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CNBC’s Megan DeMatteo wrote an interesting article on net worth, which I thought was quite interesting. Interesting enough to give a perspective on why most people focus more on income, and don’t necessarily think about what should be worth.
Some may argue that net worth are best suited for the deep pocketed in our society, because pressing needs and low to average earning makes it almost impossible to acquire assets. While this maybe true to some degree, recent Fidelity Investment study shows, we should have ten time our income put aside by the age of 67.
Consumerism and lack of financial management are the two most conspicuous reasons why the feat of asset acquisition is beyond reach for many.
In order to ascertain what our net worth is, in measure to our age in life, we first need to understand its definition.
Assets minus liabilities= Net worth. It is that simple.
What is more complex is knowing what assets and liabilities are. By Fidelity investment standard, assets include:
- Cash within bank accounts, such as checking, savings, money market accounts, etc.
- Prepaid debit cards
- CDs and savings bonds
- Government bonds
- Health savings accounts
- Investment accounts including 529 college savings plans and individual taxable investment accounts
- Retirement accounts, including IRAs, 401(k)s and 403(b)s (Pensions from jobs in the UK)
- Life insurance policies with cash value
- Annuities with equity (Private pension in the UK)
- Vehicles including cars, RVs, motorcycles, boats and helicopters
- Real estate, including rental homes and primary/residential homes
Liabilities (or debts) include:
- Mortgages
- Home equity lines of credit or home equity loans
- Credit card balances
- Instalment loans, including personal loans, auto loans and student loans
Given the formula: Net worth= assets-liabilities, you can use the table below to see if your net worth fit in your household average (not median) age bracket.
