Net Worth

Usually, we think of gross income (salary) as the measuring stick of how well off or wealthy a person is currently. However, I think this is a poor measure compared to net worth.

I have seen many people with huge gross incomes with little net worth.
I have seen many people with rather small gross incomes with a high net worth.

Since Net Worth = Assets - Debt, it really makes you realize how much of an effect debt has on your personal balance sheet. You may be making 90k a year, but actually have a negative net worth because you are up to your eyes in debt!

An alarming number of people under 35 have a net worth FAR below zero?! The average person fresh out of college has over $27,000 in student loans. With the high unemployment rate for these people, their student loan balances just keep accumulating interest. At what age will these people raise their net worth to a positive number?

At what age did your net worth become positive?


References:
http://www.fabulouslybroke.com/2011/03/what-should-your-net-worth-be-net-worth-by-age-and-by-income/
http://www.bargaineering.com/articles/average-net-worth-of-an-american-family.html
http://www.bloggingawaydebt.com/2010/06/negative-net-worth…/
http://money.cnn.com/2012/10/18/pf/college/student-loan-debt/index.html

33 years old.

If unquantified debt to my parents is included, I won't be positive until they pass away.

ancona said:

33 years old.

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I have noticed that the early 30s is a common age range for college educated people to finally have a positive net worth. On the other hand, people in the trade professions have much less debt and have a positive net worth by the age of 20. For those that think you need a college degree to make good money, check out how much a plumber or welder makes.

People in the US under 35 seem to be at least 3X Poorer than in 1984

I have been meaning to calculate my net worth for a while, but I've put it off since I *know* that my student loan debt is going to kill the plus side of the equation.

Started at $220,000 in student loan debt twelve years ago. Ugh.

ADK

ADK said:

I have been meaning to calculate my net worth for a while, but I've put it off since I *know* that my student loan debt is going to kill the plus side of the equation.

Started at $220,000 in student loan debt ten years ago. Ugh.

ADK

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It could be worse.

I took much longer to graduate college to avoid having any student loans. I have a positive net worth.
I then decided to marry someone with a mountain of student loans. My household does not have a positive net worth.

:loco:

For those that believe a college education is required to make a good living, simply ask Ancona.

I quit school in the beginning of the eleventh grade when my parents could no longer afford to send me to catholic school. I left home and started out on my own, and am now vice president of an environmental engineering firm. All that is needed is hard work, a desire for something better and an abhorrence of mediocrity. If you do everything as if it is to be the achievement of a lifetime, you will get far in life. Quitting time? That's for the other guy. Holidays? Those are for folks who have finished ALL of their workload and can afford to have a break. Vacations? I only started taking those ten years ago.

Do I regret not going to college?

No.

I do, however, wonder what road I would have chosen had I stayed in the game, but going from private school curriculum to public school was simply too much to take. Suffice it to say that as a younger man, I made a conscious effort to avail myself of any and all educational opportunities afforded me. The attitude we take toward work and work ethics will govern our paths without our even trying.

Hard work boys and girls, that's what matters, not that scrap of paper "they" gave you.

I wish that I had that attitude right out of the gate.

I have developed the "ancona-tude" since college and have worked diligently to pay off student loan debt. I'm down into the $45,000-ish range at this point. At some times throughout the year I'm working on two or three income streams.

Many days I wish that I took on a trade right out of high school!

ADK

I hear you with the school loans man. Many of my peers are in their early forties and just now paying off their debts for their masters degrees, yet here I sit, twenty years ahead of them as goes my savings. While they get to put the all important MS after their name and title, I fail to see how taking on so much debt is worth it all. I know one guy who changed majors after three and a half years, borrowed a boat-load of money, then turned in a completely different direction for nearly four more years. That is over seven years at university man, what are tehse kids thinking? I realize that in the late seventies I had a different pallette to work with, but for the love of pete, someone needs to explain to me how going in to debt to teh tune of a hundred and fifty large to get a masters degree is going to get me ahead.

locally I know 4 my age- who rent and will never own. I am not sure on how I got lucky- tho I was methodical about owning.

rents are so high- that how could you save for a down payment?

I am reasonably confident that I have never had negative net worth.
Yes Ive borrowed big to buy property but the loan was never near the value ( it wasnt allowed ). Ive had an easy ride on the property market since and as a result my net worth is enough for me to be able to fund a simple lifestyle to well beyond my realistic life expectancy.

I did my engineering qualifications doing one day a week at college and it was pretty hard. We did a 12 hour day and on occasions I got through a biro pen in a day.
Then we had another 12 hours of homework ........

I had to take unpaid time of work and in my entire working career I have never been asked for my qualifications ......... a phone call to someone to see if I could do the job, was the usual check.

I think this generation of Students has been totally shafted and would encourage em not to pay their student loans.

Rblong,
I frequently submit designs for groundwater remediation and contaminate removal without a PE stamp, and I do so at NASA. My remediation designs have been copied by Tetra Tech, a very large outfit who liked the way I set up plume management extraction and sparge wells as well as my iron powder and veggie oil injection points [bacterial remediation of TCE/DCE] because the dispersion was far more efficient than with their antiquated methods [by the book.....ever hear that one?]

Although these days, younger folks are often challenged on their credentials, while the grizzled old fuckers like me are not. Some of it has to do with two decades of working at/on/for the Space Center, most of it is the simple and straightforward, field-proven designs.

Most folks out there presume a college education and PE status when working for me, addressing me as Senior Engineer at my firm. That's not a pat on my own back, it is the straightforward truth of it. I don't know quite when it happened, but at some point our colleges were subverted from their original purpose as centers for higher learning in to profit centers, where students come to get milked and bilked.

There are a lot of folks from my generation who are self taught, many of whom became entrepreneurs, so I firmly believe college not to be prerequisite to success.

I always look up to the guys, older than me, who have been doing this work for a long time regardless of their education or license status. I've learned a *ton* with that attitude.

Then, I work with other engineers, younger engineers, who look at those people as old and antiquated since they don't have and i-phone and can't use MathCAD. Maybe there is a disconnect, but I find that the kids right out of school have an incredible disrespect for older engineers. Ugh.

I digress from the topic, though...

ON TOPIC: If calculating net worth, how do you figure a house purchase? Their is a mortgage and therefore debt, but how do you take in the value of the home? Do you only add the equity in the home to your assets side of the equation?

OFF TOPIC: It sounds like a lot of us on the board are engineers or scientists. Isn't it funny that we all find ourselves investing in PMs? We are all in the same boat. Which, by they way, I hope your life jacket fits because I have a terrible time keeping my PM boat above the waterline

ADK

Started my first business at age 14 - repairing musical instruments and amps. Ran away from home around 16, got convinced to come back (I had bought myself a car with cash by then), moved out again at 18, haven't looked back. Did two years of college on scholarship, no debt there. Left to take a good job, for those times, in my sophomore year, and wound up hiring some of my classmates later (as their boss).
I also left because as a sophomore, I was helping teach the senior EE lab, and those guys were dumber AND less knowledgeable than I at the time. So I didn't really see any reason to stay there with a job offer for better pay than my teachers were getting anyway. I once did run my credit cards up a few K, but learned fast and cut them up and put them in the trash - around '72 or so.

Quit the DC scene, got really poor here in Floyd for awhile (shared a barn with a horse at first), bought half an acre (amazing luck - land usually isn't that finely divided around here), built a shack, and built from there. Bought the land next to mine etc etc.


At this point the IRS is trying to take a ton of dough from me for '07, even though I lost half a mil in '08...working that, the biggest threat to my net financial worth is the government. I'm thinking about reducing my IRA payments to myself to poverty level just to avoid this and that since with everything built and paid for (other than fixing things that break), I really don't need the money as bad as most. I'd rather go on welfare than pay for Obama care for one thing - I don't get sick, just injured and have always managed to pay for it myself - self insured, responsible, all that kind of crap, and I don't want to be dragged into a system that rewards the losers with my money.

But I'm a little disappointed that we are talking mere financial net worth. That's a tiny fraction of what I think constitutes one's true net worth.

ADK said:

ON TOPIC: If calculating net worth, how do you figure a house purchase? Their is a mortgage and therefore debt, but how do you take in the value of the home? Do you only add the equity in the home to your assets side of the equation?

ADK

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My personal method in calculating someones net worth is to include car and house debt in the negative part of the equation. However, I also estimate their current value to be included in the assets. It is more work, but it is helpful to know roughly how much you could sell your car and/or house for at any given time.
$.02

hey Ancona, us old grizzlys do seem to get more respect, sometimes more than we deserve though.
Ive worked with some very bright and very young Site Managers and seen how hard it is for them to get taken seriously, while some old greybearded ex deliveryboy gets max attention.

I am totally with the concept of hiring people for their actual ability not the bullshit that they ply to try and get work ( or 'a position' if you have posh quali's )
I still have to occasionally draw on my college experience, to challenge those young designers who seem determined to make the same mistakes they were making 30 years ago, so its not totally wasted.

And its fun to see some of my concepts and method statements get used by smart young design Engineers for other projects.

My thinking has always been to try and quietly help and guide em on their way up, cos they then call me in when they become senior managers and we can take the piss, while working together in an atmosphere of mutual respect.

Well, a frustrating part of my life has been, I've made statement X, let's say, when I was in my '20's and got dissed and ignored - "you haven't lived long enough for me to take you seriously". Where now I can make the same statement X, and I'm a frigging oracle, and the only difference is how old I am. That's just dumb, IMO.
Truth is truth no matter from what lips it is uttered.

Back on topic - what's your net worth if say, most of it is tied up in paid-off land that you can't sell for anything like what it is assessed at in any reasonable length of time? In other words, how do you figure (il)liquidity into the equation? I could starve while waiting for a fair offer, or get totally screwed setting a fire-sale price, in other circumstances.

I won't do the former, because that land is not my whole portfolio, but I think you can get what I'm trying to describe here. So, does the rest of my portfolio make the land more valuable than otherwise, since I *can* afford to wait for the better price?

What if the whole isn't the same as the sum of the parts?

I'd probably have a lot of trouble selling either of my vehicles for anything near what they are "worth" as well, in today's local economy. And, almost all lifestyles need some transport to be in any way "sustainable" going forward (how are you going to hold a job if you can't get there?), unless you live in a very limited set of places where you don't need one. So, should your car even count? Or should it maybe count like this:

Sell the nice new car, get X bucks - take a big hit over what you paid.
Buy a beater, much cheaper - subtract, that's its real worth in your situation. Except you'd better be a good mechanic or the beater is going to cost a lot more in the longer run.

My motto has been for awhile - spend less than you make, you're rich. Spend more than you make, you're poor.

And yes, rblong2us - when I hire, I toss the paper out the window first, then look for talent, which might not even be a teachable thing - some people just have it, and a work ethic, and those are the ones you want, paper or none. I could wish everyone in that capacity (of hiring/firing) did things that way, but it would leave a lot of people in the street with no job, wouldn't it? I see all too many with gee-whiz paper quals, and zero ability to produce net value out there, currently - and the ratio seems to be getting worse, not better.

what an awesome topic! I want to like every post. I was completely "off paper" until i was 35 (wish I still were now, actually). No record of me, positive or negative. No assets. No debt. No nothing. Then I got married and bought a house, car, credit cards, all that crap. Decided I didn't like that and paid everything off except the mortgage. We have not paid that off, have enough cash to if necessary. The house is allegedly worth four times what I paid for it (it's hard to figure; the biggest improvement we have made that the city knows about is building a greenhouse and chicken coop) I suppose we went into the black shortly after I started pouring everything I could into PM's which made it inconvenient to spend money. There are three of us working fulltime and few bills (energy, mortgage and HORRORS cellphone, which I don't pay) and land line for this internet.

Awesome topic. :clap:

edited to add: my 28 year old pays the cellphone after I made it fairly clear that I wouldn't be paying for anyones' cellphone sarc/

Fresh out of college, I went to work with a fairly well known hedgefund manager who was a verbally abusive alcoholic asshole. Even though he was blacking out drunk 1/2 the week he was able to convey the bullish thesis on gold and hammered it into my young mind at a tender age of 22. I only lasted there a couple years before I quit and went to work with another fund which was also riding the gold bull. I was lucky. Neither of my employers advocated the use of debt and both were housing bears. They kept me away from leverage for the most part (I did get a car) and because of that, I am thankful.

So the fact I have a positive net worth isn't something I can say I decided to do on my own. I had help along the way to make the right decisions. I have no debt, I have gold and silver. I have gold shares.

Net/net.. I am doing ok. With the emotional rollercoaster that is the gold market, I can't imagine riding it if I did things differently.

DSA,
While I have never worked with other peoples money directly, for quite some time I worked with it peripherally. The vehicle was material and appliances they would purchase so that I could craft renovations, construct cabinets, set ceramic tiles, etc. In that sense I took away a good solid lesson about value and just how important cash in the bank was.

Those who use leverage [credit] in their lives should really limit it to their house and if necessary, a car. I see so many folks who have buried themselves in debts with store cards, credit cards, cars, boats, etc. and they become just miserable. Someone in their late thirties has no business having so much debt that after making all required payments each month they have nothing left. Unfortunately, big business has been largely successful in indoctrinating the general public to believe that debt is OK.