Net Worth – WTF is it and why do I care?

In a few words, your net worth is the difference between your assets (what you own), and your liabilities (what you owe). When considering your assets, you can count anything with value such as furniture, jewelry, electronics or art but I personally only count things that have significant current value and there is reasonable demand for it. I am not going to lay out every tangible asset I have and assign prices to them – that feels more like a garage sale to me. I personally factor:

  • Equity in Property
  • Retirement Accounts, IRA, etc.
  • Savings/Checking Accounts
  • Cash on Hand
  • Equity in Vehicles
  • Stocks/Bonds

When considering your liabilities, you should capture things like mortgage, car loan, student loan, personal loan or line of credit, tax obligations, and unpaid bills (medical, legal, etc.). I have heard some people account for apartment leases but I think that is a stretch. I may consider some unpaid portion of a lease that would be an obligation if you had to break the lease immediately but this is often covered with a security deposit.

“The single most important measure of personal wealth is the size of your STAKK, i.e. your Net Worth!”

I think this measurement is undervalued and often, not even something people consider. When you compare yourself to your peers or consider who is doing well, my guess is you compare your annual compensation or what someone has saved. My opinion – these alone, are worthless. So you have a hot-shot banking buddy who is making $200K/year. Or perhaps your bestie is a lawyer and she lives in the swanky part of Chicago in a high-end loft. Or maybe your cousin has amassed $150K in her 401K. Unless you consider their liabilities, these numbers don’t mean squat.

Below is the average net worth in the US by age (as of 2016):

  • < 35   – $68k
  • 35-44 – $170K
  • 45-54 – $287K
  • 55-64 – $468K
  • 65-69 – $820K (Median $194)
  • 70-74 – $861K (Median $181K)
  • > 75   – $459K (Median $156K)

Considering the median net worth for those ages that fall within the typical retirement age, I am left to wonder if the “rich/ultra rich” are inflating the averages dramatically.

You work your entire life, most likely doing something that rarely lights your rocket, probably with a tool-for-a-boss, and when you retire your net worth is between $181K and $800K (Likely 25-50% of this is equity in your home)? No way, we need to do better, much better.

So tell me, Fatties…how fat is your STAKK?

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