I wasn't financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly basis via my investment and got 5 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing in the financial market is a grand choice I made. Great video! Thanks for sharing! Very inspiring! I love this.
A few years ago I told my nephew that my wife and I were truly blessed. His response was, "You are blessed because you and Aunt Jenny worked your asses off!" Yes, it takes hard work and the courage to take some risk that others are not willing to take. Also a little luck and blessings doesn't hurt.
@@BSinNH my company is also putting 6 percent of my income.! I am putting 30 percent into the traditional 401k and 15 percent in my Roth 401k! Got to have the right behavior and discipline with money ✌🏾
Another excellent video Erin. You hit it on the head when you said an important factor in building up your net worth is to avoid lifestyle creep. I have seen too many people who constantly spent as much as they earn. Every raise or bonus went to new toys. I found that the key to my success was to never allow myself to get used to the added income. I made a point of saving almost all of my raises and bonuses. Keeping your spending in check is the key to creating a significant net worth.
I have learned live below your means, over the years I could of bought a better home, a better car, a better suit, better everything but didn’t. 40 years later I’m being paid more by my savings then my real job!
This was a very good video and discussion Erin! I agree with your comments, especially those in the last 3-4 minutes. Unfortunately, the younger folks seem to be too distracted with living, wanting to get ahead and have more things, to take this as serious as they should IMO. Saving doesn't come naturally to people, they have to be taught and learn these lessons. As their income increases, their spending increases more than their savings rate. Livestyle creep is a real issue for the younger age groups IMO. You certainly got started on your serious investment journey at a great time and I imagine you are very thankful for the timing 😉. Keep up the great content Erin and have a great week. Larry, Central Valley, Ca.
Always enjoy your content, Erin! I'm not a real believer in luck, primarily because over the course of a "career" in investing, you will see both the opportunity to invest when the market is low, and when the market is high. Now we're starting to use our investments, and one strategy we have is 2 years of living expenses in cash (HYSA), just in case when we need it we're in a "bad luck" market. That insulates us from having to pull funds from our investments at the wrong time.
@@adry729 Sounds good. I am in CA also and not planning on moving since home is paid for and we are established here. Also, thanks to Prop 13 the property bill is very low since we bought in the 90s.
@@adry729 The one good thing has for homeowners is low property taxes that to Prop 13. We have owned our home for 30 years and pay a tax bill of about 0.3% of the market value.
I max out (plus the +55 add-on) my 403(b) and HSA, plus an additional amount to a TIAA ATRA, or 'After-tax Retirement Annuity'. It comes out to almost 50% of my gross income. I wish I could have done that earlier, but I'm still in great shape. The information on this channel is so critical to that kind of success. I hope the people who really need to learn it see it. It seems like most of us commenters already have learned Erin's lessons. My income is not high, especially as I live in an expensive city; I'm at about the US median, but my savings put me in the 80th percentile. I am subject to the psychological effects of 'lifestyle creep' just like the next person, and I am fortunate enough, and still healthy enough, to pay for these modest indulgences with a little extra work on the side. In other words, I am inclined to pay for that 'creep' not through increases in pay, but gains in savings. I don't yield to the desire to crack open that vault, I just take on a little bit extra where possible.
Love the blooper reel at the end. Erin your advice on the channel is golden, but to get your channel to grow further you should further show your real personality…the blooper is a great start.
Video feed back. X Y coordinates on your chart cannot be seen by anyone that’s watching on their TV from 15 feet away. Please consider increasing font size in the future. Love your message.
Lifestyle creep definitely loosens the correlation between income and net worth, if you’re not careful! I know people that burn through $400,000 a year in spending and don’t have much accumulated net worth (relatively), in spite of a high income.
Beautiful Manners , Money Matters , International Affairs ,& Financial Fairness can help to help to enter Lower Middle Class .Yours efforts great to pick a topic .
I save 70% of my pretax income before COVID. After COVID, I do international travel 4 times a year. As it turns out, I still save 50% of my income. Life style creep varies based on people. I appear poor with everything but I love traveling. High income also makes it easier to choose the hobby you wish to put the money in.
This is the best formula I've seen to increase your net worth: 1. Pay off all of your debt. Frees up money to invest. Just don't take this extra money and blow it every month. 2. Continue to up the amount that you put into your 401k until you are maxing it out every year. You won't miss the money if you never see it, and the rate at which your balance grows will astonish you. 3. Max out your Roth IRA contributions every year. Invest that money and you get to keep all the gains tax free money at 59 and a half. 4. Invest as much as you can into a taxable brokerage account. Whether that is mutual funds, ETF's, or dividend king stocks and watch it grow (hopefully) over time.
2. Should be company match 3. Is then max Roth 4. See if you can max 401k. Even then a brokerage seems better than a 401k imo, at least a tax differed traditional 401k. Paying long term cap gains > paying income tax on your entire account
@@MeltingRubberZ28 I understand your point about the tax deferred traditional 401k. I will say that a big advantage of maxing out your 401k is that it lowers your taxable income by that amount every year, which is nice.
@derekhudson3462 yeah idk I've recently switched. A brokerage also follows the "step up rule" or whatever where if you die, it basically starts back at 0 for whoever inherits the account and no taxes are due. For 401ks it's a tax nightmare for those that inherit it.
I am not sure why you always use 8% growth. For the last 30 years my 401(k) has only gained about 5% a year. The key is to start early and save as much as you can.
Just as there is the whole thing of "timing the market vs time in the market", there is a another thing of "income vs time at an income". One of my older neighbors is a bit kermudgenly and complains about people who can't survive at $40k in out area, because they retired at an income closer to $50k. And it's like... Dude, you had a 40k+ income for 30+ years when everything was waaaay cheaper than it is today. The young couple down the street is dealing with a lot more costs, a lot more school debt, raising a kid, buying a house, and until recently we're only making $30k/yr because neither of them were on a career track yet. I mean, they are doing just fine for 2 kids in their 20s figuring life out, and it's absolutely a struggle, but they are making the steps needed to fix it. Can't compare incomes 50 years apart at wildly different stages of life and different costs of living. Or it's like my grandma who would complain about kids these days not being able to make it on $40k/yr when she was making life work easily as a single mom making $40k/yr. It's like... Damn grandma, don't you understand that adjusted for inflation you were a secretary making what today is $150k/yr!? My wife and I combined don't make $150k/yr and do a lot harder work than being glorified eye candy who answers the phone lol. It's just not a fair comparison. Our own household income plateaued at $50-55k/yr for a long time before we got enough certs and experience under our belts to get in real careers, and my income jumped from $40k to $85k in about 7 years. But it wasn't until year 3-4 st an income of $80k+ where I actually felt like I was making $80k money in an area where average individual income is $35k. It takes time for debts to be paid down, investments catch up, and things slowly get replaced before you actually feel like your lifestyle matches your income. It takes time for old stuff to be replaced, old habits and scarcity thinking to subside, and responsibilities paid for before you actually get to enjoy it... Unless you just put it all on credit cards and financing to instantly step into that life... Buts that's dumb. Hopefully nobody here doing that.
I work on 3 different remote jobs, and I am renting a room (not apartment) for 700 dollar in Boston, I only spend less than 10% of my income and saved the rest
Save and invest is for employees. The game is a bit different for a business owner. Income is what you take out of the business (and pay tax on) and net worth is what you leave in the business. It makes no sense to take a big salary and pay a big whack of tax when you can just leave the money in the company and let it grow there. The increase in business assets are unrealized capital gains that can be spent in the same way as income at some future date either by selling a portion of the company or by taking loans secured by business assets.
I think you can be a millionaire through Net Worth but Mid Middle Class through Income. For example...you could have 2 million dollars through investments & home equity but only make $75K a year.
Super video, as usual. I love the way you focus on how to get where we all want to go, pulling apart everything so we can see how it works and apply it to our own game plans. Can't believe your friend making $300k only saves $30k. We don't make quite that much but save 3x+ that, and honestly, we're not trying hard. Fly premium economy or first class for vacations, eat out at good restaurants, generally don't spend like idiots but enjoy what we want to, and that's where we end up. I can't fathom spending that much, I wouldn't know where to start.
I will never believe data that says Americans are saving more. We aren’t built that way. In my first job, 1993 or so when I was 23, we used to get bonuses. They were 12.5% of salary, paid twice a year. I would invest 100% of mine. It amazed me at the time how many of my coworkers had spent that money before they got it.
If I knew about investing when I started working I'd probably be close to $2 million today. Instead, I knew nothing and wasn't investing. I was just out there throwing ones. I'd like to say I'd do things differently, but I sure had a good time.😅😂
I’m happy with a career that’s been plateaued for ten years now…. The extra pay for moving up to a supervisory role isn’t worth the extra stress. Making the statistical “average” income each year for decades is enough, along with my wife doing some work as well.
The main thing they always overlook in these calculations is the location. $100,000 in the Bay Area isn’t even close to $100,000 in any lower COL town. That’s also why “high income” is also relative. Diversifying income and investments is the best path to building wealth. Learn to be comfortable with being uncomfortable.
10% a super saver? What is TransAmerica thinking? I am retired and reinvest at least 20% of my dividend income stream. With growing dividends every year and the reinvesting part of that back into dividend paying stocks, ETfs, etc, our lifestyle can increase much faster than inflation each year.
Income times savings rate plus amount invested times investment growth to the power time in the market. Basically lifetime savings plus lifetime investment income. It’s not rocket surgery.
1:36 - is this cumulative lifetime income, or annual income? If annual income, that would be a very arbitrary thing to compare to lifetime worth. Now, cumulative income vs cumulative worth would be much more appropriate to compare.
0:30 Technically, that's not how correlation coefficients work. For example, if net worth went up a consistent 0.5x to income, that would still have a linear correlation coefficient of 1. That is every positive movement in income yields a consistently linear increase in net worth. It doesn't have to be at a 1:1 ratio. It just has to be consistent. In the world of correlation coefficients, 0.559 is still a pretty strong number...a moderate bordering on strong cc.
If you have a lower income - yes. Esprcially given the impact of inflation today. If you have a higher income, you could theoretically live off the remaining 60%. Also depends on your lifestyle inflation.
No definition of income ... Being retired our income is mostly unrealized capital gains. Every year we save many multiples of our income - taken from our tax return. In fact, by the time we were 50, our investments provided more income than our earned income. In the long term - 30 years or more, one can expect 10% annualized return on S&P 500 investments. To suggest that the 10%+ annualized return from investing in 2008 or 2010 is bad luck is to ignore the facts about investing. Most people invest every year. And they take money out over time. In doing so they get the long term return of their specific investment. Contrary to popular belief investing in 2008, 2009, or 2010 and taking money out at the market low in October 2022 was a good investment.
haha - on every video, I make it a personal contest to see the silliest face I made during that filming process. Needless to saw, I have some epic screenshots from over the years. 😂
I dont include my primary house as net worth unless I wanted to sell. I prefer just my investments that provides me with regular cash flow. Am I wrong? Thanks for your videos.
She has discussed this before. I believe she said that for herself, she sometimes considers the equity in their home and sometimes she doesn’t. I tend to use market value minus 6% sales fee minus remaining mortgage when calculating net worth, but I also don’t pay much attention to the bottom of the spreadsheets. (I also include the cash value of some old insurance products I have; also somewhat meaningless.)
By working two jobs year round. This happens with Federal employees. They can work a 6:30 - 3:00 shift and go out and ref HS sports in the afternoons and youth sports on weekends. Since travel tournaments and off season leagues go year round, a fun way to make $$ if you love sports. Being a ref requires discipline. You can never be late.
I don't know the details of how the study measured income, but there is the possibility that some of the allegedly lower income older people were in reality just "poor on paper." In other words, they learned strategies to make it appear they had a lower income than they really did for taxation purposes. The older people could also be low income because they don't need to withdraw a lot of money from their portfolios due to being debt free (including mortgage) and not wanting to spend a lot of money on things. There are quite a few older people out there who have a large nest egg but live frugally because they have lived frugally their entire lives and can't break the habit in retirement. They could also be afraid to withdraw money from their nest egg due to fear of running out of money before they die or because they want to leave a substantial inheritance or charitable donation when they die.
I didn't make more than $3.35 an hour working as a teenager during the 1980's. But, between ages 12-19 I managed to save about $3,500 before I graduated from high school in 1987. I did babysitting, lawn moving for a real estate company, and washed dishes at a country club for golfing. My parents also gave me small allowances which I saved, but once I turned 16-17 years old they said I had to work elsewhere since they couldn't give me more money. My mom borrowed money from my bank account to paint or renovate a room, but my dad paid me back before I graduated from high school. Born premature, held back in Kindergarten in the early 1970's. Not much for daycare back then. Kindergarten was also only a 1/2 day in my rural area.
Odds are most are not keeping what they don't make.... so no it is what people make IMO based on my lived experience. Someone making $600 a month can't keep as much as me making $1,600 a month..... Numbers are the MOST important factor just not the only one!!!!!
@donaldlyons17 This is a saying that my late father said. For instance, he said it to my uncle, who was making a ton of money working for a company but blowing it all on junk. I was jealous of my cousins and their toys. My dad was an immigrant and instead of giving me all the toys I wanted, he had me start working at our family restaurant at age 10. Instead of buying toys I started collecting twenty dollar bills until I invested it all in the stock market. I still have that money today. My uncle is now broke and my cousins are not doing anywhere near as good as me financially. The point is if you need to live in a car then do it. Start you own side business. Do not get loans. There is always a way. There is usually just not the will. Yes I had great parents that taught me well but in today's internet age access to similar lessons are there available to those who seek solutions and don't expect others to solve their problems for them.
@donaldlyons17 Yup! Or another way of looking at it is, two people living on $50k/ year. One makes $50k/year, the other makes $100k. All else being equal, odds are, the one making $100k is happier.
I consider myself someone with a high net worth compared to my income. I make the average US income, and most of my life I’ve had an income below the national average. For me the best way to boost your net worth is to own a home (one that you can truly afford), and to consistently pay yourself first with paycheck deductions into retirement accounts and live within your means with what is leftover. After nearly 30-years of investing I crested the million-dollar net worth wall, and the majority of my net worth is in investments and not my home. My only major mistake is that most of my investments are locked in tax deferred IRA’s, which I did on purpose so I wouldn’t be tempted to raid my retirement accounts, but that left me with a shortfall of easily accessible funds for emergencies. I have been slowly building back up my emergency fund after I depleted it for a new roof.
Why not especially if you have significantly paid a lot of it already? Housing is part of your net worth no matter how you look at it but it is not considered liquid cash unless you want to do a reverse mortgage which is not so smart. The bottom line is, it is part the net worth.
Moderate collation with net worth and income does not even sound right!!!! Yeah Erin so you don't think there is a direct correlation between the two? So why do you compare yourself to others according to your own previous statements at time if there is not a direct connection between income and outcome? WE KNOW THAT THE RELATIONSHIP BETWEEN INCOME AND OUTCOME IS DIRECT BECAUSE THE MAX IN BUYING POWER IS THE INCOME SIDE!!!!
Yeah so let me see you believe in "harder I work the luckier I get" YET YOU HAVE DUEL INCOME so no the more money you make that you don't have to spend the more options you seem to have...... If luck plays a role conditions likely matter too.... YOU HAD THE PRIVILAGE OF EVEN GOING TO COLLEGE..... WHICH EVERYONE DOES NOT EVEN HAVE!!!! F THAT YOU NEEDED LUCK THE ENTIRE TIME!!!!
That high income can be powerful and yet dangerous. It all comes back to lifestyle creep, comparisons and keeping up with the Joneses. No matter the income, if everything falls apart the moment you stop working you haven't made it as yet. Lifestyle creep will get you stuck in the rat race. Its hard to go back once you've tasted the nicer lifestyle, and you need more money to afford it. Your tax obligation goes up with more money, and the number of true friends goes down.
This isn't good advice. 1. The percentage of people, making 300 000 $ a year is low and these people are likely to know how to handle money. It's a myst, that high income earnets have no idea how to manage their finances. The real problem are people, who just don't make enough money to pay their bills and the number is rising.The idea of simply saving is outdated as you have to save and invest. You can't do that, if you have a low income.Even if you save, that won't build wealth, as you need the money to cover unexpected expenses ( the car breaks down, you need a new washing maschine, there's a medical problem). Most people can't afford life any more.
I'd like to share something funny. I was playing around with an online investment calculator today and I was shocked by how much money I could earn by the time I hit 65. It took me several minutes to realize that I had wrongly entered a contribution rate of $30,000 per MONTH -- rather than my intended $30,000 per YEAR. OOPS! LOL!!!!
I live in Vietnam and I only earn $38,000 but my expenses are so low here that I am able to save $1500-$1700 per month which I throw into my investments. It's so great to be able to live in a place where I can eat out every day, only pay $400 in rent, and still have plenty of savings despite having such a "low" salary. I am in the top 5% of the society here with my salary. I can't justify living in an overpriced society like the US. I feel bad for everyone there. I can get the same quality of life here - probably better -- for a third of the cost.
Only problem is that it's all relative to how much you can earn in an area and how much everything costs.. Most people in US would rather live in the US just because it has the best quality of life and you can travel to any climate zone with little resistance, it's just a matter of if you can afford to live in the more desirable climate zones.
@@Lolatyou332 "you can travel to any climate zone with little resistance" That assumes that people want to do that or even if they want to that they will do that. Most people get caught up in the day to day and miss out on the world that is literally a 15 minute drive away.
Super saver status would be defined by what most people do. If most people only save 5% then someone saving 10% or more would be considered a super saving
Is it really important to compare people based on savings? Like I don't worry about what others do because our goals, time, expenses etc. are all different so the precent they and I save should be different given those factors.....
I wasn't financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly basis via my investment and got 5 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing in the financial market is a grand choice I made. Great video! Thanks for sharing! Very inspiring! I love this.
A few years ago I told my nephew that my wife and I were truly blessed. His response was, "You are blessed because you and Aunt Jenny worked your asses off!" Yes, it takes hard work and the courage to take some risk that others are not willing to take. Also a little luck and blessings doesn't hurt.
You are so right David! 😊
Don’t forget the good priorities you and Jenny must have!
I am saving 45 percent of my income towards my 401k! I am a SUPER SAVER 😊
Why? Are getting a match on all of it? If not, why not max out the match and then use the money in a general brokerage acct? Not sure I see the value.
@@BSinNH my company is also putting 6 percent of my income.!
I am putting 30 percent into the traditional 401k and 15 percent in my Roth 401k!
Got to have the right behavior and discipline with money ✌🏾
that's super saver status
@@ErinTalksMoney Thanks! I also have an Roth and Traditional IRA with Fidelity. My goal is to have over 2 millioni in less than 10 years 😊
Good luck!!!
Agree on super saver comment. 10% is a nice floor to achieve, then you go up from there.
Another excellent video Erin. You hit it on the head when you said an important factor in building up your net worth is to avoid lifestyle creep. I have seen too many people who constantly spent as much as they earn. Every raise or bonus went to new toys. I found that the key to my success was to never allow myself to get used to the added income. I made a point of saving almost all of my raises and bonuses. Keeping your spending in check is the key to creating a significant net worth.
I started allowing some lifestyle creep when I hit my early 30s - it actually felt REALLY good 😊 But make no mistake about it, I'm still frugal
Luck is when preparation meets opportunity. As photographer I was always taught that on how people seem to get lucky with getting the right shot.
Stable income is key. Job loss with instability will undercut all saving
I have learned live below your means, over the years I could of bought a better home, a better car, a better suit, better everything but didn’t. 40 years later I’m being paid more by my savings then my real job!
Basic accounting, assets = liabilities + equity + revenue - expenses.
I literally just made this comparison with my wife. Behind on income side but ahead on net worth side
This was a very good video and discussion Erin! I agree with your comments, especially those in the last 3-4 minutes. Unfortunately, the younger folks seem to be too distracted with living, wanting to get ahead and have more things, to take this as serious as they should IMO. Saving doesn't come naturally to people, they have to be taught and learn these lessons. As their income increases, their spending increases more than their savings rate. Livestyle creep is a real issue for the younger age groups IMO. You certainly got started on your serious investment journey at a great time and I imagine you are very thankful for the timing 😉. Keep up the great content Erin and have a great week. Larry, Central Valley, Ca.
Thanks so much Larry! I hope you have a great week! 😊
Auto-investing on payday and setting up direct deposit into a HYSA have helped me a ton
automation for the win!
Always enjoy your content, Erin! I'm not a real believer in luck, primarily because over the course of a "career" in investing, you will see both the opportunity to invest when the market is low, and when the market is high. Now we're starting to use our investments, and one strategy we have is 2 years of living expenses in cash (HYSA), just in case when we need it we're in a "bad luck" market. That insulates us from having to pull funds from our investments at the wrong time.
The channel continues to grow. Yay you! Great topic.
Yay! Thank you! 😊
I like Erin's percentages for Super Savers better. I try to save/invest closer to 40-50%.
Agreed. I usually am at 40%. Goal to retire earlier than 65 in a HCOL area or move somewhere less $$$. CA is very expensive.
@@adry729 Sounds good. I am in CA also and not planning on moving since home is paid for and we are established here. Also, thanks to Prop 13 the property bill is very low since we bought in the 90s.
@@adry729 The one good thing has for homeowners is low property taxes that to Prop 13. We have owned our home for 30 years and pay a tax bill of about 0.3% of the market value.
I max out (plus the +55 add-on) my 403(b) and HSA, plus an additional amount to a TIAA ATRA, or 'After-tax Retirement Annuity'. It comes out to almost 50% of my gross income. I wish I could have done that earlier, but I'm still in great shape. The information on this channel is so critical to that kind of success. I hope the people who really need to learn it see it. It seems like most of us commenters already have learned Erin's lessons. My income is not high, especially as I live in an expensive city; I'm at about the US median, but my savings put me in the 80th percentile. I am subject to the psychological effects of 'lifestyle creep' just like the next person, and I am fortunate enough, and still healthy enough, to pay for these modest indulgences with a little extra work on the side. In other words, I am inclined to pay for that 'creep' not through increases in pay, but gains in savings. I don't yield to the desire to crack open that vault, I just take on a little bit extra where possible.
@@adry729how much you make? Thats a lot
Love the blooper reel at the end. Erin your advice on the channel is golden, but to get your channel to grow further you should further show your real personality…the blooper is a great start.
Thanks for the tip! 😊
Print your own money... that's how you can become high net worth!! :)
I spent year reducing my expenses. My income is below the median but I still do ok because I have extremely low expenses
Video feed back. X Y coordinates on your chart cannot be seen by anyone that’s watching on their TV from 15 feet away. Please consider increasing font size in the future. Love your message.
Lifestyle creep definitely loosens the correlation between income and net worth, if you’re not careful! I know people that burn through $400,000 a year in spending and don’t have much accumulated net worth (relatively), in spite of a high income.
Beautiful Manners , Money Matters , International Affairs ,& Financial Fairness can help to help to enter Lower Middle Class .Yours efforts great to pick a topic .
I save 70% of my pretax income before COVID. After COVID, I do international travel 4 times a year. As it turns out, I still save 50% of my income. Life style creep varies based on people. I appear poor with everything but I love traveling. High income also makes it easier to choose the hobby you wish to put the money in.
I think that's a huge point - spend where it matters most to you!
This is the best formula I've seen to increase your net worth:
1. Pay off all of your debt. Frees up money to invest. Just don't take this extra money and blow it every month.
2. Continue to up the amount that you put into your 401k until you are maxing it out every year. You won't miss the money if you never see it, and the rate at which your balance grows will astonish you.
3. Max out your Roth IRA contributions every year. Invest that money and you get to keep all the gains tax free money at 59 and a half.
4. Invest as much as you can into a taxable brokerage account. Whether that is mutual funds, ETF's, or dividend king stocks and watch it grow (hopefully) over time.
2. Should be company match
3. Is then max Roth
4. See if you can max 401k.
Even then a brokerage seems better than a 401k imo, at least a tax differed traditional 401k. Paying long term cap gains > paying income tax on your entire account
@@MeltingRubberZ28 I understand your point about the tax deferred traditional 401k. I will say that a big advantage of maxing out your 401k is that it lowers your taxable income by that amount every year, which is nice.
@derekhudson3462 yeah idk I've recently switched. A brokerage also follows the "step up rule" or whatever where if you die, it basically starts back at 0 for whoever inherits the account and no taxes are due. For 401ks it's a tax nightmare for those that inherit it.
I am not sure why you always use 8% growth. For the last 30 years my 401(k) has only gained about 5% a year. The key is to start early and save as much as you can.
Just as there is the whole thing of "timing the market vs time in the market", there is a another thing of "income vs time at an income".
One of my older neighbors is a bit kermudgenly and complains about people who can't survive at $40k in out area, because they retired at an income closer to $50k. And it's like... Dude, you had a 40k+ income for 30+ years when everything was waaaay cheaper than it is today. The young couple down the street is dealing with a lot more costs, a lot more school debt, raising a kid, buying a house, and until recently we're only making $30k/yr because neither of them were on a career track yet. I mean, they are doing just fine for 2 kids in their 20s figuring life out, and it's absolutely a struggle, but they are making the steps needed to fix it. Can't compare incomes 50 years apart at wildly different stages of life and different costs of living.
Or it's like my grandma who would complain about kids these days not being able to make it on $40k/yr when she was making life work easily as a single mom making $40k/yr. It's like... Damn grandma, don't you understand that adjusted for inflation you were a secretary making what today is $150k/yr!? My wife and I combined don't make $150k/yr and do a lot harder work than being glorified eye candy who answers the phone lol. It's just not a fair comparison.
Our own household income plateaued at $50-55k/yr for a long time before we got enough certs and experience under our belts to get in real careers, and my income jumped from $40k to $85k in about 7 years. But it wasn't until year 3-4 st an income of $80k+ where I actually felt like I was making $80k money in an area where average individual income is $35k. It takes time for debts to be paid down, investments catch up, and things slowly get replaced before you actually feel like your lifestyle matches your income. It takes time for old stuff to be replaced, old habits and scarcity thinking to subside, and responsibilities paid for before you actually get to enjoy it... Unless you just put it all on credit cards and financing to instantly step into that life... Buts that's dumb. Hopefully nobody here doing that.
I work on 3 different remote jobs, and I am renting a room (not apartment) for 700 dollar in Boston, I only spend less than 10% of my income and saved the rest
Save and invest is for employees. The game is a bit different for a business owner. Income is what you take out of the business (and pay tax on) and net worth is what you leave in the business. It makes no sense to take a big salary and pay a big whack of tax when you can just leave the money in the company and let it grow there. The increase in business assets are unrealized capital gains that can be spent in the same way as income at some future date either by selling a portion of the company or by taking loans secured by business assets.
I think you can be a millionaire through Net Worth but Mid Middle Class through Income. For example...you could have 2 million dollars through investments & home equity but only make $75K a year.
Super video, as usual. I love the way you focus on how to get where we all want to go, pulling apart everything so we can see how it works and apply it to our own game plans. Can't believe your friend making $300k only saves $30k. We don't make quite that much but save 3x+ that, and honestly, we're not trying hard. Fly premium economy or first class for vacations, eat out at good restaurants, generally don't spend like idiots but enjoy what we want to, and that's where we end up. I can't fathom spending that much, I wouldn't know where to start.
I will never believe data that says Americans are saving more. We aren’t built that way. In my first job, 1993 or so when I was 23, we used to get bonuses. They were 12.5% of salary, paid twice a year. I would invest 100% of mine. It amazed me at the time how many of my coworkers had spent that money before they got it.
If I knew about investing when I started working I'd probably be close to $2 million today. Instead, I knew nothing and wasn't investing. I was just out there throwing ones. I'd like to say I'd do things differently, but I sure had a good time.😅😂
I’m happy with a career that’s been plateaued for ten years now…. The extra pay for moving up to a supervisory role isn’t worth the extra stress. Making the statistical “average” income each year for decades is enough, along with my wife doing some work as well.
As long as you like what you do, that's what matters most
The main thing they always overlook in these calculations is the location. $100,000 in the Bay Area isn’t even close to $100,000 in any lower COL town. That’s also why “high income” is also relative.
Diversifying income and investments is the best path to building wealth. Learn to be comfortable with being uncomfortable.
very important point!
For many people, there's a 1 to 1 correlation between income and SPENDING.
Come for the financial education... Stay for the bloopers.
haha!
10% a super saver? What is TransAmerica thinking?
I am retired and reinvest at least 20% of my dividend income stream.
With growing dividends every year and the reinvesting part of that back into dividend paying stocks, ETfs, etc, our lifestyle can increase much faster than inflation each year.
doesn't 10% seem low to be a super saver?!?!?!
Income times savings rate plus amount invested times investment growth to the power time in the market.
Basically lifetime savings plus lifetime investment income. It’s not rocket surgery.
Buffet has an income of hundreds of millions a year, not $100K. Dividends and interest are income.
1:36 - is this cumulative lifetime income, or annual income?
If annual income, that would be a very arbitrary thing to compare to lifetime worth.
Now, cumulative income vs cumulative worth would be much more appropriate to compare.
It is current net worth and current annual income.
As income increases net worth decreases because liabilities increase.
You don’t need high income just save and invest. Also eliminate any debt
I wonder why there is a noticeable dip in net worth at the 40-44 age bracket, while the overall trend is consistently upwards. Anyway, great video.
Probably because they are putting kids through college. 😂
Kids getting older! They get progressively more expensive!
Start early invest and forget it.
0:30 Technically, that's not how correlation coefficients work. For example, if net worth went up a consistent 0.5x to income, that would still have a linear correlation coefficient of 1. That is every positive movement in income yields a consistently linear increase in net worth. It doesn't have to be at a 1:1 ratio. It just has to be consistent.
In the world of correlation coefficients, 0.559 is still a pretty strong number...a moderate bordering on strong cc.
Most people are living pay- check to pay- check and are maxing out their credit- cards to buy groceries.
Is saving 40% too much?
If you have a lower income - yes. Esprcially given the impact of inflation today. If you have a higher income, you could theoretically live off the remaining 60%. Also depends on your lifestyle inflation.
love the outtakes!
😂🙏
What outtakes?
At what time?
@@ArmageddonIsHere end of the video
No definition of income ...
Being retired our income is mostly unrealized capital gains. Every year we save many multiples of our income - taken from our tax return. In fact, by the time we were 50, our investments provided more income than our earned income.
In the long term - 30 years or more, one can expect 10% annualized return on S&P 500 investments. To suggest that the 10%+ annualized return from investing in 2008 or 2010 is bad luck is to ignore the facts about investing. Most people invest every year. And they take money out over time. In doing so they get the long term return of their specific investment.
Contrary to popular belief investing in 2008, 2009, or 2010 and taking money out at the market low in October 2022 was a good investment.
10 to 53 @8:23 is still 5X though
Great information 🎉
Thanks for watching!
@@ErinTalksMoney you're welcome!
The FACE during the outtakes was worth the whole video.
haha - on every video, I make it a personal contest to see the silliest face I made during that filming process. Needless to saw, I have some epic screenshots from over the years. 😂
Is it really an issue of correlation, or is it causation...or both...🤔
Consistent saving and investing is the road to riches.
Good episode. Like the bloopers too.
I dont include my primary house as net worth unless I wanted to sell. I prefer just my investments that provides me with regular cash flow. Am I wrong? Thanks for your videos.
She has discussed this before. I believe she said that for herself, she sometimes considers the equity in their home and sometimes she doesn’t.
I tend to use market value minus 6% sales fee minus remaining mortgage when calculating net worth, but I also don’t pay much attention to the bottom of the spreadsheets. (I also include the cash value of some old insurance products I have; also somewhat meaningless.)
@@shawnbrennan7526 thanks
I don't tend to include my home in my net worth calculations either. I just like to consider investments - same reason as you pointed out, cash flow 😊
Excellent breakdown and analysis
thanks! 😊
By working two jobs year round. This happens with Federal employees. They can work a 6:30 - 3:00 shift and go out and ref HS sports in the afternoons and youth sports on weekends. Since travel tournaments and off season leagues go year round, a fun way to make $$ if you love sports. Being a ref requires discipline. You can never be late.
I don't know the details of how the study measured income, but there is the possibility that some of the allegedly lower income older people were in reality just "poor on paper." In other words, they learned strategies to make it appear they had a lower income than they really did for taxation purposes.
The older people could also be low income because they don't need to withdraw a lot of money from their portfolios due to being debt free (including mortgage) and not wanting to spend a lot of money on things. There are quite a few older people out there who have a large nest egg but live frugally because they have lived frugally their entire lives and can't break the habit in retirement. They could also be afraid to withdraw money from their nest egg due to fear of running out of money before they die or because they want to leave a substantial inheritance or charitable donation when they die.
The 2nd variable increases by a proportionate* amount, not necessarily identical amount
I didn't make more than $3.35 an hour working as a teenager during the 1980's. But, between ages 12-19 I managed to save about $3,500 before I graduated from high school in 1987. I did babysitting, lawn moving for a real estate company, and washed dishes at a country club for golfing. My parents also gave me small allowances which I saved, but once I turned 16-17 years old they said I had to work elsewhere since they couldn't give me more money. My mom borrowed money from my bank account to paint or renovate a room, but my dad paid me back before I graduated from high school. Born premature, held back in Kindergarten in the early 1970's. Not much for daycare back then. Kindergarten was also only a 1/2 day in my rural area.
Correlations: Do you prefer pearsons r, spearmans rho, or the kendalls tau?
It's not what you make. It's what you keep.
Odds are most are not keeping what they don't make.... so no it is what people make IMO based on my lived experience. Someone making $600 a month can't keep as much as me making $1,600 a month..... Numbers are the MOST important factor just not the only one!!!!!
@donaldlyons17 This is a saying that my late father said. For instance, he said it to my uncle, who was making a ton of money working for a company but blowing it all on junk. I was jealous of my cousins and their toys. My dad was an immigrant and instead of giving me all the toys I wanted, he had me start working at our family restaurant at age 10. Instead of buying toys I started collecting twenty dollar bills until I invested it all in the stock market. I still have that money today. My uncle is now broke and my cousins are not doing anywhere near as good as me financially. The point is if you need to live in a car then do it. Start you own side business. Do not get loans. There is always a way. There is usually just not the will. Yes I had great parents that taught me well but in today's internet age access to similar lessons are there available to those who seek solutions and don't expect others to solve their problems for them.
@donaldlyons17 Yup! Or another way of looking at it is, two people living on $50k/ year. One makes $50k/year, the other makes $100k. All else being equal, odds are, the one making $100k is happier.
@@hogroamer260 Well you might be right about happier but I know the ones making 100k have multiple times the options of those making 50% less!!
That correlation graph is a mess. The legends are not spaced proportionally-- at all.
I consider myself someone with a high net worth compared to my income. I make the average US income, and most of my life I’ve had an income below the national average. For me the best way to boost your net worth is to own a home (one that you can truly afford), and to consistently pay yourself first with paycheck deductions into retirement accounts and live within your means with what is leftover. After nearly 30-years of investing I crested the million-dollar net worth wall, and the majority of my net worth is in investments and not my home. My only major mistake is that most of my investments are locked in tax deferred IRA’s, which I did on purpose so I wouldn’t be tempted to raid my retirement accounts, but that left me with a shortfall of easily accessible funds for emergencies. I have been slowly building back up my emergency fund after I depleted it for a new roof.
Do you use net or gross to calculate the percentage.
Don't count your house (if you have): it can give a false sense due to the latest housing boom.
Why not especially if you have significantly paid a lot of it already? Housing is part of your net worth no matter how you look at it but it is not considered liquid cash unless you want to do a reverse mortgage which is not so smart. The bottom line is, it is part the net worth.
@@ihaveadreamformykids4400 ...because you're not going to sell your house if you need some $$$ to cover something not monumental.
@@drticktock4011it is considered illiquid cash and it is part of your net worth
Hello Erin!
Hello Eric 😊
Moderate collation with net worth and income does not even sound right!!!! Yeah Erin so you don't think there is a direct correlation between the two? So why do you compare yourself to others according to your own previous statements at time if there is not a direct connection between income and outcome? WE KNOW THAT THE RELATIONSHIP BETWEEN INCOME AND OUTCOME IS DIRECT BECAUSE THE MAX IN BUYING POWER IS THE INCOME SIDE!!!!
Shout out to the 50 year old who makes $260k+ and has 5 grand in the bank.
😂😂😂
Lifestyle creep is a real thing. When you get raises, try not to go into more debt or spend more to keep up with the Jones.
100%
Really?
Yeah so let me see you believe in "harder I work the luckier I get" YET YOU HAVE DUEL INCOME so no the more money you make that you don't have to spend the more options you seem to have...... If luck plays a role conditions likely matter too.... YOU HAD THE PRIVILAGE OF EVEN GOING TO COLLEGE..... WHICH EVERYONE DOES NOT EVEN HAVE!!!! F THAT YOU NEEDED LUCK THE ENTIRE TIME!!!!
That high income can be powerful and yet dangerous. It all comes back to lifestyle creep, comparisons and keeping up with the Joneses.
No matter the income, if everything falls apart the moment you stop working you haven't made it as yet. Lifestyle creep will get you stuck in the rat race. Its hard to go back once you've tasted the nicer lifestyle, and you need more money to afford it. Your tax obligation goes up with more money, and the number of true friends goes down.
My net income and worth fall short of your projections. Should I feel bad or like a failure? LOL
No, just decide whether you want to do better (or not) and adjust as needed. Time heals.
I like how this video gets interrupted by new car ads
😂 🔥
This isn't good advice.
1. The percentage of people, making 300 000 $ a year is low and these people are likely to know how to handle money. It's a myst, that high income earnets have no idea how to manage their finances.
The real problem are people, who just don't make enough money to pay their bills and the number is rising.The idea of simply saving is outdated as you have to save and invest. You can't do that, if you have a low income.Even if you save, that won't build wealth, as you need the money to cover unexpected expenses ( the car breaks down, you need a new washing maschine, there's a medical problem).
Most people can't afford life any more.
Better you understand it somehow today otherwise it will be late
@@pradeepshirur5435
What exactly is there to understand? I described the present reality of most people clearly.
Fit ❤❤❤
I'd like to share something funny. I was playing around with an online investment calculator today and I was shocked by how much money I could earn by the time I hit 65. It took me several minutes to realize that I had wrongly entered a contribution rate of $30,000 per MONTH -- rather than my intended $30,000 per YEAR. OOPS! LOL!!!!
hahaha! 🤣 too funny!
Twenty nou! :)
I live in Vietnam and I only earn $38,000 but my expenses are so low here that I am able to save $1500-$1700 per month which I throw into my investments. It's so great to be able to live in a place where I can eat out every day, only pay $400 in rent, and still have plenty of savings despite having such a "low" salary. I am in the top 5% of the society here with my salary. I can't justify living in an overpriced society like the US. I feel bad for everyone there. I can get the same quality of life here - probably better -- for a third of the cost.
80M vnd per month. You are living wealthy in VN
Only problem is that it's all relative to how much you can earn in an area and how much everything costs..
Most people in US would rather live in the US just because it has the best quality of life and you can travel to any climate zone with little resistance, it's just a matter of if you can afford to live in the more desirable climate zones.
Have you lived in the US? Don’t feel bad for everyone here, because it’s actually a great place to live. Note: I have lived on both Asia and US.
@@Lolatyou332
"you can travel to any climate zone with little resistance"
That assumes that people want to do that or even if they want to that they will do that.
Most people get caught up in the day to day and miss out on the world that is literally a 15 minute drive away.
@@mjs28sthere wasn’t ANY assumption, it was a factual statement.
Your microphone is really bad and peaking
So much blah blah blah to say something so simple. 🤦♂️😂
Super saver status would be defined by what most people do. If most people only save 5% then someone saving 10% or more would be considered a super saving
Is it really important to compare people based on savings? Like I don't worry about what others do because our goals, time, expenses etc. are all different so the precent they and I save should be different given those factors.....