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Net Worth - A wider view
Old 10-03-2018, 01:22 PM   #1
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Net Worth - A wider view

The linked article may have been posted somewhere on ER before, but I think it deserves a subject heading, as it discusses numbers from many different different viewpoints, comparisons and definitions. Some of which are:

Date of statistics
Household, Individual,
Household head, single male, female
Average, Median, Mean
Age
Retired or working
With or without home equity
Quintiles

Since there are no national statistical standards, it's easy to misunderstand the frame of reference for many of our threads...
for instance..."I don't include my house as part of my net worth, as I expect to have to have a place to live". Interesting to compare, when the home is worth $300K.

Before you read the article, memo to self... the average net worth of a 65 year old retiree is: ?

https://wallethacks.com/average-net-...ut-Home-Equity

And... if that's not enough,... some interesting views on
"The Average Net Worth For The Above Average Person"

https://www.financialsamurai.com/the...verage-person/
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Old 10-03-2018, 01:43 PM   #2
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I've read the Financial Samurai blog post before and found it interesting because it allowed me to compare myself with others who I think are more similar to me rather than just the population in general.
The comments are interesting to read. Some say his methods are too aggressive, but I found them to be a good guidepost.
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Old 10-03-2018, 01:51 PM   #3
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I see that I'm above average and so I'm going to celebrate with a nice expensive lunch at the Samurai Sushi Bar -
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Old 10-03-2018, 02:23 PM   #4
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I don't understand the thinking behind not including home equity in your primary residence. Sure, it's less liquid than most investments, even less so than real estate investment properties, obviously, but it's still an asset that you can use if you move, or if you want to take out a low-rate, secured loan.

Also, woo-hoo! I'm high end...for once!
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Old 10-03-2018, 03:11 PM   #5
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Originally Posted by The Cosmic Avenger View Post
I don't understand the thinking behind not including home equity in your primary residence. Sure, it's less liquid than most investments, even less so than real estate investment properties, obviously, but it's still an asset that you can use if you move, or if you want to take out a low-rate, secured loan.

Also, woo-hoo! I'm high end...for once!
I agree. I never understood that. Its still an asset that can be used to your benefit in many ways.
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Old 10-03-2018, 03:27 PM   #6
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Quote:
Originally Posted by The Cosmic Avenger View Post
I don't understand the thinking behind not including home equity in your primary residence. Sure, it's less liquid than most investments, even less so than real estate investment properties, obviously, but it's still an asset that you can use if you move, or if you want to take out a low-rate, secured loan.

Also, woo-hoo! I'm high end...for once!
You're generous... it's just plain stupid to exclude home equity. There are standard definitions for personal financial statements and net worth always includes home equity

I'm having trouble believing his numbers.... $250k equity for the above average 30 year old? I highly doubt it. My 34 yo DD had no student loan debt, above average income, no job gaps and is a good saver and I doubt that their NW is $250k... well into 6 figures but probably not yet $250k.
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Old 10-03-2018, 03:55 PM   #7
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Originally Posted by pb4uski View Post

I'm having trouble believing his numbers.... $250k equity for the above average 30 year old? I highly doubt it. My 34 yo DD had no student loan debt, above average income, no job gaps and is a good saver and I doubt that their NW is $250k... well into 6 figures but probably not yet $250k.
I started recording every stat I could for my finances when I was 30. My NW at the end of 2013 (when I was 30) was $337,393. I never made above $70k. I was always a saver though...from my teens, 20's and now 30's. My sister is the complete opposite. No one taught me to live below my means or save/invest. I was just lucky and found a lot of financial forums.

My wife was in grad school when I was 30...she was 29...her NW in 2013 was $127,418.
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Old 10-03-2018, 04:23 PM   #8
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Not sure what my NW was at 30, but I am sure it was negative...
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Old 10-03-2018, 04:32 PM   #9
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I was in the black but well under 100K. But hey, that was 33 years ago too.
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Old 10-03-2018, 05:02 PM   #10
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Originally Posted by pb4uski View Post
You're generous... it's just plain stupid to exclude home equity. There are standard definitions for personal financial statements and net worth always includes home equity

I'm having trouble believing his numbers.... $250k equity for the above average 30 year old? I highly doubt it. My 34 yo DD had no student loan debt, above average income, no job gaps and is a good saver and I doubt that their NW is $250k... well into 6 figures but probably not yet $250k.
I mentioned his numbers are aggressive, but over time I think they hold up for someone seeking to be “above average”. It would have been tight for me to match some of his numbers early on, but now I comfortably outpace them by a lot.
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Old 10-03-2018, 06:26 PM   #11
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I don’t think 250k is hard to hit by 30. We are talking about people at the high end after all. I did graduate with about 7k student loans (academic scholarships, financial aid, and jobs)
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Old 10-03-2018, 06:36 PM   #12
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For straight net worth, I include home equity in the calculation, otherwise, it's not an apples to apples comparison.



However, I do not include home equity for the purposes of calculating cash flow to support my basic retirement spend because I'm not intending to generate cash flow from it (via rental, loans, etc).

I'm considering our home equity as a kind of insurance policy if we need additional dollars to move into a retirement home. Kind of overkill but that's how we want to do it.
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Old 10-03-2018, 07:19 PM   #13
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My 22 year old had between $60-$75K savings. Out of that I only gave her $5K for graduation. So I believe it’s possible. She is not a highest earner either, just average for Silicon Valley.
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Old 10-03-2018, 08:18 PM   #14
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So would you divide these numbers in half for a couple? DW and I are on the high end if we consider ourselves as one person. As the main breadwinner, this is easy for me to concede, since I guess the bulk of our NW is “mine”. Of course, there is no “mine” as anyone who got divorced will tell you. So how do you look at these numbers if you’re married?
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Old 10-03-2018, 10:22 PM   #15
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Originally Posted by YVRRocketSurgery View Post
For straight net worth, I include home equity in the calculation .....

However, I do not include home equity for the purposes of calculating cash flow to support my basic retirement spend because I'm not intending to generate cash flow from it (via rental, loans, etc). ....
+1 I think this is a common approach.
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Old 10-03-2018, 10:39 PM   #16
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in my calculations , i exclude my residential property and investment property from the $value ( but not income and costs )

both are liable to lose $value , in the property downturn in my area ( in the short and medium term ) and i have no plans to sell either property , either
i focus on my liquid assets valuations ( and income )


as an old-timer mentor once said about his property holdings .. 'they aren't worth a damn thing until somebody with a wad of cash wants to buy some of it '

so for me cash-flow implications YES , estimated valuations NO

if i had mortgages on those properties ( or even one of them ) that is a whole different game ( the leverage game )

PS each property has a solar array installed generating cash income from the power company
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Old 10-03-2018, 11:20 PM   #17
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I use two types of Networth. The standard Networth includes all assets less liability, so that includes the house. The second Networth is Liquid Networth, which is mainly Investments you can sell in the stock market anytime plus cash. I only included net income if I am calculating Projected Future Networth
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Old 10-04-2018, 05:28 AM   #18
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Our house is not ~70% of our NW. It is about 7%.
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Old 10-04-2018, 06:17 AM   #19
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in my calculations , i exclude my residential property and investment property from the $value ( but not income and costs )

I don't agree with not counting primary residence but I understand and respect the decision not to count as it isn't considered an investment like other assets. However, any computation of NW such as for insurance needs will include it and also your personal belongings like cars, TVs, etc.



However, I don't understand not counting investment property. Real estate both primary and a rental account for about 40% of my NW although both have a mortgage on them. About 30% of NW if you deduct the mortgage balances. Regardless of the mortgages, I still have the full value of the property at risk and when the property value increases each year the mortgage doesn't increase with it. So, I count the full value of real estate in assets and then include mortgage in liabilities.



Quote:

both are liable to lose $value , in the property downturn in my area ( in the short and medium term ) and i have no plans to sell either property , either
To me, I'm more likely to loose $value in my stock investments than the real estate. Think of Pan Am, GE, MCI, and these are only some of the stocks that have lost value. I would think stock and bond investments have more downside risk today than real estate.



Just my humble opinion.
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Old 10-04-2018, 06:54 AM   #20
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I enjoyed reading the Financial Samurai piece about "Average Net Worth For The Above Average Person." Lots of assumptions, no doubt. But I thought it was thoughtfully done and could thus provide a meaningful basis for the "above average person" who might be asking the question, "Am I on-track?" I forwarded the link to our kids who are 26 and 29. They are both doing well, but probably a bit behind based on this.

In the case of DW and myself, our NW was negative (or barely positive) until about age 32 or 33. This was mostly due to my decision to go back to grad school at 27 (graduated at 29). This consumed all of our meager savings. Our two kids were born when we were 29 and 32. Kids are expensive. We had a mortgage, two car loans, bought furniture on loan, and some credit card debt that took years to pay off. Then around 33-34, things started taking off. Debt was gone except for the house and one car. Both careers were going strong, yet we kept lifestyle creep in check. Savings were starting to accumulate into meaningful numbers. We managed to call it quits by 52, mostly enabled by the "above average" earnings that resulted from my decision to go back to grad school.

So... everyone's path will be different. It doesn't need to be a straight line. But for "above average" people (as loosely defined in the piece), I think it is helpful to have a more meaningful comparison point than what you get from broad-based statistics. Then again, if you have a solid plan, the plan itself should tell you if you're on track without the need for external comparison points. But even with a solid plan, I just think it's human nature to want to know where you fit in relative to peers.
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