How Much Should Your Net Worth Be at Your Age?

One of the biggest challenges in financial education is understanding what wealth truly is. People often equate wealth with visible signs of success, like owning a large house or driving a new car. However, the reality is often the opposite. True wealth, measured by net worth (assets minus liabilities), can be inversely related to the size of someone's home or the year of their car. 

In The Millionaire Next Door, authors Thomas J. Stanley and William D. Danko, explore this misconception and introduce a simple equation to determine whether you are an average, above-average, or below-average accumulator of wealth. Here's the formula: 

Expected Net Worth = (Annual Gross Income × Age) ÷ 10 

For example: 

• A 30-year-old earning $60,000 annually should have an expected net worth of $180,000. 
    ($180,000 = $60,000 × (30 ÷ 10)) 

• A 35-year-old earning $85,000 annually should aim for $297,000. 
    ($297,000 = $85,000 × (35 ÷ 10)) 

While this equation isn’t perfect and may not apply to everyone, its simplicity makes it a powerful tool for gauging financial progress. Tracking your net worth and comparing it to a benchmark helps ensure you're on track toward financial freedom. Without this awareness, many people reach retirement age only to realize they must keep working—not because they want to, but because they have to. 

Other Models 

Fidelity’s Savings Rule of Thumb 

Fidelity Investments provides a simple, age-based guideline to help you estimate how much you should have saved for retirement at different points in your life. According to this method: 

• By age 30, your savings should equal 1× your annual income. 

• By age 40, aim for 3× your annual income. 

• By age 50, strive for 6× your annual income. 

• By retirement age (67), your goal should be 10× your annual income. 

For example: 

• A 30-year-old earning $60,000 annually should aim to have $60,000 saved. 

• By age 40, if that same person earns $75,000, their target would be $225,000. 

This method focuses on retirement readiness, ensuring you’re setting aside enough to replace your income in later years. However, it doesn’t account for other assets or liabilities, which limits its ability to measure overall net worth. 

Dave Ramsey’s 15% Rule 

Dave Ramsey’s approach centers around a straightforward savings habit: Invest 15% of your gross income in retirement accounts each year. 

By consistently saving and investing 15% of your income, compounded growth should provide a sizable nest egg over time. This strategy doesn’t prescribe specific net worth targets at each age but instead prioritizes building long-term wealth through disciplined saving. 

For example: 

• If you earn $85,000 annually, you will invest $12,750 per year. 

• Over 30 years, assuming an 8% average annual return, that yearly contribution could grow to over $1.7 million. 

The strength of this approach lies in its simplicity and focus on habit-building. However, it requires significant consistency and doesn’t provide clarity about your financial standing at specific life stages. Additionally, it doesn’t help you assess whether you’re ahead or behind schedule based on past performance. 

Both of these methods offer valuable insights into saving and wealth accumulation. Fidelity’s model provides clear milestones, while Ramsey’s focuses on actionable habits. However, neither addresses net worth as directly as The Millionaire Next Door equation, which provides a broader picture by factoring in both income and age. 

Consider this hypothetical scenario: 

Tracking your net worth is especially valuable because it accounts for both your assets and liabilities. Many people focus solely on their investment accounts—like their 401(k)—and overlook debts or other financial obligations. This can create a misleading picture of financial well-being. 

• Person A focuses entirely on growing their investment accounts, contributing aggressively to their 401(k) and taxable brokerage accounts. By retirement, they have $800,000 saved. However, they carry $30,000 in credit card debt at a 20% interest rate, a $50,000 car loan at 7%, and a mortgage with a $200,000 balance. Their car is worth $35,000, and their home has $50,000 in equity. Their net worth is calculated as:  
    $800,000 - $30,000 (credit card debt) - $50,000 (car loan) + $35,000 (car value) - $200,000 (mortgage) + $50,000 (home equity) = $605,000. 

• Person B, on the other hand, prioritizes building net worth by paying off high-interest debt and managing liabilities alongside their investments. By retirement, they have $600,000 saved, no credit card balances, no car loans, and no mortgage. Their car is worth $15,000, and their home has $100,000 in equity. Their net worth is calculated as: $600,000 + $15,000 (car value) + $100,000 (home equity) = $715,000. 

Even though Person A has more in investments, their financial position is weaker due to the burden of high-interest liabilities. A 20% credit card interest rate and 7% car loan will likely outweigh the typical long-term investment return of 6–8%. Meanwhile, Person B’s approach to minimizing liabilities means they are in a stronger overall financial position, with fewer obligations eating into their wealth. 

Ultimately, the most important takeaway is the need to track where you are financially and use a benchmark to measure your progress. Whether you choose The Millionaire Next Door equation, Fidelity’s age-based milestones, or Dave Ramsey’s 15% rule, the key is having a way to assess your financial health and stay on track toward your goals. 

While building investments is crucial for long-term wealth, ignoring liabilities can lead to significant problems down the road. A large mortgage, high-interest credit card debt, or unpaid student loans can erode your financial progress if not addressed. Regularly calculating your net worth—at least annually, but preferably semi-annually or quarterly—ensures you’re not just growing your assets but also managing liabilities effectively. 

The best financial strategy balances both sides of the equation: growing assets while reducing liabilities. By doing so, you gain a clearer picture of your true financial position and stay consistently on track toward financial freedom.

If you’re not sure where to start or need help tracking your net worth, I can help by contacting me directly for personalized suggestions and tools to get started. Taking control of your finances begins with understanding where you are today—let’s build a plan to secure your financial future.