I mentioned before that I was wanting to read Thomas Stanley’s The Millionaire Next Door. Well, today I took my girls to the bookstore so they could play and I could do some reading. Sure enough, they had this book and I couldn’t wait to dive in! While I only got to read a few chapters, I did come across one very interesting formula on calculating how much net worth you should have…
What should your net worth be at?
The formula is simple:
Take your age multiplied by your yearly pre-tax income (including money earned from investments) and divide by 10.
That is how much net worth you should have accumulated.
So for me – I’m 29 years old, times pre-tax income of $70,000 (total estimate) divided by 10 gives me $203,000. Ummm, I am no where NEAR this number for my net worth. But that’s OK! My husband and I are getting serious with investing, looking into buying a rental home, focusing on growing our annual income and really working on saving money, so I know we’ll be able to catch up. I definitely wished we would have focused on investing when we were in our early 20s, but it’s better to start now than wait another 5 years.
Have you seen this formula before? Does it ring true for your situation??!