Life Tagged With:

I’m going to be a millionaire!

February 3, 2012 By 14 Comments

Ok, before you all get excited and think I won the lottery or something, know that I’m talking 40 years from now. I was staring at my Net Worth goal page and pondering the feat when it occurred to me how beneficial increasing my net worth every year is really going to be.

Imagine I just stay on this track of a $25,000 net worth increase every year from here on out. No more, no less. By age thirty I’ll be up six-figures. In 20 years I will have jumped a half-million dollars. By retirement, I will cross the seven figure mark.

Seven figures. One million dollars.

Then I had a “holy shit! I’m going to be a millionaire!” moment. It had never really occurred to me before. When I put my retirement savings numbers into those pesky RRSP calculators, it always spits out something with only five zeros after it. Which is fine, but I never really saw myself in millions — but now I realize it’s realistic. I would even argue that it’s likely.

This of course hinges on increasing my net worth by $25,000 every year. I think that’s doable. In my head I was going to up the figure every year: maybe $30,000 in 2013? Or dare I shoot for $40,000? Manageable figures, anyway. Numbers that seem plausible, based on climbing the corporate ladder and growing my personal wealth.

It is possible there will be years of lesser net worth growth though. If I ever take time off from the working world to have a family, $25,000+ in annual asset growth is potentially unattainable. Additionally I can’t expect to make it through the next four decades without another stock market dip (crash?) or two. I have no idea what financial hardships I’m going to have to weather during my lifetime, but I’m definitely not going to pretend they’re not coming.

Lately I’ve found myself back into my competitive spirit that lounging in France previously took out of me, so I have to be careful not to burn out, but I have to admit, the first thing I thought of when I saw “one million” was “why not two million?”

And then a really dark crazy ambitious side of me countered, “why not five?”

But then I was like, “what the hell am I going to do with five million dollars?!”, and I stopped myself, because that’s just crazy and I would be like one of those people on that hoarders TV program, except I’ll just have been hoarding money. Crazy isn’t cool.

Filed Under: Save Tagged With:

Net Worth and Income Goals for 2012

January 30, 2012 By 11 Comments

Now that I’m a grown-up, full-time career girl, I feel like it’s time to start setting some income goals.

I have a number in mind for my goal gross income for 2012 but I’m still trying to figure out if it’s unrealistic or not. My salary at work is fixed, so that’s pretty straightforward. I’m bringing in some regular additional income tutoring, and freelance writing opportunities are coming up which is awesome, but difficult to estimate how lucrative they’ll actually be. Investment income is increasing, but I think it will be years before it generates anything truly substantial. All in all, I have a lot going on that make the number in my head possible, but I hate the idea of failing SOVERYMUCH I feel a great mix of terror with all this excitement =p

Nevertheless, I’ve come up with a figure, and I’ll be tracking my gross income in that context from now on. I’ll try to share my progress, and then maybe do a big reveal at the end of the year if I make it — but if I don’t make it, we’ll all just pretend none of this ever happened and I will tell none of you about the days I will spend crying in my bedroom in defeat. If I come up something menial like $500 short I will lose my mind with frustration — it’d be worse than being $5,000 short!

As for net worth, my plan is to cut my student loan in half and max out this year’s TFSA contributions. This will result in about a $15,000 net worth increase. I’m going to go ahead and get super ambitious and say I plan to increase my net worth by $25,000 in 2012. I decided this before it occurred to me that I’m planning a very expensive vacation to Africa in July. That kind of scared me because if I’m going to go on a ~$5,000 vacation AND increase my net worth by $25,000 that means I really have to account for $30,000. So I’m hyperventilating a bit, but I still think this is possible! I STILL BELIEVE IN ME! (that was said in a triumphant, passionate, I-can-do-anything voice, preferably while standing on a chair, in a room of bewildered strangers).

Because of the trip, I’m going to go soft on myself for the Net Worth goal and not spend days crying in my room if I fail. I mean, if I boost my net worth by $20,000 it’s still going to be amazing. Maybe the stock market will undergo rapid recovery and growth, and take some of the pressure off me…

I will make charts and maybe a tab at the top there to track this (update: HERE THEY ARE!), and all of you may encourage or mock me at your leisure. 2012 is my money year!

Filed Under: After Grad Life Tagged With: , ,

Net Worth

January 13, 2011 By 5 Comments

I really love NetWorthIQ.com. I started using it in May 2010 to track my net worth, and I’ve found it a useful tool to track my progress and compare myself to others. Sadly, comparing myself to others sometimes sucks. Here’s a screen shot of where I stand compared to the rest of the site, as well as my peers that have the same education (Bachelor’s degree), income, occupation (student) and age (25-29):

FML!

Stupid student loans, they kill me.

Firstly, ignore that big “All” column — it’s for the whole site, which has a decent sized population of old rich millionaires and probably some fakers wanting to feel rich, even if it is only on their computer screen.

Anyway, actually the biggest problem here is my age, which I think is the most relevant factor (the comparison for income and education again is against all members of the website). I’m lumped into the 25-29 year old group, and some of those bastards are seriously skewing the average. Just kidding.. sort of. I am expecting that four years from now when I’m on the upper end of the age bracket, I’ll boast more impressive stats — ideally well above average!

So exploring this comparison further, I learned…

I’m really good at: saving cash! I have larger cash assets than many of my peers in my income range & occupation.

I’m really bad at: saving for retirement! Believe or not, many of my peers are on the ball and have way more retirement assets than I do.

I wanted to post this entry so I have something to look back at to see how far I’ve come in a year or two or more from now. NetworthIQ always gives you a nice little line graph to track your progress monthly, but I am interested to see what I improve compared to my peers. Seeing the comparison helps me focus: should I be saving more for retirement? Should I stop ignoring those student loans?

I think it’s very important to track your net worth. It’s really the only indicator of financial health. Some people think they are well off because they have a large home or expensive cars, but if you’re carrying more debt than assets (ahem), you shouldn’t get too comfortable. It’s very important to me to achieve a high net worth, particularly at a young age. It might seem crazy right now, but I do expect to see myself near or above the six-figure mark in personal wealth by age 30 — and you’ll have my blog to watch me do it ;)

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Wealth is something you buy on layaway

November 19, 2010 By 2 Comments

My net worth goal is a layaway program. Or at least that’s how I think of it: I’ve invested a little bit into the purchase, and now I make payments every month until I’ll eventually have paid in full. It’s going to take awhile, but I just didn’t have the funds available to make the purchase outright at the beginning, so this is the best option for me.

I don’t think very many people think of saving and investing as a way of spending your money, but it is. You’re making a purchase when you buy stocks or mutual funds or GICs, and I would even argue when putting the cash in a savings account. What are you buying? A variety of things, it really depends what your goals are. Essentially you’re buying your long-term wants, but you’re also purchasing peace of mind, security, preparedness, and at the very end, wealth — which translates directly into freedom.

Imagine not having to work if you don’t want to. Imagine traveling the world, going to any country you wanted and staying for however long you liked. Imagine not owing anybody anything, not for a mortgage, a car, your education, or any purchases on your credit card. Imagine never getting a bill, because everything is paid automatically by the interest and dividends of your investments. Nice, right? This is what I’m buying when I choose to spend my money on savings.

I’ve long since abandoned the perception that allocating money for savings cuts into my disposable income. If anything, I frequently think of it the other way around, where shopping gets in the way of my wealth accumulation. I feel like most of the obstacles we set for ourselves to keep from saving money are mental blocks, so its important to entertain a perspective conducive to your success — though changing your thinking about anything is rarely an easy task and can take some practice. Just remember that you can walk the same path with baby steps, so start small on your layaway program and you will eventually meet your goal if you stay on track.

On that note, this morning I just put an extra $100 towards my June 2011 trip to Iceland! I’m now at 20% to my goal! Reykjavik, here I come.

Filed Under: Save, Spend Tagged With: ,