This post will provide some suggested net worth growth target rates by age. It’s good to have net worth growth targets to help ensure you will retire comfortably. After all, everything is relative in finance. If you’ve got a net worth target of $1 million at age 30, but most people at age 30 have a net worth of $2 million, you’re actually behind!
In your younger years, your net worth growth will be faster because you are poorer. As you get wealthier, your net worth growth will likely slow down given a large base. As you get wealthier, you also don’t want to take as much investment risk out of fear of going in reverse.
Methodically growing your overall net worth is what wealth creation is all about. Your net worth is the culmination of savings, investing, real assets, and liabilities. I’m much more concerned about growing my net worth than only growing my stock portfolio because my stock portfolio is just a portion of my net worth.
Grow Your Net Worth Appropriately
Think of your net worth like a battleship during a time of war. As the intrepid captain, you are navigating your net worth to glory through sea mines of temptation and unknown icebergs of economic downturns. The greater you build your net worth, the more careful you steer.
It’s always important to think about your net worth in a risk adjusted manner. Putting 100% of your net worth into the stock market isn’t so bad when you’re a single 28 years old with $150,000 to your name.
But if you’re 50 years old with a couple kids entering college, you’re likely not allocating your entire $1 million in assets into the stock market.
My Net Worth Growth Goals
When I was in my 20s, I didn’t really track my net worth because I didn’t know better. I was focused on my career and saving as much as possible. My idea of net worth diversification was investing as much as I could away from the stock market given my pay and career were already dependent on the stock market. Every year 20%-30% of my compensation was paid in the form of company stock so there was no escape.
For 10 years this strategy worked pretty well because the stock market really didn’t go anywhere from 2000 – 2010 and real estate caught fire until 2007.
Now everything is on fire as both real estate and stocks are at all-time highs! Let’s just hope the battle ship doesn’t burn down with so much unbridled mania.
I’ve been much more surgical in managing my net worth in my 30s given it has grown to a point where it throws off an important passive income stream. Not having a day job anymore makes it that much more important to protect my financial nut.
If I can grow my net worth by 10% per annum, I’m usually satisfied. To put 10% in context, Bernie Madoff was able to amass $50 billion dollars under management because he delivered fake 10% annual returns!
In this article I’d like to provide several net worth growth targets to consider as well as a net worth growth framework by age. I think if I was able to read this article in my 20s and early 30s, I would have allocated more of my net worth into equities and would have a 10% higher net worth as a result. Hopefully this framework will help many of you build wealth.
Net Worth Growth Benchmarks To Consider
1) S&P 500 Index Performance.
The index of 500 large cap weighted stocks was introduced in 1957 and makes up 75% of the total US market capitalization of stocks. In other words, the S&P 500 index is the best reflection of the US economy. Returns have been anywhere from -43% in 1931 to +52% in 1954 to +30% in 2013. The average hovers around 8%.
The only way to get ahead if you are behind the average net worth for the above average person is to grow your net worth faster than the S&P 500 index. Targeting the S&P 500 index as a net worth growth benchmark is generally for middle aged individuals.
Just one thing to note. After a massive bull market since 2009, return forecasts over the next 10 years is way down. Therefore, you ironically will have a lower net worth growth target to shoot for.
2) Risk Free Rate.
The risk free rate is the 10-year government bond yield. It is risk free because the US government is the most sovereign nation and will pay you back unless we get attacked by aliens. The current risk free rate is roughly 2% in 2022 from a low of 0.51% in 2020. The risk free rate has been coming down for over 30 years as we’ve managed to contain inflation in the US and enact more effective economic policy.
Given I believe the ideal withdrawal rate during retirement touches no principal, growing your net worth by at least the risk free rate should be the base case goal for all individuals, especially traditional retirees over 65 who no longer have strong earnings power.
3) Industry Specific Indices.
Every industry has differing rates of growth. It would be unfair to compare the growth rates of the stable telecom industry with the growth rate of the internet industry. You can track your industry’s annual growth rate through the performance of industry ETFs such as: HDG (hedge fund), XLP (consumer staples), XLE (energy), XLF (financial services), XLV (healthcare), XLI (industrials), IYR (real estate), GDX (materials), IYZ (telecom), XLK (tech), and XLU (utilities). You can be even more specific by tracking your own company’s stock price performance if it is publicly traded.
If you want to expedite your wealth, then a large part of it has to do with choosing the right job in the right industry. This is why it’s important to do well in school so you have the options to choose your destiny. The top industries for MBAs are now tech and internet, as opposed to banking and management consulting in the late 90’s.
The Ideal Scenario: A great goal is to make money in good times and bad times. Based on my net worth growth rate benchmarks, an optimal scenario is to earn the risk free rate of return during down markets and match the S&P 500 growth rate during up markets. In order to do this, you’ve got to break down your net worth and make assumptions across each asset class. You’ve got to hedge out risk. No easy task, hence the ideal scenario. I’ll discuss my ideal scenario strategy in a future post.
Assumptions For A Net Worth Growth Target Framework
- Risk tolerance: Risk tolerance decreases the older you get due to added responsibilities, a larger net worth in need of protecting, and less time to make up for investment losses.
- Earnings power: Earnings power increases steadily up until about 50 and begins to decline due to age discrimination, risk of termination, less energy, and the risk of not finding work again if terminated.
- Economic variables: Average historical variables of GDP growth 3%, inflation 2.5%, risk free rate 0.5% higher than inflation.
- Education: Graduated from college or attended a trade/vocational school.
- Employment: Continuous employment or livable income since graduation.
- Savings rate: At least a 20% average after taxes over your entire career.
- Net worth upon entering the work force: $0. I realize many students nowadays graduate with debt, but for simplicities sake we start with a $0 net worth. If you have student loans, then think of the educational capital you have to bring your net worth back to zero.
Net Worth Growth Target Rates By Age Chart
18-30 YEARS OLD: EXTREME NET WORTH GROWTH PHASE
Between the ages of 18-30 you should be in the extreme net worth growth phase. If your net worth is $10,000 at the age of 23 one year out of college, it should be fairly easy to double your net worth to $20,000 if you make $40,000 a year and live rent free in your mom’s basement.
You’ve literally got nothing to lose when you’re young. It’s important to take calculated risks in your career and in various investments. You’ve got plenty of time to learn from your mistakes. You’re also able to have a redo by going to graduate school.
Net worth growth rate target per annum: 50%-100%+
31-35 YEARS OLD: RAPID GROWTH PHASE
Age 30 is a big milestone for both men and women. Speaking from a man’s point of view, we either will have “made it” or know we are on the right path to making it at age 30. Income should be much greater than income in your 20s, which should help accelerate savings and investing. 31-35 is the median age where most Americans buy a home.
After 8 to 13 years of contributing to your 401(k), you should have roughly $130,000 – $330,000 if you follow my 401(k) by age chart. You begin to see the growth of your assets make a difference to your overall net worth. No longer is it just about making more money by going to work. It’s about making your money work for you.
Net worth growth rate target per annum: 25%-50%
36-40 YEARS OLD: HIGH GROWTH PHASE
You begin to take risk off the table because you might have dependents. No longer are you going to have a majority of your net worth in stocks when you’ve got a spouse and a little one to put through school. Your parents are likely in their 60’s to 70’s if they are still around. You’d like to set aside some time and money to care for them if needed.
36-40 years old is a great time for income growth as you’ve now got 10-18 years worth of experience. You’re old enough to get real respect from your employees, clients, and managers. In terms of love life, 35 years old is also the golden cross of love for men. Your net worth is much more diversified now with real estate, stocks, bonds, and risk free assets. If you don’t have any dependents, you can afford to take more risk.
Net worth growth rate target per annum: 10%-25%
41-55 YEARS OLD: NORMALIZED GROWTH PHASE
After 20 years of saving and investing you’ve grown a respectable sized nest egg which you’d like to protect. You begin to tire working for the man so the thought of your retirement nest egg losing any value petrifies you to be more conservative with your investments. You’ve got a propensity to hoard cash like the rich.
With 25-45 years left to live on average, you can’t get too conservative. You’re actively looking to generate passive income streams or spend more time on optimizing your income producing investments. Assets that provide yield such as high dividend stocks, annuities, and muni bonds start looking appealing.
Net worth growth rate target per annum: 10% – 15%.
56-70 YEARS OLD: MAINTENANCE PHASE
You don’t necessarily have to be 56-70 years old to be in the net worth maintenance phase. If you’ve achieved your desired financial number at a much younger age, staying in the maintenance phase is fine too because you’ve got all the money you need.
With a minimum net worth return based on the 10-year risk free rate, you are assured to earn at least 3% on your net worth every year. On a large number, 3% is enough especially now that you’ll be able to withdraw from your pre-tax retirement accounts and receive Social Security.
Net worth growth rate target per annum: Risk free rate (3%) – 10%.
71+ YEARS OLD: REDUCTION PHASE
If we spend all our years slaving away at a job and die without enjoying everything life has to offer that would be a crying shame. I conservatively bake in a negative net worth growth rate to allow people to spend their money beyond the risk free rate of return. This is even though the ideal withdrawal rate in retirement doesn’t touch principal.
The ideal scenario is to earn enough to happily live off your dividends and interest to guarantee you’ll never run out of money. You’ll also be able to pass down your assets to the next generation and to charities.
If you find yourself with more money than you need, you can afford to take more risk with your net worth if you’d like. However, by this age I think you’ve figured out what makes you happy. Making more money likely is not necessary. It’s much more rewarding using your money to help other people instead.
Always Build Your Net Worth
Obviously everybody’s lives aren’t going to go according to plan or follow my various life stage descriptions. Some may find themselves long term unemployed during their supposed high earning years. Others might have hit the jack pot earlier and decided to de-risk because they’re completely satisfied with what they have.
The global pandemic should be considered an anomaly never to be experienced again. At least real estate and stocks did well during a global pandemic. But I don’t recommend baking such numbers into your retirement pro forma calculations. It’s much better to be conservative and end up with too much than come up short when you are no longer capable of working.
Once you get to a comfortable net worth level I encourage you to shoot for a 10% annual growth rate. My definition of a comfortable net worth is when you become UNCOMFORTABLE losing any more than 15% of your net worth in one year.
A 10% annual growth rate is close to the historical S&P 500 average annual return. 10% is also roughly 3X the risk free rate. This net worth growth target rate ensures that you are staying ahead of inflation. You also aren’t putting too much of your net worth at risk.
During bull markets, greed is going to really tempt you to go outside your risk tolerance zone. Definitely be honest with yourself in knowing what you can stomach to lose. During bear markets, fear will make you hoard cash and miss investment opportunities.
You might even develop a notion of wanting to spend all your money before the market loses it all for you! In either environment, try and be disciplined to sticking with a net worth growth target. I hope my net worth growth framework helps!
Wealth Building Recommendation
One of the best way to become financially independent is by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place. This way, you can see where you can optimize your money.
Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts. I then managed my finances on an Excel spreadsheet. Now, I can just log into Personal Capital to see how all my accounts are doing, including my net worth.
A great feature is their Portfolio Fee Analyzer. It runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging!
Finally, they have an amazing Retirement Planning Calculator. It pulls in your real data and runs a Monte Carlo simulation to give you deep insights into your financial future. Personal Capital is free, and less than one minute to sign up.
Grow Your Net Worth With Real Estate
In addition to investing in stocks and bonds, I’m a big proponent of real estate investing. Real estate is a core asset class that has proven to build long-term wealth for Americans.
Given interest rates have come way down, the value of rental income has gone way up. The reason is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
My favorite two real estate crowdfunding platforms are:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
Both platforms are free to sign up and explore.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. Thanks to real estate, my net worth has grown far greater than I could have ever imagined! Suggested Net Worth Growth Target Rates By Age is a FS original post.
My age and networth are in your 31-35 bracket. I had a 51% gain in NW for 2013. I had ~45% for 2012. I was actually fretting over those numbers recently, but your charts and the comments here have put me more at ease.
Very nice! Can you elaborate on how you were able to get there?
Sure. There wasn’t really a whole lot too it. It would have been more than 50% in 2013, but I had to pay for my wedding and honeymoon… missed out on a few points there, but I think I can live with that trade :)
I’ll divide everything into contributions and gains. This was the first year that my gains passed my contributions, and I think that there is a good chance that will continue in the future (the snowball is rolling).
Contributions represent 40% of my NW gains. These are contributions to both retirement and non-retirement accounts. Because I’m hoping for a relatively young retirement, more than half of these contributions are in post-tax dollars. I do still max out my 401k, but I’m considering cutting back since it has grown to represent about 50% of my portfolio.
Gains represent the remaining 60%. The market went on a tear last year, and because I’m relatively aggressively invested in equities (~80% of my investments are in index ETFs like VTI, VB, and VUG) I caught a good chunk of that. The 20% of my investments that are not in index funds are in older bonds/CDs, stable dividend stocks (utility / energy mostly) with ~4% yields, or in an emergency fund.
I would say that a year ago that 80-20 mix was probably closer to 90-10. I have a tendency to pile up cash in years where the market advances considerably. I’ll unload that cash when things get cheaper (or when I decide to finally bite the bullet and purchase a house).
Gotcha. I long for the day where my contributions can affect such a great percentage in net worth. Those were the fun times! Now my contributions are under 3% a year, and it’s very hard to make a difference. Hence the importance of allocation for me.
Nice article.
In 2013, my NW went up around 8%. It was taken down by a few items:
1. Buying a larger residence and pumping money into some renovations and improvements.
2. Birth of our first child.
That being said, I also turned 40 in 2013 and have been a bit more conservative so I missed out on the huge stock market run for the most part. My overseas stock holdings didn’t do very well at all compare to the US market. Oh well.
I am just above the top of the NW range for the 71+ age group so that’s also why I am a bit more conservative.
Last year was also the year I was able to shed 40 -45 lbs (now am a trim 155 – 160 lbs on a 6’2″ frame) so that was a far bigger accomplishment than growing the NW a few more percentage points. I’ve already donated my entire old wardrobe to charity.
Cheers,
Mike
Howdy Mike, what percentage of your stock portfolio invests in Asian markets, and Thailand specifically?
8% is pretty good and inline with the suggested growth rate for the NW range I have. What did well for you?
Unfortunately all my stock portfolio is in the Thai stock market, I also have some investments in early start up companies which are totally illiquid until there is a sale. My NW increase came from the old fashioned way- saving a ton of my income and getting a good bonus.
That formula worked well for me in up and down markets so I’m sticking with it for the time being.
-Mike
I’m 29 and have a huge negative net worth because of student loans :( I don’t even count my net worth b/c it’s so bad. I am putting away over 1k towards debt and once I am debt free I want to put that towards savings, retirements, etc. I’ll need to catch up.
Sorry to hear about that. But at least you have educational capital!
Maybe it’s time to really highlight your negative net worth on your blog to get you in this intense phase of net worth creation. But maybe you are already there given you started a blog about reducing debt.
Sam,
At this point our goal is growth of 20% annually. (That includes contributions) At that rate it will exceed our annual income earnings. I’ll hit financial independnce when my gains are greater than income without contributions.
A 20% annual growth is impressive for your age and assets. That’s a doubling of NW every 3.5 years. Hope you get there and don’t forget to take me out to a nice juicy steak dinner at Morimoto’s and then some cocktails at The Study next time I’m in Honolulu!
Sam,
This is an excellent article!
I’m obviously in a later life phase, so, I think 6 to 8% overall annual net worth growth would be satisfactory. Actually, my stock investments are up around 21% for 2013. I’m very happy with that!
I’m actually more concerned with helping out my children as opposed to growing my personal net worth. This looks like a year where I purchase a third house. I don’t want my grandchildren growing up in an appartment, and houses are cheap right now!
Lucky grandchildren!
I’m pretty lucky as well thanks to a grandfather’s real estate investment over a half century ago.
Good job on the stock growth!
Sam,
Good stuff. I can see how these NW targets are fairly reasonable if you start young and stick with it. I didn’t really start saving until I was almost 28 years old, so I’m way behind the curve here at 31. However, I’m confident at my pace that I’ll be squarely in your target range when I’m 40. Wish me luck! :)
Best wishes.
Good luck DM! You are killing it with your 60%+ after tax savings rate and if the stock markets don’t disappoint us you will surely catch up by 40.
The actual percent growth for me was around 1000% but that is simply because of where I ended up. I had a negative net worth and pushed into the positive right at the end of the year. Looking at your table, I feel the numbers are pretty accurate. I’m a little behind schedule right now but should be able to make it up through a high saving percentage as the years go on.
Keep up a 1,000% growth rate for just several years and you will be a billionaire in no time! :)
You have us pegged pretty well. For 3 out of the last 4 years we have experienced a 35% to 39% growth in our net worth (10% the other year out of the four). That’s how I retired at 33! Most of that growth came from excellent market returns (which are really outside of our control).
At this point our net worth won’t grow as fast since new contributions to investments won’t be happening. Who knows, perhaps my Root of Good income will skyrocket and make the net worth continue to grow!
Yah never know right Justin? Got to be in in to win it. Good luck!
Excellent article. My wife and I are halfway between your NORMALIZED GROWTH PHASE and MAINTENANCE PHASE. I would be happy if we make between 3% and 8% growth per annum going forward.
Sounds good Bryce. Then you’ve achieved money happiness too given you’re at that phase. How did you do in 2013?
I’m reading “Your Money Or Your Life” by Vicki Robin and Joe Dominguez and just finished the first step where I calculate my net worth for the first time in my life. At 27 years of age, I am at a net worth of -$11,100.00 and have over $23,000 of debt left to go (student loans mostly). My main 2014 goal is to get some of that debt lumped off because, as shown above, I’m really not where I should/want to be. It finally hit home that I need to be conscious about my money – got to start somewhere, right?
For sure Jamie. There’s no better time to start than right now. We can’t count on anybody to bail us out, and we will eventually tire from working long hours, hence the absolute need for savings and eventually getting your money to work for you.
Good luck!
I love this type of post. I didn’t do so hot in the first age group but I’ve been hustling to try and get caught up. It’s very motivating to have high returns and net worth goals. Takes sacrifice and sweat to build a big nest!
Sometimes when I see these kinds of suggestions, it makes me want to kick myself in the butt for not having saved a penny during my 20’s up to mid-30’s. My networth then was in solid negative territory. On the bright side, my site is earning a little bit of money from adsense. I have to work on getting more passive type of income so I can just save more every month!
Now it’s time to kick my nephew in the butt again for buying a truck with a $400/month payment, and probably not maxing any of his retirement options.
Look on the bright side, hopefully you had tons of fun in your 20’s and 30’s as result?
So long as your nephew is making 10x the value of his truck, all is good!
Yep, definitely had fun in my 20’s and 30’s. I often overdid it. hehehe
I don’t think it’s that great to be living at home with dear old dad and paying more on the truck payment than saving.
Can’t take those fun time memories away!
I think your targets are very reasonable! The key is starting young with a small amount of money. Having a clear goal and plan may be difficult at 22 years old, but you have to start with something. Most people do not start and think you can catch up later.
As I watch my net worth grow, I keep raising the target. It may be one of the reasons, I am delaying retirement to max out Social Security and have a reasonable pension (including lifetime medical). I expect to have some difficulty with the reduction phase! Istart withdraw at a 2% rate until I get comfortable.
Good stuff, as always, and very timely since my wife and I do a regular net worth analysis twice a year (July 1st and Jan 1st). We’re just within range of your suggested net worth (assuming value of property minus what’s owed is accounted for), and still aggressively climbing our way out of her debt. (Doctor of optometry wasn’t cheap).
This year, there will be a big change as I prepare to open a restaurant, which if it goes well, will help boost our savings very quickly, or if it goes badly, will cost us to fall behind (small initial investment, but the absence of steady income will be felt). Also, getting health insurance without corporate will be an interesting process as well (my wife owns her own business, and now I’ll be shifting to business ownership too, so we can no longer rely on a company health insurance plan).
Thanks again for the great post!
Fancy charts! Nice job compiling them. I wanted to take the information and create more action. I think it’s the MBA in my trying to always find solutions to problems, not just highlighting info.
Hi Jane,
It’s just the “ideal” situation. It’s something I encourage people to strive for, including myself, which is why I have a passive income goal that I have yet achieved.
In my post, I bake in a Reduction phase so people do spend down their principal. Can’t take it with us right?
S
I like how you break it down by age. We are entering the 41-55 phase and our target is to normalize growth. Isn’t 10-15% a bit high?
It’s a bit high for us because I’m not working full time anymore. I’m shooting for 8-10% annually. We also need to figure out how to avoid big losses. I’m afraid of the next market turn down.
8-10% and 10%-15% has 10% as an overlap right? Most people still work at age 40. Imagine if you still had your engineer salary and company stock how much more you could grow your net worth.
Protection is definitely key.
As with most everyone else, 2013 was a good year for my net worth. I was really helped out by the price appreciation in my home which has been outstanding since buying it in 2011.
GREAT timing buying your property in 2011! You’ll see in an upcoming post/chart that 2011 was the optimal time to buy.
Great article an insight. I am in the rapid growth phase and thanks to real estate increased my net worth well above the suggested figures. I have seen 50% growth in the last few years every year. That’s not just appreciation but buying properties below market and fixing them up.
NW up 19% but I never really change my house value. I just have that listed as what I think I could sell it for in 30 days or less. My stock portfolio is up 24.5% but since I have added cash to it this year I do not think I am even close to outperforming the market. I feel like I am more aware of my personal finances than anyone I know. But when I read your articles and take 5-10 minutes to think them over, I feel like I am not doing near enough to maximize my efforts. I will continue to work on that. In 2014 I will work to save more, invest more, pay less in fees.
25% is a solid blended return in equities. It would actually be odd if you came to this site and thought you were even more gung ho about personal finance, since this site is almost 100% personal finance and not a general site.
Well, I’ve got 5.5 more years in the extreme growth phase. When I cut my rent check I do wish I was living in mom and dad’s basement where the cost would be MUCH less than the grand a month I pay for the “privilege” to live in NYC. I would say those who are married with children in the 18-30 range probably are a bit more risk adverse than those of us who only have to be concerned with ourselves. One of my goals for 2014 is to become more aggressive with investments because you’re right, I really don’t have much to lose.
Sounds good Erin. And what you do lose will be a great learning experience for your investments when you’re older and have more money.
NYC really is awesome. Time of your life I say! Enjoy it and take those risks!
I was a little worried when I saw how much someone in my age group should have in Net Worth, but then I decided I need to include my military retirement and VA disability. These are two income streams that “should” never go away, though congress has recently put a kink in future retirement cost-of-living raises. Here is how I figured it: I took the amount of my monthly checks, multiplied by 12, then divided by 4%, i.e. the amount of withdrawal one would typically make from a retirement account in order to maintain principal. Does this make sense to you? Do you think this valuation of these income streams is valid? After my calculations and adding these numbers to the rest of my Net Worth, I fall comfortably within your window for my age group.
Paul, it makes absolute sense. If you have guaranteed benefits for life after retirement, you have Golden Angel Wings! Take the annual benefit amount and divide it by 4% to get the capitalized value of such a guaranteed stream.
Just sent this article to a friend of mine, as we were having a discussion on how to invest based on where he is in life right now. I am furiously trying to make up ground for my negligence during my 20’s. Lord knows I wish I could go back and teach younger me to invest and take risks. But now they’re just sunk costs…
All is good b/c you know what you want and you’ve still got a lot of time anyway. If you’re done by 40 then you’re ahead of the vast majority of folks!
Tell me about the fun stuff you did in your 20s! I try and live vicariously through others b/c I was pretty damn focused and I don’t think I had as much fun as I should have.
Very nice analysis! I compared it to my notes on our own net worth growth and it’s pretty close.
Good stuff. Glad it corroborates.
Due to my own stupidity and some hard-learned lessons, I missed out on several prime years for growing my net worth. I’m now in super-go mode and am trying to increase net worth by at least 25%/year. I ended 2013 with something like a 150% growth but that’s not entirely sustainable and was driven largely by focusing on paying off debts. 2014 is for increasing income and growing some passive income streams, hopefully.
Good luck for 2014. What were some of the stupid things you did?
Choosing an undergrad major that did not make me very employable, necessitating grad school for a “get-my-foot-in-the-door” MBA. Building up approx. 40k in consumer debt (which will be paid off in a month). Taking a very low-paying job right out of school. Etc, etc. Lessons learned, though. Onward to bigger and better things.
Another nice article, Sam. We’ve experienced the stock growths that you describe here, but unfortunately our rental home’s value continues to lag (after what was a nice increase during the summer months, which has now gone away). I’m really looking forward to the day its value actually equals what we owe, since we remain so far upside down that it really drags down our net worth.
Mike,
Remind me where you guys live again? I’ve seen some robust property appreciation charts by city/state for 2013 and so long as you don’t live in Arkansas, there should have been decent progress.
Sam, I just discovered this reply after coming back here to refer this post to a friend. The house is in the Tacoma / Olympia, WA area (and it has gone down even more from when I posted this!). It really is a mill stone around our necks, but we’re paying it off very aggressively and have been lucky to have great renters the entire time (so far!).
Love the post…so any chance you can complicate it a little bit more with your opinion on this subject. Take yourself for example…if you are in your mid-thirties but are significantly above the NW target, should you really be shooting for 10-25% increase each year? Is there some adjustment factor for the above average NW accumulator? It is not as hard to increase your NW 20% when you are at $500k and still in the prime earning years…but once the number gets bigger at a relatively younger age (for talking purposes say larger than your scale goes to at $3M) does the % annual increase essentially go towards the risk free rate? I guess what I’m asking, is at what point do you suggest moving to playing 90% defense and 10% offense (like the 70 year old dude)…does my question make any sense?
Absolutely, which is why I included the Risk Tolerance column and suggested Net Worth levels. If you’ve got $2.5 million by 35, perhaps you want to go shift into the Maintenance Risk Tolerance level which corresponds to a 3-10% annual net worth growth figure.
Everybody’s desire for money and risk tolerance will be different, so the chart should provide Multi variables from which to choose instead of just choosing by age.
Gotcha, I sort of figured that. So with super young retirees like yourself are you still going to be in wealth building mode until you hit 71 like in the chart? Or because your financial nut was bigger at a younger age does that tipping point come a little earlier for the super accumulators?
I had a monster 2013. I forget the # off the top of my head, but it was in the 30s. 2012 it was a little over 50%. Making several lifestyle adjustments in 2014 and taking a new gig with a pay cut to accomplish that, so I’m expecting a year of slower growth. I invest heavily in the stock market, so there’s some “what the market does” effect on the growth, too.
Thanks Sam. I enjoy reading your articles because they give me an idea of where we should be financially- or where we could be. We actually doubled our net worth this year (we’re 34 and 39), but I think that was in part because we took new jobs in 2012 that pay more and have allowed us to hugely increase the amount that we are saving and investing. That plus the market rise meant 2013 was a pretty good year for us. We will see how 2014 shapes up- probably won’t see such a meteoric rise in 2014, but you never know :-)
Can’t ever complain about a doubling of net worth! Well done. That’s incredible! I’d love to read a post about how you did it. I’ve got an upcoming post on what I plan to do to achieve my ideal net worth growth scenario.
Our 2013 net worth growth was 49.6%, ending the year at $624K and 31 years of age.
We model everything with a relatively conservative 6% growth rate after we reach FI.
Nice job! Your growth rate, age, and net worth amount (I assume “our” means two) all correspond nicely to my chart.
One more 50% year and you guys will be knocking at millionaire status!