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What Should My Net Worth Be At Age 25?
Are you wondering what should my net worth be at age 25? Good for you as it’s important to get an idea of where your net worth stands in relation to other 25-year-olds. After all, everything is relative in personal finance.
At age 25, you’ve still got your entire career and money-making life ahead of you. The key at age 25 is to know and follow the fundamentals of personal finance. You’ve got time on your side. With a great habit of saving and investing for several decades, you will be amazed at how big your net worth will grow!
The Average Net Worth At Age 25
According to CNN Money, the average net worth for the following ages in 2021 are:
$9,000 for ages 25-34
$52,000 for ages 35-44, $100,000 for ages 45-54
$180,000 for ages 55-64
$232,000+ for 65+
Therefore, it’s safe to say that the average net worth of a 25 year old is closer to $0than it is to $9,000, given the age range includes 25-34. An average net worth of $0 at age 25 sounds kind of sad. However, due to student loan debt and credit card debt, it’s understandable.
With only several years of employment out of college, the average 25 doesn’t make or have a lot of money. Some 25-year-olds weren’t able to get a great job due to a pandemic. A large percentage of 25-year-olds have had to live back home with their parents. Thankfully, the economy is recovering.
All this said, I believe the above average 25-year-old should have a net worth of closer to $80,000. Let me share with you why I believe a financially save 25-year-old should have this amount.
The Above Average Net Worth At 25
To achieve the above average net worth of $80,000 for a 25-year-old, you need to be and do above average things. Here are some attributes of an above average person:
1) Someone who went to college and believes grades and a good work ethic do matter.
2) Does not irrationally spend more than they make.
3) Saves for the future because they realize at some point they no longer are willing or able to work.
4) Takes responsibility for their own actions when things go wrong and learns from the situation to make things better.
5) Takes action by leveraging free tools on the internet to track their net worth, minimize investment fees, manage their budget, and stay on top of their finances in general. Once you know where all your money is, it becomes much easier to optimize your wealth and make it grow.
6) Welcomes constructive criticism and is not overly sensitive from friends, loved ones, and strangers in order to keep improving. Keeping an open mind is critical.
7) Has a healthy amount of self-esteem to be able to lead change and believe in themselves.
8) Enjoys empowering themselves through learning, whether it be through books, personal finance blogs, magazines, seminars, continuing education and so forth.
9) Has little-to-no student loan debt due to scholarships, part-time work, or help from their parents. Our parents have saved and invested through the largest bull market in history. It’s understandable that parents want to help their children out.
Now that we have a rough definition of what “above average” means, we can take a look at the tables I’ve constructed based on the tens of thousands of past comments by you and posts I’ve written to highlight the average net worth of the above average person.
The Above Average Net Worth Calculated
First, we must highlight what the average tax-deferred retirement savings plan is for those in America. We’ll focus on the simple 401K system we have here where one can contribute a maximum of $19,500 of their pre-tax income every year in 2020.
Being only 25 is a huge competitive advantage to allow for compounding to work its magic. Compounding is the greatest force in investing. Most of Warren Buffet’s wealth was created after his 60th birthday!
This chart can be used as a rough estimate for those with the RRSP plan in Canada, and retirement plans in Europe and Australia as well.
In fact, any country that has any sort of tax-deferred retirement plan and social safety net program for retirement that has a GDP/capita of $30,000 or more can use the below chart as an aspirational guide. Remember, we are talking about the “above average person.”