http://www.sorted.org.nz/calculators/net-worth/index.php
Working out your ‘net’ worth, handy and with a cute looking mouse to boot.
Wasp
**************************************************Its not what you earn but what you do with what you earn
I agree with the cute mouse, but STRONGLY DISAGREE with the calculations.
True net worth is calculating the combined equity in all your assets that EARN MONEY (what they are worth minus what you owe), then MINUSING from this your family home, cars etc (these are liabilities!!!).
This can be expressed as a ratio for your age to calculate how well you have done at investing!!!
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582the millionair next door has some good calculations of exactly how to do it.
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582I was under the impression “net worth” is simply total assets minus total liabilities.
Your nest egg is then net worth – all of those things than don’t produce an income. The stats boys reckon quite a few of us have a negative nest egg….cool !!! It doesn’t take into account capital appreciating but non-income producing assets like paintings, gold, coins, rugs, vacant land, spec shares etc etc but you get my drift.
Terminology aside…you can argue the toss all day over terms…the important thing is that you are being mentally and physically challenged in what you do and that it is interesting.
Dr Stanley Thomas reckons a crude but usually accurate formula is
net worth ‘should be’ = 0.112 * your age in years * your annual gross salary.
Don’t ask where the 0.112 factor comes from….5 years ago he reckoned it was 0.1 and has since refined it up to 0.112.
So, if you are 50 and are on 70K, your net worth ‘should be’ 392K. He reckons if your net worth is double this expected figure or more, 784K or more, you are an accumulator of wealth. If your net worth is half this expected figure or more, 196K or more, you are spendthrift destined to go nowhere.
That is…if you think you’re wealthy for your age and income, use a factor of 0.224. If you think you’re average, use 0.112. If you know cash pours through your fingers, use 0.056.
He gets this from studying really loaded individuals and reckons the two most outstanding determinants to wealth are age and income. There’s more of course to go into the melting pot that ultimately dictates what you are ‘worth’ in a monetary sense, but those are the big two.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
Wow! Don’t know if it’s just a coincidence but using Dr Thomas’ formula I’m nearly 2k over average… That’s pretty accurate considering how simple the formula appears, especially if it works that well for everyone. Reassuring to know I’m not having to use the 0.056 factor too [smiling]
Sonja
So, if you are 50 and are on 70K, your net worth ‘should be’ 392K. He reckons if your net worth is double this expected figure or more, 784K or more, you are an accumulator of wealth. If your net worth is half this expected figure or more, 196K or more, you are spendthrift destined to go nowhere.So Dazz, using that formula, you calculate what your networth “should be “according to your age right??
Then you work out what it actually is and that determines whether you are an under achiever or an over achiever.
The question is, when working out what your network IS currently, surely you dont count your family home and cars as assets????
This would give you are wrong result. How can you actually live off a nest egg that you are living IN and driving IN?
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582Hiya Dr X,
As I said previously…one can argue and carry on all day over terminology. As such, there is no right and wrong answer.
Use whatever criteria you feel comfortable and happy with. You shouldn’t / wouldn’t be comparing or competing with any other investor so it doesn’t really matter whether you are right or they are wrong or whatever….
It’s a roughy guide…use it as you will. I think the cats that Dr Thomas has been studying and gathering data on, the family home and irrelevantly small items like cars pale into insignificance to their overall net worth, so whether they include them or not is quite irrelevant.
It’s only when you have bugger all in the way of investments, that things like family homes and cars become a big part of the scene.
eg; Mr Business Owner has 60 MM in income producing assets. His house is worth 3 MM and his posho swanko cars are worth 150K. In the grand scheme of things who cares if the house and cars are included….small beer. If the house and car is all he has, then yes, they become relevant.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
You must be logged in to reply to this topic. If you don't have an account, you can register here.
