Average Net Worth By Age in 2022!

it is your favorite time of year net worth by age on the money guy show it's brian preston the money guy that's right brian this is one of the shows that we get the absolute most excited about because one of our favorite things in the world to do is to do our annual net worth every year and as we think about that one of the questions we all have i think it's just human nature is okay where am i how do i stack up to my peers and is there some sort of metric that could let me know like am i the head of the curve am i behind the curve i don't even know where the curve is so we hope through our net worth by age shows we can give you some insight into where you are and also maybe what you should be focusing on what i love about the magic that we create bo is that every year it gets better that's right and so like right now we're going to focus on we're going to go through every decade and we're going to tell you what you need to focus on with your net worth statement we're also going to tell you what it takes to be a financial mutant and i love how we've laid out all the data points this year so you can be aspirational but also take inventory of where you are this is going to be helpful no matter where you are in your wealth journey so i think with that let's jump right in and we always like to start kind of at the beginning because when it comes to doing your net worth we think it's most valuable when you start at the very beginning of your financial journey so we just titled the 20s the decade for 20 year olds starting your journey anybody who is watching this if you're in your 20s get excited yup because look i don't i don't consider myself a jealous personality i just don't i mean i've never been one that has fomo or feels like i need to look at something and wish that i had something somebody else has but i will tell you i am slightly green hued in the fact that 20 year olds have so much opportunity that every dollar that comes into their possession can turn into incredible things so if you or anybody i don't care if you come from humble beginnings i don't care if you came from poverty you can be rich if you will utilize and maximize every dollar that comes into your possession and so one of the ways that you track that that you're knowing you're doing that well is by doing an annual net worth statement even if you're in your 20s even if you're at the beginning of the journey and so the question probably asks okay well i'm starting out you know what what should i focus on on my net worth statement what should i be excited about well in our opinion it's the assets column now yeah maybe you don't have a ton but perhaps you have a car that you've paid for maybe you've opened your very first roth ira maybe you're someone in your 20s and you made your first home purchase even though you may not feel like you're wealthier you don't feel like you've won the financial game yet odds are you do have some assets that you can list even if it's only on emergency fund or even if it's only having your deductibles covered you have assets that you get to put on your net worth statement i i think a lot of people watch our content especially if you're in your 20s and you hear us say you need to be saving and investing 20 to 25 for the future a few of you you'll be like that's too aspirational and i get that and that's why i'm telling you don't let the fact that the the goal is at this level and you're here currently because we've all been poor we've all had low incomes where you know even right after college with a great education you're just not reaching your full maximum earning potential because you just you have to build your expertise so it might take a while i'm just telling you make sure you don't let a decade pass where you didn't start putting something towards your army of dollar bills i don't care it's so easy right now to put fifty dollars a hundred dollars two hundred dollars a month just make something happen in your financial and investment life and if you're trying to answer that question okay i want to start but i don't know where to start we have a free deliverable available for if you go to moneyguy.com resources we have a quick one pager that walks you through our financial order of operations with the next dollar that you save where should you put it it is 100 free it is out on our website go check that out so you can check some of those boxes like have i covered my deductibles am i getting my free employer match should i start thinking about roths and hsas when do my retirement accounts come in it will walk you through when and how to start on your asset building journey yeah i like that it helps you navigate that whole asset versus liabilities on where your next dollar should go and that actually leads me to here's a here's a siren song that i want everyone to avoid in their 20s because i get it a lot of you you go to college you go to high school you graduate high school you're in college and you feel like oh my goodness i have since i was a kid i have invested so much in myself it is my turn to actually be rewarded for all my hard work myself and that's what you see and so much of our society is set up this way too because we do have so many celebrations after you graduate college or high school even that this is your time this is the the go be your best version of yourself and that usually means special you know deals on new cars on making sure that you can get store credit cards and everything else to fake a life of abundance and success the problem is it's all fake that's right and that's what i want to encourage everyone have a healthy relationship with debt as early as possible because that is going to be the the force that takes compounding growth which is actually going to be the secret recipe to your riches and wealth in the future but if you get in debt before you even leave the starting gates you will have compounding growth working against you but look sometimes it's an unavoidable circumstance so when you are doing your net worth statement if you want to use our template that's available at learn.moneyguy.com you'll see there is a liability section on there perhaps you are someone who had to go get student loans and that's okay on your net worth statements we're gonna see that or maybe you bought your first house and you likely could not pay cash you're gonna have a mortgage that's going to fall in the liability section it's like brian said you want to make sure that you control the liabilities but you also understand that some of it is unavoidable some of it you're going to have and that's okay it's part of your financial journey so let's give just some guidelines or something guard rails for people i think student loan debt you mentioned that bo i always recommend try to keep your student loan debt below what you anticipate your first year salary to be so if you're somebody who's 18 to 22 you're in the throes of education right now just be responsible or maybe you're somebody watching this thinking of your children who will be in college in a few years try to keep that student loan debt under control credit card debt but what do we think about credit cards if you have credit card debt you should have a goal almost immediately again as you work through the foo to knock it out you should not carry credit card debt it should be no go land it's okay to use credit cards it's okay to have them as a tool in your financial tool belt but if you don't have the discipline to be able to pay them off every single month you shouldn't be using them you should not have credit card debt if you see it show up on your network statement that should be an immediate red flag that i've got to get that knocked out and then i've already mentioned it but i want to go a little deeper automobiles are financial napalm meaning that they will blow up your growth opportunity because it's not uncommon for young people i mean look i bought my first new to me used car when i graduated because i felt like i needed better wheels when i got out fortunately i only made a ten thousand dollar decision versus what i think a lot of young people are facing now which is could be a forty fifty sixty thousand dollar mistake here's what we tell you twenty three eight just put this to memory we wanna make sure if you are buying a car first of all this is not luxury this is just normal brands we're talking about the hondas the toyotas and the chevrolets of your life 20 down you don't finance for longer than three years and then it can exceed 8 the payments can exceed eight percent of your gross income if you can keep all that in check you should find that it's a very affordable car payment to your lifestyle and then there's one other thing that i want you to know your investments have to be greater than your car payment the last thing i want to see is you graduate from college and have an 800 a month car payment and only 150 bucks going towards your investments i want it to be flip flop the other way around and so maybe you're saying oh brian but that's hard i don't know 23 i don't know if i can do that or yeah i've got i'm saving 50 a month but man i can't i can't that new car i want i can't get the car payment below 50 as cold as this water is we might make the assessment man it might not be time for you to upgrade that car perhaps you ought to drive the car that you have or figure out some way to get into a less expensive vehicle so that you can abide by these rules because in a moment we're going to show you how little it takes to have huge success later in your life but the way that you create that margin is through the discipline of making decisions like man okay maybe maybe now's not the time for the new car maybe i'm gonna put that off for the future yeah let's let's actually give them some perspective on how powerful their dollars are i mean i think about the fact when you're 18 19 20 years of age it's as little as a hundred dollars a month can get you to millionaire status and i think a lot of people when they hear me say that out loud because i've said it constantly and i talk about 88 times over every dollar has the potential to turn into 88 if you invest early enough what people miss out of that whole equation is that when you add up if you took your monthly payment of for a 20 year old like 95 a month and multiplied it by the monthly savings by 45 years you're only investing 51 dollars so you're wait you're like million dollars fifty one thousand dollars invested that means nine hundred and fifty thousand dollars is coming from the growth of the investments that's exactly right 95 is going to come from your army of dollar bills remember earlier i said i was jealous i was green with envy because you have something the rest of us don't have which is tremendous years and decades of time to let your money work for you so the natural question that you would be saying is okay well 20 year olds you know brian beau just said man they should be so excited they should be just rocking and rolling well let's take a look at how the average american is doing so uh daniel pulled some stats for us that were fantastic and this um from a number of different sources that we have amalgamated and this is what we have determined that the median income for some of their 20s right now is about 28 000 a year well if you look at the median net worth for someone in their 20s it's about 7 864. and so the question you have is okay well is that good is that not good remember we have a formula it's a little of a take on the money guy the millionaire next door formula we call it the money guy wealth formula where you want to determine if you're an average accumulator of wealth or if you're a prodigious accumulator of wells you take your age times your income and divide by 10 plus the number of years until you get to 40. if your mind just went buggy don't worry don't worry we should have it we're going to show you in a second but what we want to show you is if we have a median income for folks in their 20 of about 28 000 a year then if you want to be an average accumulator of wealth and your income is around that 28 000 mark this is for a 25 year old then your net worth should be about your annual income about 28 000 or if you want to be a prodigious accumulator of wealth you want your net worth to be about double that amount so someone who's 25 making 28 000 a year to be a prodigious accumulator they should have about 56 000 of total net worth that's investments and equity in your home and automobiles and those types of things that actually at the bottom of your net worth statement it should be about 56 000. when i look at this data and i see the median net worth for somebody in their 20s is 7864 in a lot of respects that's actually a relief for me because i want all of my financial mutants watching this and being like look this shows me that despite what social media is telling you a lot of your peers are just as broke as you now they might have car payments they might have other things might be faking but use this to look at the data of what the the median american looks like and say this is the reality of the situation i don't have to fake it i can actually start letting the financial order of operations do this appropriately take a little bit of today for saving and investing for the future so i have that great big beautiful tomorrow let these numbers be motivating to you because you can see nobody's rich around you so use this as an opportunity to start investing in yourself so as a reminder if you want to do these calculations on your own this is what we call the money guy adjusted formula to be an average accumulator of wealth you take your age times your income and you divide that by 10 plus the number of years until you get to 40. now if you're listening to the 20 section and you're someone in your 40s you don't get to add the numbers you just divide it by 10. well to be a prodigious accumulator of wealth you want to have twice that number so we thought one thing that might be helpful for all of my 20 year olds out there maybe you're not by a calculator or you don't like to do math in your head which is okay let's look at folks from 20 to 29 and let's look at four different income ranges let's get uh someone who makes fifty thousand a hundred thousand a hundred and fifty thousand and two hundred thousand dollars and you may be saying oh my goodness no twenty year olds make two hundred thousand no they do and you're listening to the show there's a lot of our folks in high tech that are super super productive it is not uncommon so what i would encourage you to do is if you're out there listening to on itunes or iheartradio or spotify we have a chart on the screen you just go kind of pick your age all right i'm 25 years old and i make about a hundred thousand dollars a year if i want to be a prodigious accumulator my net worth should be about 200 000 so this will give you an idea of where you stand and remember if you're kind of comparing yourself to your peers the median net worth of someone in their 20s right now is about 7 800 so if you really want to be a financial mutant your number should be closer to the numbers that we're showing yeah i mean it is a lot of opportunity i love that we give the range because i know when i was in my 20s i mean i think i shared with you guys my starting salary out of college is 28 000 um it doesn't mean just because you're not making 200 grand a year in your 20s that you're you're not destined for greatness i just think it means we've given you range maximize your potential not comparing yourself to others so you you you still yourself that joy all right so we talked about the 20s we talked about starting out your journey well as was with most journeys as you're on the path it's not uncommon for things to get a little bit messy and that's exactly what we call the 30s we call it the messy middle yeah there's a lot of debate in the content meeting about this because we have used this before and i like it because i just i've shared and i feel like so much of the world and social media is telling everybody what they aspirationally should look like and that in a lot of ways that creates shame and frustration from the reality that we all live in because we call it the messy middle because yes in your 30s you're figuring out career stuff a lot more but that also means you have more responsibility you you're probably facing you got married you might be buying that first house y'all might be thinking about or having grown a family and all those things that happen pull on your your time your emotions your financial resources and it's overwhelming i mean we see people and i know a lot of you will feel like i'm talking directly to you and we are because we've all experienced i want you to know it's going to get better you just need to focus on what you can control and some of the things we're about to cover so you make it through the messy middle and come out the other side in a much better place and look i don't mind sharing you know i am actually in this i'm in the messy middle right that is sort of the life that i live in uh sometimes i need a reminder of the journey that i've already come on because it's easy to get lost in the you know crazy day at work and you come home and you get hit in the face by a couple kids and it's just like life goes wild you forget all the hard work that you've put in so one of the things that we've put on our net worth statement on the dashboard that i think is maybe one of the most valuable things we've done if you want a copy of yours you go to learn.moneyguy.com is we actually show your net worth over time yeah because if you started back in your 20s tracking your net worth what you've likely seen now is your assets have started to maybe increase your liquid assets those things that you can actually get your hands on have likely started to increase your liabilities hopefully have started to decrease or maybe not maybe those have continued going up as well but when you look at the differential the difference in your assets and your liabilities you can see that net worth that thing that you're trying to build is slowly ticking up over time and you can take a breast and you can take a breath and say yeah i did it i'm doing okay i'm moving in the right direction i know life is crazy but what i am doing is mattering and it's moving me towards my ultimate goals so you were very comforting and you were very nice in what you said i'm going to be a little harder on our 30-somethings because i you know when if you went back and watched what i told 20 somethings i gave them a lot of grace on their savings rates and i said look if you you know we tell you you need to be invest saving and then putting that money to work through investing 20 to 25 of your gross income and i said look in your 20s you're probably not there because you're just figuring out this whole career journey you 30-somethings you need to be saving 20 and investing 20-25 i hate to give you the tough love but i do think you're now old enough that it's required for your 50 year old self to look at you and go thank you job well done versus looking at you going what were you doing i mean how did you blow your 20s and then even your 30s which was your your redemption tour moment where you could have gotten this right don't blow this opportunity you need to focus on saving and investing that 20 to 25 for your future now okay i'm going to give you the benefit of the doubt and say that the 30 year olds that i'm talking to okay maybe you have been doing those things and you have been moving in the right direction well you know one of the ways that we love to measure wealth one of the ways we love to think about our progress is by figuring out what our accumulator score is and we call it just the money guy accumulator score which is age times income divided by the number of years till you're 40 plus 10. what we think that's such a valuable metric for you to keep track of it's something that should stay so top of mind in front of mind that on our dashboard and the net worth template that we're making available we actually track your money guy accumulator score so if you're somebody in your 30s this is probably something you're going to hone in on because when you first started doing it you were probably well below one you weren't even an average accumulator of wealth but maybe now you're getting close to that one level where you're an average accumulator and hopefully you're moving closer and closer to where you're at two point zero which would be a prodigious accumulator of wealth i think in your 30s is when you actually start to feel like oh man this is working this thing that the guys talk about is actually moving me in the direction that i want to be moving we've spent a lot of time talking about the actual number components of your net worth statement and how you you do the assets you do the liabilities i will tell you part of the messy middle is because like i said you you've probably you've got a spouse now you potentially could have a growing family i'm going to focus on something that's outside the numbers which is actually the footnotes if you want to talk about how the net worth is an incredible communication tool for your entire financial household this is the part because more than likely you are watching a financial podcast watching youtube you're listening to a podcast watching youtube you're kind of financially nerdy sure i mean let's just face it let's call it what it is i'm nerdy you're nerdy we're all nerdy together but you probably have a spouse unless you brainwash them into watching this and enjoying the journey with you that's not as tied into this whole thing as you are the net worth is going to be the annual tradition and using our net worth tools specifically allows you to have a footnotes section where not only can you show them the assets and liabilities on the front page but you can have the footnotes which is great for the risk management side of it talking about what assets what insurance what other things that just in case something happens to the primary financial person in the household the other spouse is not left just trying to figure it all out without a road map to get there and look uh you're probably saying all right i got life insurance but i haven't done all this other stuff i haven't done the wheels i'm 30. odds are i'm not going to die and if i die there's enough money there my spouse will be okay and we both have life insurance the kids will be okay well think about and whenever someone says that to me i always ask them this question immediately i say hey if something would happen to both you tomorrow who would take care of your kids and oftentimes it's they kind of look at each other and they and there's like oh well yeah i'd be my sister right no no no my brother oh well what and it's this week and when it's difficult for you to solve that problem on this side of the grave imagine how difficult it would be for your loved ones to try to figure that out what i love about having a robust footnote section on my network statement is it shows me that my deficiencies do i have something under life insurance okay check do i have disability insurance okay check do i have wills estate documents important people important phone numbers okay check it reminds me of the things i need to not forget every single year before we move past this i would tell somebody because this is something i've done personally i've always done this this net worth statement so my my wife knows exactly what we have going on financially we've also now married this to a password management app so that we can share our password so that if something ever did happen she could actually take my net worth tool that we use we use the same one that we're offering to you guys on learn.moneyguy.com and you can use that as the roadmap and then have those apps connected in a shared folder so then your spouse has access to all those accounts that is i'm telling you that's gold to make sure that you have good communication as well as access to everybody in your financial household now you i don't think i've ever heard you call it this before brian but you said the 30s the messy middle was the redemption tour yeah it was the it's where okay maybe you didn't get serious in your 20s but you still have time here's why you still have time remember for a 20 year old if they want to be a millionaire by the time they get to 65 they got to save about 95 a month well if you wait until you're 30 years old it's still doable you can't save 95 anymore to get there you have to save 270 dollars a month but if you do that and you do that consistently from the time you turn 30 all the way until the time you turn 65 when you get to retirement you can be a millionaire i i think it's worth also highlighting because i just love showing people the power of compounding growth is that once again even though it's not as great as the 20 year old that's doing 95 a month that could turn into a million a 30 year old doing 270 a month if you do that for the 35 years into the future you've only really invested 113 000 dollars so to turn 113 000 into a million means that 89 of the growth of the millionaire status actually comes from your your army of dollar bills working for you harder than your hands can harder than your back your brains guys that's why we call it the redemption tours because that is still incredible to get 90 growth or quote right under 90 growth means you should get excited that your dollar every dollar that comes into your possession can turn into something pretty damn incredible all right so the question then brian is all right how are our peers doing if i'm a 30 year old how are the other folks same age as me doing well if we look at the median income of 30 year olds in this country it's about 47 766 dollars and if you look at the median net worth it's about forty five thousand dollars or so so remember we have these formulas that we love age times income divided by ten plus the number of years until you get to forty so if we just use this 47 almost 48 000 income and we assume someone is 35 years old to be an average accumulator of wealth you would need to have saved about 111 000 of total net worth or if you want to be a prodigious accumulator of wealth you would want about double that amount at 223 000. again the way that we arrived at those numbers were through these formulas age times income divided by 10 plus the number of years until you get to 40. when you had the avatar up you know he was a nerdy looking guy i think he might have had starbucks in there yeah so he had some coffee in his hand but in your 30s look i've already said it in your 20s i feel like i'm very grace filled in the fact that i want you to look at the fact that your peers are broke so that you can control your fomo that you need to go boost your lifestyle and so you can start focus on what's important when i see the 30 year olds and i see how low the american numbers are i'm kind of saddened by it it's not as much as i hope it's aspirational i hope that you anybody who's watching this will use this to know i need to focus on making sure i foundationally am building wealth in the background through saving and investing minimizing liabilities so that really your money can do all the hard work in in the long term i feel like that that is greatly missed by the majority of americans out there absolutely right uh but it's not missed by all right so we there are financial mutants out there that are doing this so if you are in your 30s and you classify as a financial mutant you want to track sort of how close am i to being that prodigious accumulator of wealth again we just picked every age 30 to 39 and we looked at four different income strata making 50 000 a year 100 000 a year 150 000 a year 200 000 a year and then using the formula this gives you an idea of where you should be at each of these ages and incomes remember the median for someone in the 30s is about 45 000 but if you're a 35 year old and you make a hundred thousand dollars a year you should not be at 45 000 to be prodigious you should be at almost 467 thousand dollars to be considered a prodigious accumulator of wealth so you can see lots of opportunity here i love that we give you the metrics to actually compare and contrast not just looking at your peers because i don't i don't want you comparing i want you to maximize your potential financially and that's why we are going to load you up with the tools you know remember you can always go to moneyguy.com resources for the free deliverables things that we're showing like in today's show and then if you really want to accelerate the process go to learn.moneyguy.com because that's where we actually had the financial order of operations course and then even our net worth tool that i think is so powerful and tracking everything we're covering today so let's talk about something that's a i kind of resemble well i know for a little bit i just had a little bit i just had a birthday and you guys you guys are cruel you know here's what's bad about working at a financial planning firm as you get close to 50 everybody's like man catch up you're getting close to those ketchup contributions that's kind of cruel in a way a lot of ways because look i'll go and tell you i just had a birthday it doesn't bother me that i got a year old right i would do think when i crossed that into that fifth decade though that it's going to feel something different let's go for it am i in my is that will that be the sixth when you're crossing your 50. that's a better way to say that yeah because man that might even be more depressing to say it that way but it is one of those things where i always this is what i call the fork in the road moment now this is i think you guys like picking on this and since i've gone through it i can kind of express it because i'm old enough that i've i've seen people who are excited to embrace their age and what their money has become what they've done with the resources and then i've seen people who've gotten what i call the bitter train where they've made very bad decisions in the past and it is in your 40s that you kind of had the midlife crisis because you realize oh my goodness what i don't love what i do i don't like where i've ended up and this is unfortunately the age also where people start poisoning the well on younger generations because they tell everybody oh the system's working against you this is you know no don't the 40s is the perfect time and by the way it's not over it's not game over if you are watching this for the first time and you're 42 43 years old and you're like man how do am i going to get this thing out of the ditch we've got the answers for you but i will be honest it's going to be hard work and you can't shy away from that fact as you're building your financial army yeah it's it's one of those beautiful things i think it's uh shawshank redemption right where he says you know you can either get busy living or get busy dying right in your 40s you are faced with i can either get busy thinking about what the next chapter looks like or i'm gonna need to get busy fixing what i did not do for the past couple decades but you do still have time so when you go download your net worth template when you go to learn.moneyguy.com and do that you'll notice that one of the things in your 40s you start thinking about is maybe you have been building and maybe your wealth has been growing and you've reached that critical mass that we often talk about where perhaps instead of just using a few index funds or instead of just focusing on target retirement index funds you start recognizing there are benefits to be had not just from asset allocation how you spread out your assets but also asset location what types of accounts you hold your assets in and what types of accounts you're building we call that a bucket strategy we call those your three buckets so one of the things we think as you transition through your wealth building journey that you want to keep an eye on and we put it right front and center on our dashboard is your tax buckets how much money do i have in tax free investments those are like your hsas and your roth iras how much do i have an after-tax that's like my bridge account my joint account or my individual account or my trust account then how much do i have in tax deferred and 401ks 457s 403bs and am i building those buckets in such a way that if i want to retire at 50 i can or if i want to retire at 55 i'm structured in a way to efficiently do that monitoring your tax buckets each year when you do your net worth statement will inform you as to the best way you ought to think about accumulating wealth in the year to come yeah it's you've said it in in several ways i just want to kind of bring it back in the fact that this does impact tax efficiency because realize there's very few things you can control out there in the macro economy but you can control fees paid as well as taxes paid so be smart about it and what i like about this is also is a liquidity thing you know because if you do have people that think they're part of the fire movement and they're going to retire early or you're somebody who just needs to have liquidity because you're paying cash for your cars and other big purchases you need to know how much of your money is where in the tax buckets this is why it's so powerful that we actually put this tool on our net worth statement because it does let you get a dashboard view of what can i get access to when because this is the part i'm hoping that all my 40-somethings you've been doing this long enough that not only do you pay attention to the tax bucket but you get to see where you are in your journey to abundance and you actually get to look at the data i mean this is the part i love i started tracking my net worth 2006. that's a long time so we've got 15 years a lot of data but we have associates here primary advisors here who started the year after college that are not too much younger than me sure i'm jealous i mean because think about because it is so cool to look at your journey to abundance because bo we were talking about this in show prep and i want you to cover it a little bit more we talk about looking at your net worth but then comparing that to the the millionaire next door formula because in your 40s by the way it is the full millionaire next door formula it's no longer adjusted for the money guy stuff for all the people under 40 where you can say in my average accumulator of wealth and my prodigious accumulator or wealth it's all gonna be here on your journey to abundance and what i think is great is you know we like to focus on that point in time okay right now if i take my current age and my current income and i multiply those and i divide that by 10. okay that's my current score but what i think is really great when you get into your 40s when you do have that data is you can see am i improving that well you know maybe in my early part of my journey i wasn't i was starting out i wasn't an average i wasn't a wealth accumulator at all i was negative i didn't have anything going on but then as i began to build and as i began to watch my net worth statement become more and more mature not only did i move towards being an average accumulator of wealth but i crossed that threshold and now i'm actually working towards being a prodigious accumulator of wealth in your 40s you can actually make sure that the decisions you're making are truly moving you in that direction if you start to see this kind of flat lining you ought to do a self-assessment and say man what am i not utilizing my resources as effectively and efficiently as i could be and what things should i begin changing to get those numbers to start moving up i think looking at net worth just taking the the 30 000 foot macro view a lot of people who are watching this might be scared because you're like i've never done a net worth i don't even know where the numbers would come out don't not do it because you're fearful because i'm telling you guys if you will just go through this exercise it's going to be very powerful for multiple reasons first of all if you're behind wouldn't you rather know now why you still have more time that's right to adjust course correct it and save more and thus more it's much better to figure out today than to let another two three five ten years go in the future where the situation becomes harder and even more dire if you're ahead of the curve i mean it's good to know answers good or bad if you're ahead of the curve maybe you can do things a little differently you've built enough margin into your life realize your 40s this is bo and i disagree a little bit because i'm older i'm wiser i know this stuff once you're over 45 if you've checked all the boxes on some of the other things you're supposed to be doing in the financial order of operations maybe you are simplifying your life by paying off that low interest debt you'll never know the answer to those things though unless you're tracking creating the metrics to know where you're in the financial order of operations or even to review your net worth annually so don't skirt your responsibility to do this exercise every year and look i like to give you a hard time about being in your 40s being old blah blah blah it's not actually true because you're your dollars stu do still have a lot of juice left in them if you were just thinking about okay if not maybe i'm going to start maybe i want to have another million dollars by the time i retire and i'm 40 years old if you can save 780 a month starting at 40 all the way until you get to 65 that would be the equivalent that would build to another million dollars by the time that you retire so even if you think about all that money you would say that 780 times those number of years you'd have about 234 000 you've put to work for you that will turn into a million it's still remarkable how powerful your dollars can be even if you're not at the very beginning of your financial journal i mean think about this i mean we have talked about yes 20 year olds they have 95 growth opportunity the 30 year olds 89 77 still strong i mean i would put that on a t-shirt and go 77 growth i mean we're still kicking so i mean that's why i'm telling you when i mentioned redemption tour for 30 year olds there's still time on that redemption tour the train has not fully left the station even for my 40-somethings get excited maximize what you can do today to build that great big beautiful tomorrow still okay so let's see how do we compare to our pier so if we look at the me the average american in their 40s daniel i mean did he go fine the i mean this is a librarian i mean daniel this is what he thinks of people in my life keep going keep going the median income for someone in their 40s right now in this country is about 51 000 median net worth about 145 000 so we've now crossed into six-figure land which is great however if we use the formulas that we love using age times income divided by 10 the millionaire next door formula and a median income of 51 000 you should have about 231 thousand dollars to be what's considered an average accumulator of wealth or if you want to be a prodigious accumulative wealth you have about double that number so for a 51 000 income earner you should have about 463 000 of total wealth accumulated yeah i mean it's it it looks bigger those numbers are starting to look bigger but i got to tell you as somebody who's going to be approaching retirement in the next 20 years they better be big because when you're living off the money you know you don't get to take you the last thing you want to do is get to retirement and basically burn through the principle of your investments as fast as possible what you're actually hoping ideally is that the money grows upon itself it kind of is like a self-healing fabric is that you pull just a little bit out each year and then that gap feels right nicely right back up every year that is important so those numbers i i don't know i think it's important that we have people who go through the formula to see where they compare and that's why i'm glad we've created resources so they can compare their personal life to where they should be and exactly we're going to even take that a step further because we know that you guys out there are financial mutants and so we have a listing of all of our folks in their 40s from age 40 to age 49 looking at different income strata fifty thousand dollars a hundred thousand dollars a hundred fifty thousand dollars and two hundred thousand dollars so if you know that i'm a forty five year old and i make a hundred thousand dollars a year if i wanna be a prodigious accumulator of wealth i should be approaching millionaire status i should have at least 900 000 accumulated now remember the median for 40 year olds right now in this country is about 145 000 we're telling you that if you make a hundred thousand dollars we want you to be approaching that millionaire status so this is a really great tool to figure out about where am i and where should i be moving on my wealth i just noticed this did not come up in show prep but if you look at on that 49 year old column hundred thousand dollars at age 49 equals 980 000 to be a prodigious accumulator wealth you and i both know ramsey solutions does so much research on when do people cross millionaire status it's not what instagram tells you when they show you the people in their thongs over in bora bora you know they're 30 year old living there or 25 year old living their best life ever most millionaires reach at age 49 it first happens in their their employer provided retirement plan according to ramsey solutions i couldn't believe how good when i'm sitting here watching we're doing this show i'm like that is exactly what they cover over ramsey solutions 49 year old making a hundred thousand dollars a year crosses into 980 to be a prodigious accumulator of wealth i love it when the universe is kind of you see how this all comes together the way it's supposed to be yeah it's beautiful you know it's it's interesting how if you listen to like really sound financial information it all kind of echoes itself that's for a reason that's because it works that's because it's tried and true so if you are someone out there listening you're thinking man i just want to get started i just i hear what you guys are saying i want to make some on the right side of this one of the best things that you can start doing is just start tracking your net worth statement we've got a tool available for you go to learn.moneyguy.com check out our tool and make it an annual tradition so that you can be someone when you do listen to a financial commentator or you are having a conversation with a family member a colleague you start to hear some of those same wealth building echoes and you get to say oh oh no i'm doing that i've i've been doing that i'm on that journey it's an exciting exciting thing so the last decade we want to talk about on today's show is 50s and beyond and but we went ahead and went the optimist route because we are very optimistic um you know we put this is when you're winning the game i mean this is the point where i'm hoping you're like okay i need to measure twice i need to kind of see where we're landing this plane of all the opportunities i have how i've built financial independence and hopefully move into that fifth level of wealth which is abundance this is the opportunity to celebrate if you have done everything right we often talk about when we are savers when we're investors we're building up this army of dollar bills but early on it's just a small little squadron perhaps it's not an entire army what you want to do is continue building it and building it and building it one of the things you get to do as your wealth increases is you get to look back and say how powerful is my army of dollar bills and that's one of the things we've put front and center on the dashboard of our net worth template where we show you how powerful is my are my dollars and this is how we quantify that we look at the annual change in liquid assets you have divided by your annual income so that you can see what percent of your total annual income did your army of dollar bills grow and this is what's really really exciting and this is the game that brian and i like to play if our net worth increases our liquid assets increase more than a hundred percent of what our annual income was it was like our portfolio our army of dollar bills our net worth machine in that year actually worked harder than we did yeah that's a that's a congratulations moment when you see on your dashboard of our well our net worth tool cross 100 congratulations because that is a a big accomplishment and that's why we celebrate it that's why we put it as a metric to keep track of because that does mean your army of dollar bills worked harder than you actually did through your earned income that's so powerful and that's why we also tell you that might be the point because you are trying to figure out where is financial independence what are my goals what's my legacy what am i what's my why financially or maybe you're just so busy you can't do it all yourself and you don't know what you don't know that's why we put on our website it doesn't matter if you go to a bound wealth if you go to moneyguy.com we have a work with us because we want to help you this is the abundance cycle fulfilled where we love on you learn apply grow but you will reach a level of success if you're doing all that we share that you're going to need somebody to be your co-pilot and help you figure out the next step and we'll be right there to help you out through that process and one of the things that we do when we work with clients so we help them answer questions about their financial life because when you're in your 50s there are decisions that you have to start thinking about about like social security when am i going to take it and how do i take it and hey i've got this pension and if i retire at this point when does that come into effect well one of the beautiful things i like is some of those questions for future dated things that we know are going to happen but aren't actually taking place today we get asked this question all the time brian where does that go on my net worth statement how do i account for social security those are one of the things those are some of the items that we put on the footnotes page so we often tell folks hey if you haven't taken social security but you know that you're going to have a social security benefit or you have a pension that you're going to have access to when you leave employment those are all the types of things that you get to put on your footnotes and i would argue that in your 50s is when those things start to get really really important because how those look will impact and dictate some of the decisions you're going to make as you enter the financial event you're exactly right i mean we talk about social security is it since it's a promise of future income streams it's not really an asset or a liability it's more of a promise a future income or cash flows that will offset your living expenses in retirement so that goes on the footnote same thing with pensions a lot of you guys now look if you have a lump sum option there's a case to be made and we would argue that you could put that on your asset side but if you know it's just a promise of a future string of annuitized payments that's probably going to be something that goes on your footnotes so you need to make sure it's properly disclosed you know what it is and what i also like and i think we'd be remiss if we didn't say it another good part about the footnotes page is because you still need to be thinking about risk management you've won the game even if you've done it right you've won the game but there are things that could derail your financial life it's important that you are insuring against those things i mean you still might have life insurance that's enforced you still if you're working you have disability insurance policies this is the appropriate place to disclose it to your loved ones as well as just to keep track of everything one of the things that happens with a number of my clients in their 50s when i'm kind of working through this and they send me their net worth statement i'll see something but hey you know we just did this exercise we determined that you guys are financially independent when i look at your footnotes you guys are still spending money on this life insurance you don't need anymore right there might be a time where your footnotes might remind you of things that needed to be there in the past certain types of insurance certain types of protection certain types of risk management that perhaps you've graduated beyond if you're doing this exercise every single year of listing this out putting it down on paper and keeping track of it it will remind you of those things you need not to forget and don't mishear us we're not saying if you are financially independent and have life insurance just quit making your payments that's actually one more reason why it's a better measure twice moment that's why we love helping our clients figure out how do you gracefully and appropriately exit some of those insurance policies if you don't need them because there is some economic value to that coverage especially if you bought it while you're young and now you're you're older and yeah you even though you you're rewarded financially that you don't need the protection you still should take into account what's the graceful way to exit this now maybe you're someone who says okay i'm in my 50s and i've been tracking and i like it but i'm just not quite there and i'm nervous i'm running out of time i'm nervous that i don't know if i'm gonna hit there it's okay take a breath and relax because you do still have some juice in your numbers remember we showed you that a 20 year old has tons of juice 95 over their working career a month can turn into a million well for you you can still if you wanted to get to a million dollars right from 50 to 65 you'd have to save about 2500 a month but if you were to do that every month by the time you got to retirement about 55 of that million would be your army of dollar bills working for you so maybe you don't have a million dollar shortfall maybe you have a half a million dollar shortfall maybe you have a 250 000 shortfall over half of that could be funded by your army of dollar bills working for you even if you don't figure that out until age 50. there's still a lot of juice in those dollars in those soldiers for you the the the ding ding ding moment for me was still 55 is going to come from the growth of your investments that's powerful don't let somebody fill your glass up and you call it half empty you still have an optimistic opportunity here to let your army of dollar bills go to work for you so don't give up get to work you still have time to make things happen all right so let's look at how does amer how do americans in their 50s do well if we look at the median income for americans in their 50s right now it's about 54 000 per year median net worth about 182 000 but if you subscribe to our wealth formulas the millionaire next door formula age times income divided by 10 and you assume someone's 55 making 54 000 they should be a touch under 300 000 of net worth to be an average accumulator or to be a prodigious accumulator they should be about double that amount at just under 600 000 but just looking at the median or the typical american that's not going to do it anymore we are now close enough to finding financial independence to leaving the workforce you probably could use our resource to let you figure out hey am i a prodigious accumulator of wealth how close am i am i behind or my head we've got the resource for you that's exactly right so if you are a 50 to 59 year old we've got a few strata we've looked at fifty thousand hundred thousand hundred fifty two hundred thousand and if you know that you're a fifty 55 year old making a hundred thousand dollars a year and you want to be a prodigious accumulator of wealth your net worth should be about 1.1 million that's a far cry from the median in america but being a financial mutant is a far cry from being the average or the median american you look at and you think about money differently and that's reflected in your overall net worth and when you look at your overall financial circumstances we've been covering this all show we've been showing little screenshots 20s 30s 40s 50s guys you're going to think that you know because this is latter part of the year as we're recording this you're going to think we got a bunch of elves in the background working on all this because we not only have created the net worth tool that is going it's the same tool we're now using for our own financial tracking we've also created a free deliverable all you have to do is go to moneyguy.com resources it's called the prodigious accumulator of wealth by age where you can actually do exactly what we talked about from 20 all the way to 59 years of age compare it to your income and then you can compare that to your net worth you can know exactly are you ahead of schedule behind schedule we've created the resource that will make this easy for you brian we get asked this question all the time hey i understand you guys are like financial gurus and your advisors and yada yada yada if you just give me one piece of advice what would be that one piece of advice i think probably the first thing i say is you know start saving start saving and investing but the second piece of advice right after that that i would tell people is start doing a net worth statement don't let the excuse of oh i don't have any money or oh i only have debt or oh i'm too young or oh i don't make enough or oh fill in the blank of the excuse if you will just activate that invisible hand in your mind to do this exercise every single year i am convinced that you will be blown away with what it looks like 5 10 15 years from now you just said the key thing it will activate the the wealth creation i always you know when i talk about the invisible hand i'm talking about really this magical thing that's in between your ears which is your brain guys i've shared this this analogy sometimes doesn't hit but um i'm old enough that i um my eyesight's not as well and when i went to the eye doctor recently i'm approaching 50 she said we're going to do monovision where we're going to just correct where one eye will see a far away one eye we'll see close up and i was like there is no way this will work that just sounds like you were just creating chaos is what but you know what three days later it's like beautiful then i'm telling you you're like how is that even possible it's because this brain up here it can do so much more than you realize so why wouldn't you also activate that brain so it can work while you're sleeping while you're you know while you're building in the background start tracking your annual network start putting your goals write them down record them creating plans for it and i think you're gonna wake up three years in the future five years in the future you're gonna look back and go holy cow those guys are right and it's not magical it's just how powerful we talk about how powerful your dollars are wake up that invisible hand because your brain is that powerful too you're missing out if you don't take advantage of all the resources we've created moneyguy.com slash resources all the free stuff if you actually want to accelerate and go beyond just the free stuff i want you to go to learn.moneyguy.com we actually have the financial order of operations course it will tell you what to do with your next dollar as well as now brand new a net worth statement tool that not only helps you track because everybody you can go download a free template in excel or sheets that will do this but if you what we've created is in excel actually gives you a dashboard with measurable metrics so you can actually use this to navigate your journey and we want to hear from you as you start using it as you start loving it let us know if you don't follow us on instagram follow us on instagram and interact with us if you don't follow us on facebook follow us on facebook interactive we want to know how much this is changing your life and we have a community of financial mutants all around us that would love to hear from you guys as well so make sure you check it out and then interact with us so we can know what you think about it so come join us on this journey our annual tradition of doing the net worth statement we'll be waiting for you we'll be here to talk about it i'm your host brian preston mr bo hansen money guy team out

Channel: The Money Guy Show

Views: 144,072

Keywords: money guy show, debt, budget, cash, real estate, insurance, how to make money, save, credit card, compound interest, buying house, buy stock, success, personal finance, Average Net Worth By Age in 2022!

Id: Q9IzuD4SD5E

Length: 55min 6sec (3306 seconds)

Published: Fri Jan 07 2022