Its arguable that CNN Money is the best personal finance resource on the web. There are thousands of little gems hidden on the site. One of my favorites is the cost-of-living calculator which allows you to compare costs between two regions. An unofficial (keyword: UNofficial) offer for a job in San-Francisco was turned down almost immediately because I would make less relative to where I live now. This is despite a raise in pay of at least 40%. I didn’t like the job either.I’m not here to talk about that calculator, there is another I couldn’t stop playing with this weekend. The net worth comparison is loads of fun. We live in a competitive society. Even if the figures are skewed and outdated, we all love to have a basis for comparison. Go to the calculator, and plug in your age and income. It generates figures based on both. So if I’m 40 (I’m not) and make $50,000 a year (I don’t), the median net worth for my age is $44,875 and based on income $109,975.
But how do you figure out your net worth?
There are variances, but I always include everything. In my case, this includes some savings bonds, retirement accounts, brokerage accounts, my car, etc… I’m adding up all my assets because that is my NET worth. Others would exclude such things as retirement accounts, but then that wouldn’t be net worth. I keep track of my net worth and something I call Liquid Worth, we’ll talk about that another day. Once you add up the value of your assets, you’ll want to add up the value of your liabilities. My only liabilities are a car loan and a credit card with a small balance thats paid every month. I know most people would have more, and thats fine. Debt is not evil in most forms.
Now back to comparing yourself to the rest of the country. There are a couple of things to consider. If you are 50 and your net worth is $120,000, that doesn’t mean you are in good shape. It just means you are slightly better than the median from a 2005 survey. I would go so far as to say you’re in bad shape. In a country with a negative savings rate, being at the median is downright terrible. Since you are reading a personal finance blog and probably Weakonomics.com linked from another PF blog, you are probably either in good shape or working towards it.
How do you compare?
So you’ve run the numbers and been able to compare yourself to your peers. Perhaps you ran the figures for other people too (I did my parents, brother, and girlfriend’s parents). You see what I meant about the competitive society? We can’t help it. And I can’t help sharing with you what I got. Relative to people in my age group, I have more than 50 times the net worth. Relative to my salary, its about 1.2 times. I don’t expect people in my age group to compare to me, I didn’t have college loans to pay off and never ran up credit card debt. So I’ve got a head start on my generation, but that doesn’t mean I’m satisfied with my situation. I do feel proud when compared to those in my salary range though. Given I’ve been in a real world job for less than a year, I am very proud to comparable to those in my salary range. Again, not satisfied with my situation at all.
In keeping with my promise to make some changes on the blog, I split up this post. 5 minutes of personal finance literature a day is all you need. Go play with the calculator and then read a blog about more interesting topics. Part II will be tomorrow and we’ll look at an alternative comparison to net worth.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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