Trent made a great point about The Millionaire Next Door and their calculation of what your net worth should be at certain points in your life.
Target Net Worth = Age X Annual Pre-Tax Income / 10
So, let’s say I’m a 23 year old, fresh out of college. I am carrying $25,000 in student loan debt and my only asset is my car, but I get a job paying $30,000 a year. According to this formula, this is my net worth:
Target Net Worth = 23 X $30,000 / 10 = $69,000
I don’t know very many fresh college graduates with a net worth that high – most are saddled with a lot of student loan debt and simply haven’t been in the workplace long enough to build any assets
I freaked out when I did the calculation. According to that equation, I should have had a net worth of at least $156,000!!!! But then I reminded myself that I clearly didn’t earn money as a baby 
and I only JUST got this job out of University – I was earning much, MUCH less before.
Instead, Trent offers up this equation instead:
Target Net Worth = (Age – 27) X Annual Pre-Tax Income / 5
By these estimates, I should have -$39,000 as my net worth.
That sounds a lot better. Negative net worth still sucks, but it’s better than seeing that your # should be $156,000!
My net worth right now is approximately -$29,000…. so I’m $10,000 ahead of the game so far.
PHEW.
And by the end of 2008, I should be at a net worth of -$3000, when my benchmark (based on the equation above), should actually be -$26,000.
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Lady N
on Sep 18th, 2007
@ 7:37 PM:
I totally freaked out when i heard that “net worth” calculation too! I felt so underachieved. Now with new calculation, I feel like an overachiever.
Fabulously Broke in the City
on Sep 18th, 2007
@ 7:43 PM:
Phew! I’m not the only one then.
I thought: .. are you kidding!? $156k?!?
But I guess it’s meant to be used for when you hit 40 or older, to show whether or not you are a PAW.
The thing is, if you save more than 15%-20%, you can assume that you’re a PAW. Most people don’t even save 2%.
SavingDiva
on Sep 19th, 2007
@ 12:17 PM:
For the MND calculation, I’m supposed to have a net worth of $101,400
For the other prediction, I’m supposed to have a net worth of -$7800
Neither describe my current situation, but the MND calculator makes me feel like a horrible under achiever, but I think that’s the point.
Fabulously Broke in the City
on Sep 19th, 2007
@ 8:50 PM:
Agreed.. it made me think about how little I’ve been saving – but at least I read the book, it changed my life for the better, and now I’m on the way to killin’ that figure
SF Money Musings
on Sep 21st, 2007
@ 12:40 AM:
I love the best of posts! The clothing ones were particularly helpful because I’m a bit style-challenged.
Can you do a post maybe on how to act, carry yourself and talk about yourself if someone asks you something without sounding boastful? That’s something else I struggle with . I don’t talk about myself because I’m modest but it gets into other issues.
Fabulously Broke in the City
on Sep 21st, 2007
@ 6:32 PM:
Ahh… SF Money Musings – mais oui
I’ll post something later on tonight after I come up with a list in my head..!!
Great idea..