As promised I have started to look at how your net worth should change depending upon you age. Also as the Millionaire Next Door formula was quite crude I have looked around the internet to see if there are any other ideas for how your net worth can be calculated and I came across this interesting way of calculating net worth from The Simple Dollar blog, it has a slight tweak compared to the Millionaire Next Door. The target Net Worth formula is (age -27) x Annual Pre-tax income / 5 compared against the Millionaire next door formula of age x Annual Pre-tax income/10.
Just realised the first thing I should explain is how do you work out your net worth. I have already given you the target formula out of the Millionaire Next Door but I did not confirm how you work out your current net worth.
Really your net worth is the value of all of your assets minus all of your liabilities or what you own minus what you owe.
I have recently been reading an American book called the Millionaire Next Door it was released in 1996 and was written by Thomas J. Stanley and William D. Danko. The book is based on research carried out by the two authors over several years. It looked at how millionaires became millionaires and what they did to accumulate this wealth. It also looked at deciding how you can identify if a person has a high net worth compared to their current wages. I though we would look at deciding if we have a high net worth and at a later date I will look and doing some more posts.