After publishing my latest Net Worth Targets By Age post, I received some pushback from people who felt it was more appropriate to use a multiple of spending as opposed to a multiple of income to calculate a net worth target. The argument is that most people spend less than they earn, therefore taking a multiple of spending creates an excessive net worth target. Fair enough if you want to make excuses. But don’t you want a challenge?
What if your spending goes up drastically due to unforeseen medical expenses? What if you have to start supporting more people? What if your investments lose money as we forget they sometimes do? What if you get laid off with no severance? What if you can’t sell your house to pay for living expenses because the market dried up? Because there is no rewind button in life, I think it’s better to be more conservative with your financial calculations.