We all know that we should be saving for the future. We’re aware that this money is “for retirement” and should be close to “a lot”. Finance blog Financial Samurai breaks it down to a simple, easy-to-understand target net worth for each age range.
While the targets provided aren’t going to be a one-size-fits-all type deal, they provide a target for how much money you should probably have saved by a particular age given a certain income. For example, a 30-year-old who’s worked eight years at a pay rate of $40,000 per year should probably have saved about $80,000. As Financial Samurai explains:
It’s very important to have some idea of target net worth figures because it’s not so much what you earn, but what you save. There are countless stories of people making huge salaries only to piss it away on frivolous things and end up with very little to nothing. This is why I highly encourage everyone to have around 30% of their net worth in risk free assets just in case everything goes to hell.
Continue to actively track your net worth progress a couple times a year. Targets will help you adjust your finances accordingly and increase your chances of reaching your goals much faster than others who do not bother. You should also consider calculating your net worth by your realistic living expenses to come full circle.
You can read the source link for more information on just how the author got to these factors, but it might not matter in practice. The mere act of having a goal to shoot towards can help most of us get better bearings as we navigate our savings than we’ve had before.
How Much Should My Net Worth Or Savings Be Based On Income? [Financial Samurai via Rockstar Finance]