Your net worth is your assets minus your liabilities so what you own minus what you owe like let's say you have a car that you paid off in full. So that car is yours it's your asset let's say you have student loans because who doesn't that's your liabilities.
When you have a negative net worth that basically means if all your debt was due right now if Chase Bank of America, Fannie Mae whoever was like give me my money you would have to sell all your assets and you still would not have enough money to satisfy those debts.
When you have a positive net worth which is you know hopefully you are working towards that if all your net did you could sell what you own to pay off what you owe and still have some extra sub on out with.
Median net worth
Here is the chart that shows what your net worth should be depending on what age you're at so the majority of you guys that watch this website are under 35 and based on that you need a median net worth of $10,000 if you own a home if you don't want a home you need $5000 and you are in line with the average person.
I know you look above average so as you can see when people do reach that retirement age around their mid to late 60s we're showing a median net worth of $200,000 which if you're planning on living for another at least 20 years.
This is why I said I don't know that never works it is what you should really be focusing heavily on and instead I think you should be focusing on how can I still make money even when I am oh that my bones are not working I get used to.
We need to unlearn and relearn because I know we've been told you know especially if you have money in a 401k that oh do a traditional route because when you get older you shouldn't be making as much money so you'll be in a lower tax bracket I have a lot of things wrong with that theory but let's just talk about the main points.
Why would I want to make less money the older I get?
I mean I don't know about you but our moment in this stack up not down and number two how do you know what this country is gonna be with 40 years from now I mean chances are it might go upwards I highly doubt that would be in a lower tax bracket because next thing you know the lowest tax bracket will be 30%.
We don't know what the future holds we know what's going on right now at least so I know but my goal is to make more money the older that I get so when I do retire I know that I am NOT throwing my life on to my kid or my other family members to take care of me because I'm taking care of myself.
How much would you need for retirement what should your net worth be when you retire?
It depends everybody's situation is different I can throw a number out there for you I know a lot of people saying well you should have a million dollars because if you make 4 % on your million and all this math but the situations are different.
Depending on who you are what if the other house is fully paid off you don't need as much as somebody who's still renting what if you have social security there's a whole bunch of different factors which I wouldn't dependence was just carrying but that's another article for another day.
When a lot of people think about retirement they're just thinking okay pension Social Security and 401k and when I tell you all those things are in deep doo-doo I mean that I will have videos about pension 401ks and all that in detail.
The idea is these things may not be around forever especially if you are in my age group if you are in your mid to late 20s you might not see Social Security. Most people don't even get pensions right we mostly went from pensions to kind of that 401k movement.
If you are banking on a fixed income forget about it maybe you'll have it maybe you'll be lucky right things won't take a turn and you'll still get that money but what people don't seem to understand fully is what inflation does and how we can really evolve your wealth eat away at your purchasing power and leave you dead broke and again.
Building up your own Portfolio
The government has every incentive to manipulate downward inflation because it makes that economy look bad we're growing more it's less money than they have to pay out to people. They've promised money to so don't focus so heavily on having fixed income really focus on kind of building up your own portfolio of assets that you can use when you are ready to fire your boss.
How can we work on doing that so like I mentioned accent minus liabilities is your net worth.
What side should you be focusing on if you are younger than 30?
Please actively focus on the liability piece that holds you down you cannot do as much as you could do. If you were financially free so be so active while you still have your bones in shape while you don't have to worry about the thyroid in your legs arthritis.
Make sure you are paying down that debt especially credit cards that we all know credit cards are very vicious right it may charge you an ungodly amount of interest. So get rid of that before you're 30 and even if you are older than 30 and you don't know you're not that free that should be your main focus you should not be worried about being.
Invest in Assets
Heavily invested in assets and because you have liabilities that are going to be holding you down and holding you back. If you have credit card debt which is variable rates right get rid of that.
I'm not so pressed about student loans because typically they are under like 6 % or so. It's more manageable rather than credit card debts which are almost always in the double digits after you are debt-free.
Focus on Assets
Then you should heavily focus on assets I'm not saying that you shouldn't focus on assets before then but you're doing yourself a disservice if you are just still holding on to a whole bunch of debt and when I say assets.
I don't only mean stocks your 401 K mutual funds that are all one type of asset which is intangible if you cannot do anything with it unless you sell it or if you have dividends and that's a little bit different but it's not just stocks and bonds okay it's things that are gonna put money into your account all the time.
The problem that I have with growth stocks which just starts what you buy and then you know hopefully it appreciates in value is that.
1.You don't have any control over the company they can drag somebody out of a plane.
2. Next thing you know stocks plummet
But when you have physical assets things that you have control of things that you can kind of hold they're tangible you can make money from them. Then it really puts you in the driver's seat.
Why I say net worth doesn't really matter?
It's because I intend on everything that I purchase I don't have any intentions on selling it so when I retire I'm more focused on cash flow versus net worth.
Let's say you bought a home at the height of the housing bubble right you had no clue you can't really time the market. Let's say you bought a house but when you purchased it you were able to get renters in there the renters paid for that mortgage.
You have an investment property you have a cash flowing investment property even if 2008 to happen again and now your property is worth half that. If you still have tenants in there you can still actually afford to get the mortgage paid for and put money in your pocket well then you might have negative net worth right but you still have positive cash flow.
Cash flow is more important than that worth and if you want a way to go into more details about that throw it in the comments and I definitely will.
If you have real estate properties if you have dividend stocks, stocks that will pay you monthly quarterly yearly stocks that actually pay you to own it if you have a business like YouTube or blog. There are so many online businesses right now. I mean even if it wasn't an online business there are ways to make money even into your golden years that will still keep you sitting right.
I want to have these just set your net worth this depends on the kind of message you want to live if you're the person there's a one worry about having cash flow well then you would need to focus on having dividend stocks that could pay enough that would satisfy your lifestyle.
Let's say you were able to live up to $4,000 a month well whatever you invest in whatever your portfolio is it would need to be able to generate $1,000 a month so how would that look for the stock market.
For example, if you were to have a dividend that paid 7 to 8% which is what I've seen it I work for a company that pays that so it's possible you would basically need to have $160,000 invested in that company earning a 7½% interest would give to your $1000 a month.
So you have to kind of back into that answer how much do you need how much do you think is a reasonable amount to actually earn on whatever you have invested.
