Evaluating Your Net Worth

Once you’ve calculated your net worth you might wonder how well you are doing in comparison to your peers.

Fortunately, TheCollegeInvestor.com recently dove into financial data of millennials to calculate the net worth of individuals between ages 18 and 35.  They collected data from the National Association of College Employers, The Wall Street Journal, and the Federal Reserve about millennial savings habits, annual salaries, and student loan debt.  Here’s what average net worth of millennials by age is:

(Source: TheCollegeInvestor.com)

You’ll notice that most millennials don’t begin to increase their net worth until after college, age 23, and actually have negative net worth until the age of 30. How do you compare?

If your net worth is below the average, don’t sweat.  Life is expensive.  It’s good that you are realizing a need for improvement now and have some time to address the issues.

If your net worth is above the average, don’t give yourself a pat on the back yet.  The above chart is the average net worth of millennials, not what a millennial’s net worth should be.

Conventional wisdom regarding net worth goes something like this: by age 30 you should have 1x your annual income, 4x your income at age 40, 7x at age 55, and 10x at age 67.   You will notice in the above chart that the average 30 year old does not have anywhere close to 1x their salary saved. There is a large gap between reality and conventional wisdom.

However, that doesn’t necessarily answer the original question. How well are you doing compared to your peers? How strong is your net worth? Arguably, you can never have too much net worth. The higher your net worth, the sooner you can retire, the more you can give to charity or pass down to family members, and the more freedom you have. Unfortunately, there’s not a great answer except to say that you can always do better.