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January 07, 2008


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one important caveat on the Bankrate column and its data: the figures cited are 7 years old. Given the runup in both stocks and home equity since 2001, presumably a goodly share of people have seen their net worth increase since then. More recent data would make this a bigger story.

Updated numbers are available from the Federal Reserve's 2006 Finance Survey, but even those numbers only go to 2004.

Median income - $43,200. Average income - $70,700 (which means some of the people making more than $43,200 make A LOT more than $43,200).

Median net worth:

90-100 percentile - $942,100
80-89.9 percentile - $311,100
60-79.9 percentile - $160,000
40-59.9 percentile - $71,600
20-39.9 percentile - $34,300
Below 20 percentile - $7,500

For reference, the $86,000 in 2001 that FMF mentioned above is actually $91,700 in 2004 dollars (due to inflation).

Oh, and the link to the most recent survey:

Keep in mind that these figures include people who are just "starting out". For example, my wife and I have a net worth that is well into negative territory including significant educational debt (which will pay off in the long term income-wise) plus a mortgage which we just took out this year.

That said, we have no credit card debt, we're fully funding Roth IRAs, and are aggressively paying down the mortgage (the highest interest rate loan we have).

So, our financial situation is great in terms of the direction we're going: Actively giving to the church and other charities, no high interest debt, actively saving, aggressively paying down debt. However, our situation looks awful if you look simply at net worth. Give us 5 years and it will be a whole different story.

Keep the above in mind when you read these sorts of figures.

I know that this has been mentioned before but I think net wealth calculations get very, very fuzzy when you are dealing with mortgage debt. Not counting mortgage debt, my net wealth is somewhere in the low to mid six figures. Throw in what I owe in my 30-year-fixed, however, and I have NEGATIVE net wealth, also in the hundreds of thousands. So depending on how you look at it, I am either relatively wealthy or in abject poverty. So which am I? Curiously, I feel like I'm neither.

Median age in 2000 was 35.3, so computing the Millionaire Next Door's wealth index, 86000/(43200*35.3/10) is 0.6, so the median person is close to poor. The nineties percentiles would be interesting since that is where all the action is.

One thing that isn't likely included is pensions that haven't vested. While those are much rarer these days, for those that will have them, they will easily represent the bulk of their future wealth.

Since a million can only safely generate $40,000 in income, if you want to capitalize their jobs, the median household is worth a million, it is just that they have to work for it.

you mentioned that if you include mortgage debt that you have a negative net worth. If without the mortgage debt you net worth is in the six figures. How is this possible? You have negative equity in your house of $100000 PLUS? Are you not including the value of your house along with the mortgage debt because they should atleast offset.Unless your real estate market has tanked dramatically.

How should term life insurance be included in net worth calculations? For instance I have a 1.5 million 20-year term policy. How do I figure this into my net worth?

Term life insurance has no cash value, so I would not include it in any net worth calculation. I am also curious about Dave's net worth calculation.

Either way, this article makes me feel a bit better! Thanks for brightening my day!

A comment on Dave's situation: in the past five years, there have been a lot of people who purchased houses ranging from $400k on up to seven figures, with practically no money down.
So, if you owe $600k on your mortages, that could really swing the net worth ledger from plus to minus. Declining real estate values and lots of mortage debt = subprime crisis and then some.


I was reading the Typepad blog and saw they are bragging about you and your blog. I zipped over to the NY Times and read the article that quoted you. Congratulations on the great media coverage of your blog!


Although I agree that net worth is important, I'm not sure it is more important than income. Income is what people live on day to day -- not net worth. And we each live on day-to-day defines each person's standard of living.

I agree that income is what really matters, but a larger net worth allows one to create more income than he otherwise could. It's at least supplemental if not replacement income.

And as far as people saying that a million dollars isn't what it used to be, it's getting kind of old. Like you said, most people who say this probably don't have anywhere close to it and it's pretty much just stating the obvious at this point.

Hmm. I was just told by some people that it was no big deal that I earned "Just" six figures (and I do earn more than "Just" 100K). I guess being in the top 20% of earners isn't what it used to be :)

I don't understand why people keep citing these "median" statistics. They are meaningless. What good does it do yourself to compare yourself to the median person in the country? Have you seen the median person? Would you want to be anything like them? You also have no idea how they get these net worth numbers. It's like the tired argument that Americans are in too much credit card debt, when the fact is that over 70% of Americans have never had one penny of credit card debt, and the majority of the ones that have had small balances for short periods of time, it's just that there is a small population that carries enormous credit card debt which skews the numbers on "average credit card debt".

I watch the Suze Orman show on TV most weeks, the people they profile are generally very dumb about personal finance. However I would say that at least 99% of them make more than $60,000 per year and probably 90% of them make more than $100k per year. Sure there are a lot of people making $50,000 per year or less but there are also tons of people who never went to college, or never graduated high school. Or people who just immigrated here and are working cash paying jobs. The list goes on and on. The "middle class" is a wide range, but most of the strong arguments for what the range should be are around $75k-$200k. People act like $100k is a lot of money, on $100k you can't live "rich". I don't know where the rest of you live, but where I live most kids right out of college are earning more than $100k to start. On $100k after you max out your 401k and pay taxes you're left with about $60k - not a lot of money, particularly considering you should save at minimum another $10k of that.

These numbers are not only meaningless but they're ripe with flaws. Why bother with them? Unless of course it makes you feel better about yourself, which is probably the case.

Jorge -

100K + right out of college? Where do you live? I would agree that it may be common place for a salary in excess of 100K a couple of years out of college, but in order to get that in most of the US right out of school.... you gotta be coming from a top teir law school.... doc.... or alike. And I would say that is not common place.

Does it happen? Of course. But I could hardly agree that most kids right out of college are earning more than $100k to start..... I would say 40-50 is average right now out of school where I live.... which is reasonable because if you are worth anything, one can easilly turn that into 100K+ in a matter of years.

I agree with the comment above about mortgages playing a factor in these numbers. With all of the refinancing and subprime stuff over the past 5 years, I bet that takes a huge hit on net worths. With first time home buyers included, I doubt many (if any) of them have net worths more than their original mortgages are for, which puts them in the negative right away.

Jorge, where do you live??!?!?!?!? I want to move there. $60K after taxes and funding retirement funds is not a lot of money? I'm not saying that it would make you super rich, but there are plenty of people living very comfortable on less than that as a gross income.

A few thoughts/comments:

1. Yes, income is important and yes it's what you live on.

2. That said, it's your net worth that makes the difference at the end of the day. Consider someone who averaged $200k in salary per year and ends up at 65 with $100k in net worth. Is he better off than someone who averaged $70k per year in income and at 65 has $1 million in net worth? I don't think so.

3. "I don't understand why people keep citing these "median" statistics. They are meaningless. What good does it do yourself to compare yourself to the median person in the country? Have you seen the median person? Would you want to be anything like them?"


4. Jorge --

I think you're living in an area that is not normal. I don't think most kids make $100k just out of college and yes, I think $100k is a good income.

Another note. There are a handful of youngsters, not that I am that old, that I have come across over the past couple of years that think they DESERVE 100K out of school. And unfortunatly, after working with them, one quickly realizes this is the furthest thing from the true. I think people often forget the difference between what they want.... and what they are really worth. Not everyone can drive a porshe or Beamer.....

Plus.... 70-percent of statistics are made up... or is it 80?

If someone watches Suze Orman I wouldn't trust any numbers or financial statistics they use. 100 k right out of college. I would like to hear where this stat is coming from? I would trust the surveys for income, but net worth would be hard because there are so many intangibles.

On Cnn money awhile back the did an article and the starting salarys were...
Engineers were 50-60k
Accountants were 45k
Finance were 42k
Marketing 37 k

These were 2005 numbers. but even with a difference of 15% they still aren't anywhere near 100k a year. Even when you graduate you still have to prove yourself before the big money rolls in. High academics doesn't always translate into the real world.

I live in NYC. And yes, I guess I was talking about people coming out of top tier schools. I went to one of them so most people I know also went to them, also I'm a bit biased because I work in an industry that pays high salaries. I'm actually a pretty low earner amongst my peers in this business (wall street) because I work in more of a support role after deciding I wasn't built for the front office stuff. But $100k out of college was actually on the low side these days. The biggest barrier to entry is college, Wall St. is notorious for hiring almost exclusively from the top schools (for the good jobs that is). A typical first year analyst right now will make between $120k-$180k their first year and it grows quickly from there. But people I know in IT also earn $100k+ over here, they may not have made it right out of school but they were making it in their mid-20s, and for IT they didn't have to go to a great school. On the higher end stuff like software engineers, the ones I know also make six figures (maybe they started at around $70-$80k) but got to six-figures quickly.

Are costs in NYC higher? Sure, but not by much. The media blows it way out of proportion. I grew up in St. Louis, I can tell you that except for housing most of the costs here are the same - in fact with all the options in NYC you can find even better bargains. Housing is more expensive but if you're buying you're building equity anyway. If the typical owner of a small apartment in NYC decides to move to the midwest they could buy a mansion and still have hundreds of thousands left after selling their apartment. So one can argue how relevant housing cost really is. Besides, the high prices are in Manhattan, if you're willing to live a couple miles away (like millions of people do) than your housing costs are roughly in line with any moderately priced city.

FMF, in regards to your comment #2 - I completely agree with it. Well not completely, but largely. At the end of the day it is net worth that matters. But the example you cite is simply an example pulled out of thin air. Granted in that example the $50k earner with $1 million in the bank is better off than the $200k earner with $100k in the bank. That much is obvious. But the fact is that isn't the norm. That is something I just addressed in one of your older posts as well. If you were to plot incomes vs. net worth I bet you every penny I have you would see a positive correlation, not a negative one. But more often than not it seems you focus on the high income earners that blow all their money, when in fact most of them are probably saving a considerable amount.

Ask yourself this - if high-income earners are "smart" enough to make a lot of money, why do you so easily presume they are not smart enough to manage their money? I know we all see people who live beyond their means, but that can apply to anyone - someone making $50k per year or someone making $1 million per year. But odds are the typical person making $1 million per year is going to have a much better financial profile than the typical middle income person. Focusing on your earnings is just as important as focusing on your savings.

Jorge --

1. Your situation is not normal. You have to think about the rest of the U.S. (and the world), not just what's happening with people you know. The income numbers you cite are very high.

2. "But more often than not it seems you focus on the high income earners that blow all their money, when in fact most of them are probably saving a considerable amount."

A. "Probably." You don't know if they are or aren't.

B. I focus on the fact that no matter how much you earn, if you spend more than that, you're going backwards. That's my main point.

3. "Ask yourself this - if high-income earners are 'smart' enough to make a lot of money, why do you so easily presume they are not smart enough to manage their money?"

A. If you want to deal with facts (and not just your personal opinion), studies show that intelligence and income are related, but intelligence and net worth are NOT related. For details, see this:

B. Personally, I know several people (probably 30 or more) who make well over 100k per year and have terrible personal finances. People who are successful at managing a company's fiscal responsibilities are usually crappy at managing their own in my experience. How do I know? Because I've counseled them. Like your example, though, this is just my personal experience so I'd put more weight on the study linked above.

4. "Focusing on your earnings is just as important as focusing on your savings."

I've already addressed this issue:

Wow your data (or lack thereof) is so pronounced that its almost impossible getting through to you. Continue to believe that high-income earners aren't much more likely to have high net worths than low income earners. Believe we live in a topsy-turvy world where everything we see isn't true and all common sense is thrown out the window. Meanwhile the rich will continue getting richer.

The simplest data set you can find is probably incomes plotted against net worth. I'm not the blogger, you are, so frankly I'm not going to search for these numbers. But also, I already know what they're going to show. I'll take data over anecdotal arguments and assumptions any day.

Jorge --

You said:

"I'll take data over anecdotal arguments and assumptions any day."

No you won't. You'll take your experiences (which are waaaay beyond those faced by most Americans) and assume they are fact for everyone. That's simply not the case.

FMF!!! Congrats on the NYT mention : ).

Jorge -- You are talking about a very small, small percentage of people in the U.S. -- and a small percentage of New Yorkers, as well.

Jorge - no offense, but you are the one that it is impossible to get through to. Your situation is not normal, no matter what you think. NYC is a different world compared to the rest of the US, or maybe 99% of it anyway.

Even within NYC, I guarantee only a low percentage of recent college grads are making six figures. In your industry it may be almost 100%, but it is doubtful that statistic is common across all fields of employment.

-From a fellow St. Louisian


So living in NYC, being in a very specific field, and graduating from a top tier school, and landing a $100K+ entry level job is typical for most Americans? And sure, real estate is affordable in NYC if you don't mind being in an area where thier is a 50% chance you will shot, mugged, or raped. We would all appreciate it if you would be a little more realistic in your future posts. Thank you.

Jorge, I heard that the NY Wall Street supplies 50% of the US jobs... so maybe you are right... or not...

One thing to note... I wonder how many athletes/musicians/actors (that are definitely in the top tier of income) skew the income figures? and based off those people it is obvious there is NO correlation to them be "smart" enough to have/maintain a large net worth.

Jorge, I live in NYC too, and finance may be a great field, but the majority of NYCers, even the majority of young NYCers, even the majority of young NYCers from prestigious schools, don't work in finance. If your friends were trying to break into the arts or media or even just ordinary business jobs (not consulting), you'd be hearing an entirely different story.

Unless I saw someone's Tax return/ Brokerage statements / Credit Card /L.O.C., etc. I would not believe a word they say. People generally inflate their salaries and net worth and deflate the debt levels. There is a reason why the studies don't relate
to what people tell you. That is because people lie to make themselves look and feel better.

How come that people who argue income is the only thing that matters are always from NYC?

"A typical first year analyst right now will make between $120k-$180k their first year and it grows quickly from there."

I also work in this industry ("Wall Street"), and Jorge's numbers are patently false, without a doubt. Those are the numbers that a TOP undergrad from a TOP school would make at a TOP investment bank. They are nowhere near typical even for the industry as a whole, whether you're talking about investment banking, sales and trading, buyside investments, research, hedge funds, etc.

Personal Finance is just that , personal. The posts are supposed to appeal to a broad range of people. Not just high income earners or low income earners. If you are "smart" with your money than the more you make the more you save, simple as that.Everything in life is not a competition. It is to but yourself in the best financial situation for you. Of course if you make 500k a year you will save more in 5 years than someone who makes 50k a year does in a life time. That being said high income earners have to save alot more to maintain the lifestyle throughout life. Someone who earns 50k doesn't need 10 million dollars. Where as someone who earns big money may need that or more into retirement.Income plays a factor if your have an apptitude for personal finance if not if doesn't make a difference. People overlook the facts that peers and friends make a differnce in saving and spending. If your worried about having more than others not anount of money or posessions with make that go away.

I don't think people take into account how these numbers are sckewed because the top 50 richest americans have a combined net worth of 500 billion. If they were taken out of the equation the top percentile would look dramatically different.

I think it's funny the things people will argue over. I think Jorge has a good point, though his numbers may be a bit biased and skewed. His point was simply that you can't compare yourself to the average American. There are simply too many variables. The average networth may be $86K, but that is across all ages and economic regions. As we discovered, we can't compare NYC with the midwest. We can't compare a 55-year-old to a 25-year-old. Since I'm 24 years old, it might be more accurate to compare my networth with other 24-year-olds. But certainly not to 55-year-olds.

Also, there are too many variables in the networth game to make the number useful in any way. My dad (53) has a very low networth (maybe even negative), but he gets a pension from the Air Force every single month. How does this guaranteed income fit in his networth? Until a few months ago, I had a negative networth, but I had a lot of education debt. I feel that my intelligence and my education are actually assets and not liabilities, as my networth might indicate.

So yes, Jorge may have skewed numbers, but his points are right on.

Stop saying the numbers are skewed, people. FMF is using MEDIAN income and net worth rather than MEAN or AVERAGE for a reason.

What is a median? A median is the middle number when you arrange a data set in ascending order. So in the set 1, 2, 3, 4, 100, the median is 3.

What is a mean or average? A mean or average is the sum of a set of numbers, divided by how many numbers there are in the set. In the set 1, 2, 3, 4, 100, the mean or average is 22.

This means means and averages can very easily be skewed by outliers. If you look at 5 people, 4 of whom make $40,000 per year and 1 of whom makes $340,000, then the mean or average income is $100,000. It would be mathematically accurate to say that the average person in that set makes $100,000, but that doesn't paint a true picture of those 5 people. It is much better to say that the median income of thsoe 5 people is $40,000. Then you get a better sense of just how that population looks, without being affected by outliers.

FMF focused on median income and net worth for this very reason: so we can ignore the impact of superstar athletes, celebrities, and top-earning CEOs.

So in Lawrence's example, if the top percentile contained at least 101 people, then the net worth of the top 50 people don't matter at all in calculating median income.

Lily got there before me, to save me from my usual wordiness. ; ).

Median figures are much more useful than average figures, and yes, many of us (me included) find it helpful to see where we fall in the net worth range.

Your right I did not catch that I thought it was average net worth.

I think these numbers are interesting to view to see were people stack up. However , I think if people want a useful gage of were they stack up Age/Net worth would be more useful. For example I am in my early twenties are have a networth above the median, but I would rather like to know how many people my age have networths above the median versus below.

Speaking of wordiness, I just noticed this phrase in what I wrote: "This means means and average ...."


Boy, Jorge's comments really are unnerving. And, yes, I write this as someone with ample familiarity with the segment of the workforce he's talking about.

Let's just be blunt here: Wall Street and the top-tier law firms and consulting shops that are glued to them live in a different world. And those who move in that world often have a tough time stepping back and realizing just how lucky they are financially.

I work in an industry where, for the top tier of it, entry wages are around 130-160K. But for the industry as a whole, it's in neighborhood of 40-50K. The top represents a minute percentage of the whole. It's just unfair for those in that segment to behave as if they are representative.

And within that segment, I do see a lot of savers. In mine, the instability the industry has seen in say the last 10 years about long-term job security has caused that behavior. The real question is: are they saving enough? It's one thing to look at someone who is netting 400K a year and marvel at how they managed to save 50K in a year. But what is their financial goal and lifestyle level they are trying to achieve in retirement? That might not be anywhere near enough. There was some financial blogger out there who is a decent level exec who set out his goals. He probably makes double what I do (plus has a wife's income to include) and yet I'm likely to meet his net worth goal in less time than him on less income. That doesn't make me better, per se. The point is, what matters is one's goal for one's savings and whether you are working towards that.

From my vantage point, I see a lot of people with high incomes who are saving but not saving nearly enough for the lifestyle they have grown accustomed to and want to carry on in retirement. But others are doing fine. And others are so loaded they really don't need to think about these things.

Guess it wasn't an isolated incident where people are telling me that making 100K is no big deal. :)

Those people are all insane. I went to Princeton University so I know a thing or two about going to a top school. I also majored in Economics which is the major of most bankers and traders. True, you could make 100K your first year out with bonuses. But seriously, this is a small minority of people who can do this. Very small.

Hell, a specific segment of Wall Street is its own world. The income of a top young i-banker or hedgefunder will substantially outstrip the income of her equivalent in law in a very short period of time, barring recession or collapse in her particular specialty (in which case the lawyer, with more guaranteed upfront comp, might do better). Jorge, seriously, now is the time to realize just how atypical your experience is (and how lucky you are), or you will be doomed to spend your life as just another douchelord on the Street. The city has enough of those.

This is the best thread I've read in ages! Very interesting reading! There is validity in most of these posts, I think Jorge brings up some vary valid points but I agree that he is looking at the world from his lofty perch and things are different for most people. I know a bit about his business, anyone who has lived in NYC is pretty aware of the Wall Street community and the kind of ridiculous money they make - at young ages to boot! And they drive up prices for the other 90% of New Yorkers. Bonus season on Wall Street is practically one of the most anticipated events in New York City for high-end businesses, real estate agents, and gold-digging women. But nonetheless, a $100,000++ salary for people in their early 20s is not as common as someone like Jorge thinks.

FMF - there is a major flaw with those median numbers however. One problem with median income numbers that policy makers regularly bring up is that they are not accurate for the purposes most people use them for. For instance if you take out teenagers and senior citizens, the median income in the US goes up from something like $48k to close to around $75k. Then they argue you should also exclude the pool of people who work in jobs "not really for the money". There are lots of people, including my wife who work in jobs simply for enjoyment or fulfillment but not for money - they pay almost nothing. My wife works full-time for a writing program, helping to nurture creative writing. Her income from last year was only $22k because the program is sponsored by donations (small ones). And in fact that was a high year, the year before she only made $19k!!! That is all W2 income and gets included into these median salary statistics. But of course she is not doing it for the money, if they paid her nothing she would still be doing it. So is it fair to include people like her? Is it fair to include the high school kids who works at McDonalds so he can have some cash to buy video games and go out (i.e. not supporting himself or family)? Is it fair to include the senior citizens who work some little job to stay busy, like you see at many non-profits? I don't think it is because it gives most people a false benchmark. Most of us work to support a family, or at least ourselves. We work to secure a good savings and hopefully explore the finer things. But the statistic will make it look like the median person is earning much less than they really do.

That is also why the middle-class is usually defined with a very large range - e.g. from $40k-$150k is what I often see. Personally I like to use the median income figure of around $75k (when not including teens and senior citizens), this is what policy makers try to use. But this should also be revised upwards if there was a way to measure how many people work in low paying jobs merely for the enjoyment and not the money like my wife. I bet the true median would work out to well over $80k.

$1M is "not much" in the sense that it won't last. In the old days, a millionaire was rich _by definition_, and if he refrained from going crazy with his spending, he could realistically expect to live the rest of his life in comfort without the need for any earned income.

Net worth is a fairly meaningless number anyway, considering how for the majority of people the bulk of the asset picture is tied up in forms that are neither liquid nor income-generating. (Having a nice house to live in is a great thing, as my wife and I have been learning ever since we bought ours. And a mortgage payment that's guaranteed constant in nominal dollars for 30 years beats the hell out of rent payments that are all-but-guaranteed to rise every year at greater-than-inflation rates. But unless you're buying a house or selling one, the price of houses isn't actually a factor in anything that matters. What matters is the assets that are in a form you can spend if you have to, a form you earn income from, or preferably both at once.)

Matt I agree with you. That is why you usually see advisors and such people talking about net worth exclusing primary house. Or many just consider your liquid net worth. Net worth including primary residence does not mean much, I agree. If you are lets say 30 years old and have a $500,000 net worth that is probably pretty good. But if $400,000 of that is tied up in your house than it doesn't look too good any more at all.


For someone so focused on net worth (I agree with this by the way) then you should view inflation with more scrutiny. True, your investments are going up and you are trying to beat inflation but the current environment of excessive inflation that is being underreported (think core inflation doesn't include food, energy, housing or medicine) our savings is being eroded dramatically. The real buying power of our net worth is decreasing daily.

Isn't it time to raise awareness of this issue?



120-140 k at an ibank in this economy? you're high on something son. a typical first year analyst will make 65 k base +10 signing bonus and maybe 30-40k bonus this year if he gets lucky AND performs well. It's definitely not the NORM. You didn't mention that they also work 100+ hours a weeks, so per hour they don't make crap. Also signing bonus and EOY bonus are taxed at a higher bracket so that further lowers your take home pay.

I'm making 80,000 right out of college working 40 hours a week and no I don't live in COL hell NY.


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