NEWS 
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The Wealthy Need $7.5 Million To Feel Wealthy

“Happiness is making $1 more than your sister-in-law’s husband.”

I don’t know who said it but I consider it one of the most accurate quotes about our society’s relationship with money. A recent Fidelity Investments survey, discussed on the WSJ Wealth Report blog, found that of the 1,000 millionaires surveyed, 42% said they didn’t feel “wealthy.” The average net worth of the group was $3.5 million.

They don’t feel wealthy because wealth is relative. It would be the same as if you asked them whether they felt successful. If you earn $1,000,000 a year and everyone around you earned $50,000, you’d feel wealthy. If you got promoted while everyone else stayed the same, you’d feel successful. Our view of our own successes and wealth is based on our environment.

A 4% raise feels bad when people around you are getting 5%. It feels great if no one got raises or if there were layoffs.

This is why 42% of those millionaires didn’t feel wealthy, because the people around there were even wealthier. This Slate series by Timothy Noah on income inequality is fantastic and discusses a variety of subjects on the topic of income inequality.

Fortunately, the path to happiness isn’t paved with gold bars if you don’t want it to be. Just make a dollar more than your sister-in-law’s husband… and hope he doesn’t line his driveway with Au. :)


 Personal Finance 
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How to Measure and Track Your Net Worth

Net Worth Spreadsheet ExampleWhen you were in school, chances are you knew what you needed on each test to get an A, a B, or a C (or avoid an F!). At work, you have project deadlines to meet and performance criteria to fulfill. When it comes to your finances, there isn’t a convenient, single number you can use to track your progress. In school, there was your GPA. In personal finance, you can’t just look at your account balances because it doesn’t give you the whole picture. That’s where measuring and tracking your net worth can come in handy.

Every month I record a snapshot of our family’s net worth in a simple excel spreadsheet. By definition, net worth is your total assets minus your total liabilities. Examples of assets are cash, investments, and real estate. Examples of liabilities are debts like credit card, car loan, student loan, and mortgages. Nothing fancy there, just some simple math.

The value in doing this each month is that it gives us a “state of the family finances” you really can’t get in looking at any other number. You might have savings goals, like X dollars for a home downpayment, or budgeting goals, don’t spend more than $250 on restaurants this month, but nothing that gives you guidance across all of your goals quite like your net worth.

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 Personal Finance 
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BVC #14: Net Worth Isn’t About Money [VIDEO]

This latest Bargaineering.com video features some intro music (yay! probably won’t keep it for too long but I wanted to experiment a little with it) and a discussion on net worth. I briefly discuss how I calculate our net worth, how often we track it, and the true value in doing the exercise. As you probably expected, based on the title, the value isn’t in the number you get.

Please let me know what you think! (especially about the music and if you have any alternatives, podcast safe please, you think would work well)


 Personal Finance 
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Average Net Worth of an American Family

Do you know what the average net worth is in the United States?

Every three years the Federal Reserve Board does a survey of consumer finances, which looks at a wealth of financial information, including income and net worth. They even have statistics of the percentage of people who use the Internet to find financial data broken down by the age of the head of household (did you know that in 2007, 16.5% of families with the head of household above 75 years of age used the internet?)

Well, that’s where I turned to find out the average net worth of an American family.

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 Personal Finance 
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Net Worth By Age Is Meaningless

Net Worth By AgeNet Worth By Age charts are mere entertainment at best and misleading at worst.

Check out this CNN Money charting tool in which you enter in your age and your annual salary and it calculates some fun facts and figures. It takes your age and gives you what the median net worth figure is for each age group; it also takes your salary and gives you what the media net worth figure is for each age group. And with two numbers, you’re expected to figure out if you’re doing well, doing poorly, or just plain doing. Except you can’t.

There are simply too many variables.

Take someone who is between 25 and 34 and think of all the life changes that occur in that time period. If you didn’t go to college, you’ve probably been working for at least half a decade by the time you turn 25. Someone who did go to college likely will be a couple years into their first job by the time they hit 25. Can you compare the two? Can you honestly compare that against the median of $2,125? What if you’re 25, married and have two kids? What if you’re 25, not married, don’t have kids… is it even fair to compare the financial situation of the two 25 year olds? No way. Age is the least significant part of that equation.

What about salary? $50,000 annual salary means you should have a net worth of around $109,975. Well if a 25 year old’s net worth is around $2,125 and a $50,000 annual salaried person’s net worth is around $109,975… which is it? Which number is one supposed to believe? I know that at my first employer, someone with a bachelor’s degree in engineering could command a $50,000 salary in 2003. That person was likely younger than 25, so should they have around $2,125 or $109,975 in net worth?

If you play with these tools and find yourself ahead, that’s great. If you play with these tools and find yourself behind, you might consider it a shot across the bow if you have no extenuating or mitigating circumstances. Chances are you don’t fit into the cookie cutter scenarios so don’t get too high or low on yourself.

Net worth by age tables are fun, but take them with a ton of salt. :)

What do you think of these surveys and tools? Useful? Deceptive?


 Personal Finance 
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How To Calculate Your Net Worth

Calculating your net worth is something you see a lot of personal finance bloggers doing these days and it’s something that you may have done or be tempted to do in the near future, so let me explain what I believe is the best approach to arriving at this number. Before we get into the nitty gritty of the additions and subtractions, we should talk a little about why you want to calculate your net worth and where I think its value is.

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 Monthly Review 
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No More Figures in Net Worth Posts

I’ve decided to stop divulging hard numbers in my “Net Worth” series of posts where I publicly track our progress towards financial prosperity. The reason why I started the series was because other personal finance bloggers were putting their net worths out there and I felt like it was the cool thing to do – and it was. Had I not been so public I wouldn’t have had the honor of appearing in the New York Times, quite possibly the coolest thing that has happened since starting this blog, but I feel that the usefulness and “cool” factor of posting a net worth has been exhausted.

If you’re struggling through debt, posting the amount of debt you have gives you motivation to work harder at paying it off. As you pay, you watch that number shrink. As you pay, your readers celebrate your one step closer to debt freedom. But who celebrates when Random Joe Blogger adds another X% to his net worth? I know I don’t really care and I’m pretty sure no one else really cares either.

What people care about are the things you did, not the amount you saved, and so my monthly personal finance updates will now focus on any personal finance related decisions I’ve made in the last month and not on the dollar amounts. Do you think it is a mistake? Do you welcome this change? Do you not really care? Please share your thoughts!


 Personal Finance 
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How Do You Calculate Net Worth For Couples?

I haven’t calculated a Net Worth value in several months now, mostly to hide the fact that I bought an engagement ring, but now I have a dilemma. Since my fiancée and I have begun using a joint checking account and direct depositing all of our money into it, I have no idea (or concept) of my net worth, only our net worth. So, I wanted to ask every engaged/married couple out there… when you calculate net worth (haha, I wouldn’t calculate it if I wasn’t writing a blog, to be entirely honest) do you just add all the assets together?

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