2017621 Whatshouldyournetworthbeatagivenage?

IntelligentInvestor

Whatshouldyournetworthbeata
givenage?
Wecrunchsomenumberstohelpyoupindownwhetheryoureontrackwithregardstoyournet
worth.

GrahamWitcom 13Jun2017 8

Monematterhaveawaofringingouteveronevoeuritictreak.Weall
liketoknowwherewetandrelativetotheherd.Howmuchdooureckonthat
gumake?AmIavingmoreorlethanaverage?AmIrich?

Themotimportantmetricwhenitcometoourfinancialituationiournet
worth,whichicalculatedtakingthevalueofallouraetanddeducting
allourdet.

Iturpriingldifficulttopindownwhetheroureontrackwithregardto
ournetworthandtherealotofgreareaaroundhowwehouldevendefine
whatontrackactuallmean.

Letaumeourefrehoutofuniveritat22andeginfull-time
emploment.AccordingtotheAutralianureauoftatitic
(http://www.a.gov.au/autat/a@.nf/mf/6302.0),theaveragefull-time
weeklwagei$1,592,oraround$83,000aear.

Wellappladicounttothatattheeginningofourcareerandaumeou
tartoutat$50,000.

Refrehingl,oungteraged25to34areactuallaoveaverageaver,
puttingawa$533amonth(http://www.uncorpank.com.au/new/generation-
-named-autralia%2%80%99-et-aver)fora10%averageavingrate.
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2017621 Whatshouldyournetworthbeatagivenage?IntelligentInvestor

Thiiarealitictarget;forthoeinthetop20%ofincomeearner,ouneed
toputawa20%ormoretoeconideredaoveaverage.

The30-earaveragereturnforAuietockiaround9%,ut,fortheakeof
implicit,wewilldealwithrealreturnof6%afteradjutingforinflation.

oletcrunchomenumer.Ifouleaveuniveritat22,getour$50,000-
80,000aearjoandtartputtingaide$533amonth(roughl$6400aear)
theninvetitata6%realrateofreturnouwouldhaveaccumulatedaround
$73,000thetimeouhit30.

Thanktocompoundinteret,moneinvetedinourearlearhaa
diproportionateeffectonourlivingtandardinlaterearothemore
ouhaveputaideinour20,theetter.

Nowletgoaitfurther.Aa30-ear-old,letaumeourenowearningthe
averageAutralianfull-timewageof$83,000.avingmaoonemore
difficult,though.Arecentdicuionpaper
(http://www.ra.gov.au/pulication/rdp/2014/pdf/rdp2014-03.pdf)the
Reerveankfoundthattherewaadipinavingforthoeaged35to45,
ecaueoungerpeoplemighteavingforadepoitonahome,while
middle-agedfamiliemightepaingmortgageinteret(awellahaving
otherexpenelikechildren).Wellaumean8%rateofavingtillinveted
at6%whichwouldtakeoutoaround$218,000thetimeoure40.

Theaverageavingratethenpickupagaininlaterear,hittingapeakof
around12%atage50,oitreaonaletotargetatleat$9,000aeartoward
theendofourcareerifouwanttotainthataoveaveragecohort.You
wouldhitanetworthofaround$500,000atage50,aout$1mat60,and
$1.4mat65.

Aforhowmuchouneedtoretire,therenomagicnumer.However,mot
financialadviorrecommendautainalewithdrawalrateofaround5%,oa
neteggof$1.4mwouldprovideaearlincomeofroughl$71,000,providing
ouwithalifetleimilartoourworkingear.

Theeareallackoftheenvelopecalculationandourperonalituation
addalotofvariailit.Youhavetofactorinthingliketudentloan,
uperannuation,mortgageandinheritance.Higherincomecorrelatewitha
higherrateofaving,oifoureearningmorethan$83,000,then1015%i
morereaonale.Forthoeinlowerincomeracket,theaverageavingrate
iunfortunatelnegative.Youcangetaetterideaofwhereouhoulde
uingourownetofaumptionandMonemartcompoundinteret
calculator(http://www.monemart.gov.au/tool-and-reource/calculator-
and-app/compound-interet-calculator).

OnltwooutofeverfiveAutralianmanagetoave10%ormoreoftheir
groalar,o10%maeemlikeanamitioufigure.utitiachievale.If
oureaving20%ormore,oudeerveapotinthehighachieverlitand

https://www.intelligentinvestor.com.au/whatshouldyournetworthbeatagivenage1869041 2/5
2017621 Whatshouldyournetworthbeatagivenage?IntelligentInvestor

themagicofcompoundingwillrichlrewardouthetimeoureach
retirement.

Theearejuttat,ooucanmakeourownconcluionaouthowou
comparewithother,althoughfocuingonmoneproalinttheetwa
tojudgeouraccomplihment.till,knowingwhereoutandrelativetothe
herdcaneempowering.

Inthepiritofvoeurimandforeveroneenefit,wedlovetohearhowour
memerarefaringdoourememerwhatageouwerewhenouhitour
firt$100k,$200k,$500k,$1m?

Togetmoreinight,tockreearchandUYrecommendation,takea15dafree
trialofIntelligentInvetornow
(http://landing.intelligentinvetor.com.au/logarticlelandingpage).Youcanfind
outaoutinvetingdirectlinIntelligentInvetorportfolioclickinghere.
(http://www.invetmart.com.au/diverified-portfolio/intelligent-invetor-ii-
growth-model/7)

Categorie financialplanning ducation

8Comments IntelligentInvestor VikrantG

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Jointhediscussion

JasonNgai7daysago
Thankyouforthisarticle.
I'm25andsometimesfindithardtorelatetofinancialarticleswhichare
usuallyaddressedtoolderaudiences.Thiscertainlyhelpsputmy
situationintoperspective.
2 Reply Share

PeterC>JasonNgai7daysago
HiJason,Imademyfirststockmarketinvestment@28,$6,000
dividedintothreestocks.

Mybrokerchargedme$75pertrade(pretheinternetage),andI
paidstategovernmentstampdutyoneachpurchase.Atthetime
onlyabout5%oftheadultpopulationownedatleastonestock
(37%today).

Sincethen,Ihavecontinuedtoregularlyinvest,includingusing
DRP'swhereavailableinthefirst10years.

About10yearsagoIhadtwoofmystocksgointoliquidation,soI
havemademistakesovertheyears.
https://www.intelligentinvestor.com.au/whatshouldyournetworthbeatagivenage1869041 3/5
2017621 Whatshouldyournetworthbeatagivenage?IntelligentInvestor
havemademistakesovertheyears.

Ihittheonemilliondollarsmark@52yearsofage.

Thepowerofcompoundinterestatwork.
1 Reply Share

JasonNgai>PeterC6daysago
Wow,whatacoincidence!Ialsostartedwith$6000and
bought3stocks.Imluckythatitwasonly$11pertrade.
Yourerightinthatsavingtoinvestregularlyisthekeyto
financialfreedom.Istarted5yearsagoandthemarkets
havebeenkindtome.Ipassed$100klastyear.
1 Reply Share

GrahamWitcomb Analyst >JasonNgai 7daysago

Gladtohearit,Jason.
Reply Share

SylvainR7daysago
Iguesssomeonehastogettheballrolling.
I'mabouttoturn35andhaveaccumulatedanetwealthof$265.000inthe
last10yearswithoutanyinheritance.
SoI'mslightlyaheadofschedule.
Whatreallyhelpedmewasgettingtworedundancypackagesandputting
themstraighttoworkwiththeForagerFunds(backthenIIFunds).My
regularsavingsareinvestedfollowingIIideas..
2 Reply Share

HengW6daysago
Icalculatemycashflow/networthattheendofeverymonthandthisis
whatIfound.

From2005,ittookme60monthstosavemyfirst$50k(Dec2009!),then
16monthstopass$100k.11monthslaterIpassed$150kthenanother
17monthslaterIpassed$200k(including7monthsunemployed).Took
another11monthstopass$250k,thenawhopping20monthstopass
$300k.8monthslatertoNovember2016,Ipassed$350k.Iam34this
year,havenodebts(wifeownshouse)andmysalaryisbelow$80k
(workinnonforprofitsector).

Sharesightcalculatesmyportfolioreturnat~8%p.a.sinceinception
(2004)whilemyownXIRR(inexcel)gives~8.5%p.a.

Hopeithelps!
1 Reply Share

shopt4daysago
It'sinterestingtonotethattheRBAdefinitionofsavingsratesincludes
imputedrent(whichaffectsowneroccupiers)onboththeincomeand
expenseside,tendingtopushtheratetowards0%.Theyalsoinclude
https://www.intelligentinvestor.com.au/whatshouldyournetworthbeatagivenage1869041 4/5
2017621 Whatshouldyournetworthbeatagivenage?IntelligentInvestor

super.Thenthere'sthemeanvsmediandebate.

Readersofthissitewillalsonotberepresentativeofthepopulation.But
thenagain,thepeopleanyoneassociateswitharenotrepresentativeof
thepopulation.Ifyouassociatewithhighearning,highsavingtypes,you
willfeelbehindevenifyouareaheadofmost.Similarly,ifyouassociate
withpaychecktopaychecktypes,youwillfeelgreatsaving5%and
havingover$10kinthebank.

Anywayat30yearsold,Ihavearound~$190koutsideofsuper,~$90k
insidesuper,andonlyshorttermnoninterestbearingdebt.I'mcurrently
targetingsaving40%ofmyaftertaxsalaryincomeincludingsuper,100%
ofmyinvestmentincome,andSCGonlyforbonusesand"oncall"
payments.Bymoreconventionalmetrics(excludingSCGsuperfrom
savings,andincludingtaxontheincomeside),thatcomestoasavings
rateofabout20%.

Istartedsavingnontrivialamountsstartingfrom23whenIhadonlya
thousandinthebankanda~$28kHECSdebt.Iendedupowingmy
flatmateafewweeksrentbythetimeIgotmyfirstpaycheckfromfull
timeworkafull6weeksafterIstarted.

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