Deleted
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Post by Deleted on Mar 29, 2011 8:55:00 GMT -5
I know the Net Worth question gets asked all the time and in all sorts of ways. However, I can't seem to find any forum threads or anything via google that discusses Net Worth as a percentage of Lifetime Earnings. To me, this makes the most sense if you really want to measure how well you have saved and invested over the years.
So YMers, what is your Net Worth as a percentage of your lifetime gross earnings? Most of us will have to estimate lifetime gross earnings, but that's close enough. You can find your gross earnings on your Social Security statement if you want to be more accurate. Use the Medicare earnings column instead of SS earnings column is you're above the SS earnings cap.
As an example let's say your current net worth is $100,000. You have been in the workforce for 10 years and your cumulative gross pay over that period is $500,000.
Your answer: $100,000 / $500,000 = 20%
EDIT: See Post #26 for an update on the topic.
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Deleted
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Post by Deleted on Mar 29, 2011 9:01:06 GMT -5
I think I am around 40-50%...
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Post by Deleted on Mar 29, 2011 9:23:10 GMT -5
With about 3 yrs in the workforce (and benefiting nicely from the market run-up over the last 2 years), I'm at 65%.
DF is at around -10%...but mostly due to student loans.
We'll be at around 40% when we merge finances.
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schildi
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Post by schildi on Mar 29, 2011 10:07:55 GMT -5
60-70%, guessing lifetime earnings though. Also, what do you use? W2 income is not all that correct, as it does not include 401(k) contributions, HSA money, profit sharing, etc. What my W2 says can be $30-$35K or so below what I really grossed.
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Deleted
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Post by Deleted on Mar 29, 2011 10:17:46 GMT -5
60-70%, guessing lifetime earnings though. Also, what do you use? W2 income is not all that correct, as it does not include 401(k) contributions, HSA money, profit sharing, etc. What my W2 says can be $30-$35K or so below what I really grossed. Good point schildi. I suppose it probably makes more sense, (and more consistent), using gross earnings as the base. I'll edit original post as such.
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Baby Fawkes
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Post by Baby Fawkes on Mar 29, 2011 10:18:36 GMT -5
In line with schildi here. If you base it on W2 then I'm up around 70%, but if you base it on gross then I am closer to 45% as a rough estimate. I'm still in my 20's (just) so I'm still not near the point where my passive income outweighs my earned income. I'll be happy when I get to that point and it *should* be easy to grow that percentage from that point onwards
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azphx1972
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Post by azphx1972 on Mar 29, 2011 10:37:23 GMT -5
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cronewitch
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Post by cronewitch on Mar 29, 2011 10:39:47 GMT -5
Mine is about 50% just guessing at lifetime earnings.
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phil5185
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Post by phil5185 on Mar 29, 2011 10:42:06 GMT -5
Probably about 300% (age 72). In 1963, an engineer earned about $8000/yr - so it took quite a few years for my denominator to get to a million. Today, an engineer might knock out a million in his first 10 or 12 yrs, it probably took me over 25 yrs.
One scenario would be the $200k earner who earns $6M over 30 yrs and spent it on car depreciations, food/liquor, travel, or poor investments - and ends up with only a paid-for house & a SS check - his metric might be 8%. (And that is a valid choice - the 'you only live once' mindset).
I think you are right - this is a good metric of your stewardship of the money that you earned. But the answers can be extreme - some are way north of 1000% and some all the way to 0%. So it might be hard to draw the 'band of acceptability' - or even a 'band of desirability'. The metric goal is based entirely on the participants judgment of what s/he perceives as desirable.
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thyme4change
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Post by thyme4change on Mar 29, 2011 10:46:20 GMT -5
Do I add my husband's and my income together? Or do I take half our net worth and my income? Or can I take all our net worth, and just my income?
I think combined we are probably around 30%. That's what you get when you start late.
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Deleted
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Post by Deleted on Mar 29, 2011 11:27:11 GMT -5
Thanks for sharing azphx1972! That's just the sort of thing I was looking for.
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Deleted
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Post by Deleted on Mar 29, 2011 11:47:59 GMT -5
Probably about 300% (age 72). In 1963, an engineer earned about $8000/yr - so it took quite a few years for my denominator to get to a million. Today, an engineer might knock out a million in his first 10 or 12 yrs, it probably took me over 25 yrs. One scenario would be the $200k earner who earns $6M over 30 yrs and spent it on car depreciations, food/liquor, travel, or poor investments - and ends up with only a paid-for house & a SS check - his metric might be 8%. (And that is a valid choice - the 'you only live once' mindset). I think you are right - this is a good metric of your stewardship of the money that you earned. But the answers can be extreme - some are way north of 1000% and some all the way to 0%. So it might be hard to draw the 'band of acceptability' - or even a 'band of desirability'. The metric goal is based entirely on the participants judgment of what s/he perceives as desirable. Agreed, answers will certainly be all over the place. However, answers like yours at 300% are insightful. Most people couldn't fathom being worth more than their lifetime earnings at their job. "How could you be worth more than you've ever made? Don't you spend any money, pay taxes, etc?" But it makes sense if you understand a wealth building strategy that takes the 15-20% of your income you put aside for investments/retirement and let it grow over a 30-40 year window. As a follow-up, do you recall or can you estimate at how many years into your working career did your net worth cross over the 100% threshold of cumulative earnings? Maybe I'll target that as a goal...
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dancinmama
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Post by dancinmama on Mar 29, 2011 12:10:23 GMT -5
This message has been deleted.
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skubikky
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Post by skubikky on Mar 29, 2011 12:23:03 GMT -5
"this takes into account that the value of our home has dropped by over 50% since we purchased it."
Don't mean to hijack, but have you or anyone out there in CA been able to get a reduction in property taxes due to the lower valuation? I'm guessing no, but have been wondering about this.
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thyme4change
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Post by thyme4change on Mar 29, 2011 12:26:26 GMT -5
In AZ they are bringing the tax base down - but not as fast as I would like. I got an appraisal when I refinanced, and my neighbor did, too. We are considering petitioning to have our property tax adjusted accordingly. It would only end up saving me less than $100 - so I'm not sure it is worth my time.
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The J
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Post by The J on Mar 29, 2011 12:27:22 GMT -5
My networth is still negative, so I don't have one yet.
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dancinmama
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Post by dancinmama on Mar 29, 2011 12:32:45 GMT -5
"this takes into account that the value of our home has dropped by over 50% since we purchased it." Don't mean to hijack, but have you or anyone out there in CA been able to get a reduction in property taxes due to the lower valuation? I'm guessing no, but have been wondering about this. Oh yes, absolutely. I applied for a Proposition 8 property tax reduction in 2008. Every year they automatically reassess the property value and adjust our property taxes accordingly. They have dropped every year since. You have to apply for it to get it; it is not automatic.
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Gardening Grandma
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Post by Gardening Grandma on Mar 29, 2011 14:42:39 GMT -5
I don't know what our lifetime earnings are. Looking at the SS PEBE statements, they only show the max SS earnings. DH went over that amount most of his working life. I didn't though. :-(
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azphx1972
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Post by azphx1972 on Mar 29, 2011 16:01:13 GMT -5
Hmm, I'm pretty sure my SS PEBE statement shows my medicare wages too, but I'm not at home to check. Anyone else?
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TrixAre4Kids
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Post by TrixAre4Kids on Mar 29, 2011 16:02:41 GMT -5
Hmm, I'm pretty sure my SS PEBE statement shows my medicare wages too, but I'm not at home to check. Anyone else? Yes, it does.
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azphx1972
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Post by azphx1972 on Mar 29, 2011 16:03:20 GMT -5
Thanks trix. That's what I thought.
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TrixAre4Kids
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Post by TrixAre4Kids on Mar 29, 2011 16:10:20 GMT -5
I did a quickndirty computation and I'm about 96%. I have the SS statement, but guesstimated rental income from 1996 to the present. It'll do until I can pull more accurate figures.
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azphx1972
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Post by azphx1972 on Mar 29, 2011 16:16:31 GMT -5
Impressive, trix!
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TrixAre4Kids
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Post by TrixAre4Kids on Mar 29, 2011 16:21:46 GMT -5
Thanks Axphx1972, but when I think back of all the stupid stuff (ignorant, not stupid I guess) I've done...........Really wish I'd known more about finance way back when.
Question for you: Why don't you tag your networthiq profile with the Your Money group? Any particular reason?
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azphx1972
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Post by azphx1972 on Mar 29, 2011 16:27:31 GMT -5
Question for you: Why don't you tag your networthiq profile with the Your Money group? Any particular reason? I wasn't sure I wanted to be associated with such a group of misfits. Kidding! It's been so long since I signed up on NWIQ, and I just found these boards, so I hadn't gotten around to it. Thanks for the reminder! It's done now.
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Deleted
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Post by Deleted on Apr 15, 2011 21:31:08 GMT -5
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azphx1972
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Post by azphx1972 on Apr 16, 2011 1:56:23 GMT -5
Thanks jimmo85!
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RoadToRiches
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Post by RoadToRiches on Apr 16, 2011 12:00:59 GMT -5
I am gonna stay away from this for about year or so.... lol..otherwise, I might start drinking heavily from depression lol
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shandi76
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Post by shandi76 on Apr 16, 2011 12:22:14 GMT -5
Based on a rough calculation of gross lifetime earnings, mine comes out at about 43%.
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formerexpat
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Post by formerexpat on Apr 16, 2011 12:27:15 GMT -5
This is the metric I use over the MND formula that penalizes the young, high earners [although, I do have this formula in my spreadsheets as well]. I've been out of college for almost 8.5 years now and am currently at 33%. I'd be up over 40% if not for those darn student loans. I should be over 100% between 45 and 50 yrs old.
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