George Kamel - What Your Net Worth SHOULD Be by Age 40

Episode Date: October 11, 2023

What should your net worth be by age 40? Is it too late to build wealth? In today’s video we’ll talk through calculating your net worth, how to know if it’s good, and what to do if you’re behind.  Links:  Ramsey Net Worth Calculator EveryDollar Budget Deal: I love a good deal, when you sign up using this link , I’ll hook you up with a 14-day free trial and $15 off your first year of the premium version of EveryDollar. Learn more about your ad choices. Visit megaphone.fm/adchoices

People think turning 40 is a huge deal because you're, quote, over the hill and halfway between diapers and depends. But look, 40 is not old if you're a tree or a country or Paul Rudd. How does he look so young? Paul, if you're watching, DM me your eye cream regimen, bro, how do you do it? How does it feel to only have looks? Great. Okay, in all seriousness, I'm not 40 yet, but it's not that far off for me.

And in between existential crises, I'm actually looking forward to 40. It's not all gloom and doom. you just got to look on the bright side, right? Because I get it. If you're 40, you're older than half of the people in the United States. But on the bright side, you're also younger than almost half of the United States. That counts, right? It's kind of a glass half full kind of thing.

Kind of a life half full? Half full of love. Okay, bad example. How about this one? At 40, you're obviously older than you've ever been. But on the bright side, you're likely more wealthy than you've ever been with a net worth of Well, we'll get to that in just a moment. That's what today's video is all about, what your net worth should be by the age of 40.

Are you above average? Below average? Is average even good? Let's dig in and find out. But first, be an above average person and subscribe to this channel, like this video, and share it with all your friends who consider themselves elder millennials. You know who they are. They're always quoting Anchorman and reminiscing about the sound of dial-up internet.

And odds are their name is Jessica or Ashley, or Brandon, or Ryan, but probably Jessica. but probably Jessica. Okay, in case it's been a minute since you've thought about your net worth, here's a quick refresher on what it is and how to calculate it. Your net worth is a basic math equation. It's what you own minus what you owe. So take the total value of all of your assets. Things like your house, cars, investments, cash,

your complete set of 1994 Fleer Ultra X-Men trading cards, including the rare silver X-overs only available in the Walmart packs, minus your liabilities. Things like credit card debt, student loans, your mortgage, and the remaining $4.25 you still owe after pay because you buy now pay later what can only be described as a tub of Big League chew. You know, for old times' sake.

Pointless nostalgia. And the resulting number is your net worth. That means your net worth is not just the stuff you have, because get this, you could have a million dollars in cash and investments, but if you also have a million dollars tied up in debt, you're not a millionaire, you're broke. How was money does he have?

Jay and broke. And by the way, your net worth has never, nothing to do with your income. Just because you make a lot of money doesn't mean you have a high net worth. And yes, a six-figure salary will help you build your wealth, but it won't lead to a high net worth if you're not doing the right things with your money. And lastly, before you start jumping in the comments going, actually, George, I don't think you should include real estate in your net worth because technically you'd have to sell all that off. Shut it. Shut it, Jessica. Nobody asked, okay? It's a simple math equation. It's an accounting formula. It's not your opinion. Got it?

Now that we've got that squared away, let's take a look at how Americans are doing financially at age 40. Spoiler alert. Not good. According to the Fed, the median net worth for people between the ages of 35 and 44, which is where you 40-year-olds would be, is 91,300 bucks. But is that enough? Well, let me put it this way. It's like when you go to your friend's house and they're like, you want some Oreos, and then proceed to hand you a pack of single-stuffed great-value twist-and-shelts.

Sure, it's better than nothing, but not by much. I'd almost rather have nothing. Oh, re-re, we, re-re, oh. And you would think after working for almost two decades now that we would have a little more to our name than $90,000. But when you consider how much debt people have, it's not that surprising. Remember, debt is a liability and brings down your net worth.

And for someone ages 40 to 49, the average consumer debt amount, excluding their mortgage, is over $24,000. We can do better, people. We can do better than that, people. Oh, yes, we can. And yes, we will. Hey, we'll get right back to the episode,

but I want to give a quick shout out to our friends at BetterHelp who are sponsoring this episode. Listen, sometimes we know what's good for us, but it feels like we just can't make ourselves do it. Like, I should just go to bed, but I'm a new dad, and my baby just got a diaper rash, and it looks really red. And sometimes my brain convinces me to check WebMD, and then I click another article and another article,

and suddenly it's three in the morning. If your brain tends to work like that, therapy could help. So your brain works with you, not against you. And sometimes it's just as simple as talking things through and learning strategies to be intentional about doing the things you know you should. So if you're thinking of starting therapy, give BetterHelp a try. BetterHelp is flexible because it's 100% online, so it fits your schedule. Just fill out a brief questionnaire to get matched with a licensed therapist,

and you can switch therapists at any time for no extra charge. Make your brain your friend with BetterHelp. Visit betterhelp.com slash George today and get 10% off your first month. That's BetterHelp, H-E-L-P.com slash George, or click the link in the description. All right, back to the episode we go. So where should you be financially by age 40? Well, there's no exact figure, and obviously everyone's circumstances are different, and winning looks different for each of us.

But let's imagine an A-plus scenario. Go with me here. You graduate college debt-free, so you have no student loan payments. You drive a paid-for, reasonable, used car. And at 22, you landed a decent job, since you did most of your stupid stuff before the internet was a thing, and your salary is 56 grand a year. We're crushing it, all right?

So now we have no debt. We're making 56 grand, and we begin investing 15% of our income into our company's 401k plan. Now, let's crunch some numbers using our net worth calculator. And if you want to play along with your own numbers, I'll link that net worth calculator below. So let's start with assets. Let's say because you were debt-free, you were able to save up and put $50,000 down on a $250,000 townhome 10 years ago when you were the spry young age of 30 years old. Now, over that time, the townhome appreciated to $400,000, meaning you have a total of $400,000

in real estate assets. Let's go ahead and enter that in. All right, we've got that entered. Now for liabilities, let's say you've got a 15-year mortgage back in 2013 and an incredibly attractive rate of 3.8%. Remember the good old days. Oh, dang, way back in the day. So after 10 years, even with no extra payments,

you've paid down that mortgage from 200,000 down to 80,000. Let's go ahead and enter that mortgage in. So we've got our assets, we've got our liabilities. Now for checking account, that's going to go into our asset section. Let's say you have $1,000 in checking. So we're going to add that in there, $1,000. And in your savings account, you've got an emergency fund of three to six months of expenses, which will call $15,000.

Crush in the game. We love to see it. Now let's turn to investing. If you invest 15% of your $56,000 salary from age 22 to age 40, it would turn into $420,000 thanks to compound growth. And by the way, that's assuming you never get a raise. And if you don't increase your salary at all over 18 years, I hate to be the one to tell you this, but that sucks. I'm just dandy.

I got a bowl of chocolate pudding in my underpants. So we're going to add in this investment account under our assets and retirement here. I'm going to say $420,000. All right, moving on. You've got that paid-for car. It's less than 10 years old. It's still running fine. And thanks to this used car market, it's worth $15,000.

So we're going to add that under the car section. Now, for other assets, for fun, let's say you got that X-Men trading card collection worth $1,200. We're going to add that into the other assets section. That brings your net worth to just over $852,000. That's amazing. But again, that is an A-plus scenario, assuming you did all the right things in your 20s and 30s and had no unforeseen obstacles. Now, your report card may look a little different. We're human.

It's okay if you're not there. What is life without a few unforeseen obstacles? And while there's no official ranking here, I created my own scoring system to help you self-assess where you're at. And I call it the Camel Financial Scoring System, or KFSS for short. Now I've updated the grading scale specifically for this video. The original scale is for people in their 30s. This one is for those of you in your quadrigenarian era. Again, no shame here, but it's just good to know where we stand.

So here's the grading scale. Pay attention. Take notes. If you have a net worth of $10,000 or below, I'm calling that. and F because that means you haven't been investing, you've likely been carrying debt for a long time and probably adding to it. A net worth of 10,000 up to 100,000 would be a D. Remember, the median net worth for those 35 to 44, just over 91,000. So unfortunately, that D is pretty average. Now, a net worth of 100,000 up to 250,000, we're going to call a C. If you've got a net worth of

250,000, up to 500,000, you get a B. And finally, you get an A and a gold star. If you have a net worth of 500,000 or more by the time you're 40 years old. And if you remember the last video, what your net worth should be by age 30, an A scenario in that case was a net worth of 100,000 or more. So what that tells me is, 10 years of compound growth and good financial habits makes all the difference. Now, if you're the teacher's pet out there wondering, but George, how do I get an A plus? Simmer down, find some hobbies. So, rock collecting? They're minerals. But I'll tell you, if your net worth is $750,000 or higher by the time you're 40, I will grow. Grant you that plus, my friend. Congratulations.

Now, back to our example. If you've got $420,000 in retirement accounts by age 40, and you just continue to invest that same amount, by the time you reach 62, you'd likely have over $4 million, thanks to compound growth. So if you're looking at your net worth thinking, well, George, I'm nowhere near $500,000. Don't freak out.

Remember, this is just halftime, baby. And if you've seen Space Jam, this is the part where Michael Jordan gives the pep talk to the tune squad, and they turn this ship around with the help of Bill Murray, and they save the universe. And they did all of that in an 88-minute runtime. You've got a whole lot more time than that, my friend. You can do it.

So there are still things you can do to get back on track and start building wealth. So let's play this out. Let's say you're 40 years old and you've got that D net worth of $91,000 and you still have $24,000 in consumer debt. Not great, but it's what you got? So what do we do now? Well, first, make sure you're sticking to a zero-based budget, you're living on less than you make,

and you have that $1,000 in a starter emergency fund. Once you've got that, it's time to get serious about paying off your debt fast. I'm talking faster than Usain Bolt racing against a roadrunner, which is a great premise for Space Jam 3, by the way. And before you hate on me for that, remember how bad Space Jam 2 was. Can't get much worse. Give it a shot. What do you have to lose?

Remember, that debt is a liability that detracts from your net worth. Now, after your debt is demolished, build up your emergency fund to include three to six months of expenses, not income, expenses. Once you've got that in place, now is the time to begin in front. investing 15% into retirement accounts like a 401k and a Roth IRA and just choose some decent funds inside of those. Next up on the list, we've got the investing part going. Now we're going to start throwing extra payments at your mortgage to get that knocked out. And if you need some extra motivation, think about this. Once your house is paid off, it's going to increase your net worth.

And once you knock out that payment, you can start investing way more into retirement and take advantage of ketchup contributions starting at age 50. Not to be confused with ketchup contributions, which is what happens when the guy at Chick-fil-A accidentally gives me 14 ketchup packets. Why does he think I need 14 ketchup packets? I don't know. Does he think I have a ketchup addiction? I'm more of a honey-roasted barbecue sauce kind of guy anyways. You start to learn about all these different sauces, and I lost control. So you see, if you do the right things with your money, it's not too late to get that net worth up.

But don't put this off. Get started now. All right, I hope this video was helpful. Let me know in the comments. Be brave. Let me know what your grade is on the KFSS scale. And if you're feeling extra vulnerable, include your net worth and share it with the room. And remember, having millions of dollars in assets should not be your ultimate goal in life. It's just a byproduct of doing the right things with your money. And let me remind you, you can have a great life without being a multimillionaire.

Your net worth is not your self-worth. Plus, we're grading on a curve here. So you all get an A just for watching this channel. I'm the cool teacher. As always, make sure to like, subscribe, and share this video with your friends who are living in their middle ages era. Not like Camelot and LARPing at the Renaissance Festival, but you know what? Hey, if that's your flavor of existential crisis, you do you.

You're not hurting anyone. A foam sword can't do that much damage, except to your personal brand. Thanks for watching. I'll see you next time. I'm genuinely concerned about these Twist and Shout flavors. You got to love they have to put artificially flavored, as if we thought they're using totally natural flavors to get that real creme brule taste. Okay, this is where I get...

Chocolate banana. Now we're getting to some dangerous. territory. Mint. Don't want to feel like I'm going to the dentist. That's disgusting. There's one. White chocolate and raspberry. Raspberry. This one, although, is concerned. Golden. Artificially flavored. Did they, did people think there's real gold in these Oreos? Sorry, in these twist and shouts. Disgusting. I'm in a hard pass. Although, fun name, marketing team at Walmart.