Evaluate my Financial Status

This Book while outdated (1996) has a fairly good measurement for wealth as adjusted for income and age.

You are Mid 40's, let's say 45, and your total household income is $189k (including rental income). Their formula suggests your net worth should be 10% of these numbers multiplied. Therefore your net worth should be $850k

Your actual net worth as measured by Assets minus liabilities:

Assets: $1.2M Home +$85k+$20k = $1,305,000

Liabilities: $390k + $140k = $530,000

Net Worth = $775k

You are below where you should be. This is most likely because your savings is incredibly low, and your debt is relatively high. You most likely over extended on your home given your income level, but even still with some dividend producing investments, you could still be in a better position. With three children and college to pay for, you may be in trouble down the line.

Millionaire Next Door wrote:

This Book while outdated (1996) has a fairly good measurement for wealth as adjusted for income and age.

You are Mid 40's, let's say 45, and your total household income is $189k (including rental income). Their formula suggests your net worth should be 10% of these numbers multiplied. Therefore your net worth should be $850k

Your actual net worth as measured by Assets minus liabilities:

Assets: $1.2M Home +$85k+$20k = $1,305,000

Liabilities: $390k + $140k = $530,000

Net Worth = $775k

You are below where you should be. This is most likely because your savings is incredibly low, and your debt is relatively high. You most likely over extended on your home given your income level, but even still with some dividend producing investments, you could still be in a better position. With three children and college to pay for, you may be in trouble down the line.

Always thought net worth is based on liquid assets. Home value/equity being separate.

JCCB wrote:

I make 65k.

Husband makes 100k.

We rent out our guest house and make approx. 24k a year on that.

House worth 1.2 million.

390 mortgage.

140 K owed on Heloc.

85k in retirement fund.

20k in savings.

We are in our mid 40s. 3 kids. Little has been saved for college.

Not very good. Excluding the house, you have a negative net worth.

Your liquid assets - debt (excluding mortgage):

85 + 20 - 140 = -35k

House is worth 1.2 million. You get 24k income. That's about 2% return, but you are paying interest on the debt. So it pretty much zero's out. The house will grow. Who knows how much. Not a whole lot, and you have to sell it to realize the value.

However, if you sold the house, you'd net around 600-625k after debt repayment, fees, etc. If you invested that in a dividend paying EFT you could net 18-20k a year with the div growing at about 3-4%. The actual value will bounce all over the place, but should grow somewhere around 6-7% over the coming decades.

Real estate can be a good investment, but your house is not (it was great when you bought, but unless you sell it now or before you die, it's not a good one going forward).

Your savings are low. You have no investments outside retirement. And you retirement nest is too small.

Unless you will both get a pension, you need to ramp but the savings big time. Pay off that HELOC. Move to a cheaper home. Forget about the kids college until you get your savings where it needs to be for someone your age (2-3 times as much. I had about 5 time more than you on less income - meaning I made less money [inflation adjusted about the same] and had way more savings and retirement [Not inflation adjusted]).

I don't think you should exclude it, but you should take this with a grain of salt. Its valued at 1.2 million now, but that could easily be 600k next month. If the real estate market takes a dive like it did in 2008, you are pretty close to being underwater. If you think about it, no investments are worth anything until you sell them. So in that aspect, you're correct.

Anyway, if I were the OP, I wouldn't be comfortable with that much debt. You are also way behind in your retirement savings and lack of a college fund.

JCCB wrote:

I make 65k.

Husband makes 100k.

We rent out our guest house and make approx. 24k a year on that.

House worth 1.2 million.

390 mortgage.

140 K owed on Heloc.

85k in retirement fund.

20k in savings.

We are in our mid 40s. 3 kids. Little has been saved for college.

85k in retirement funds? How is that even possible? That is comically low. Have you simply not been funding those 401ks/IRAs?

I fear you're not going to be able to retire.

Good

I have more in retirement/savings than you do and i 'm 24. I also make half as much.

Scary low savings and retirement.

...You should have way mpre than what yo have right now in retirement. Bottom line, you should invest at least 10% of your combined GROSS salary to retirement in a low-fee, tax-advantaged mutual fund to take advantage of compound interest.

Are you contributing the maximum ($5,500/yr) to a ROTH IRA?

Anyways, that's where I see the biggest issue.

47 yo

Combined household of about $200k

Home value $500k no mortgage

Retirement savings $800k

Liquid savings $130k

Annual savings are $30k retirement and about $40k liquid.

Plan to retire at 57 and begin a second career of some kind. Hoping to sell house in 2-3 years, downsize, and put $150-200k in bank.

We spend way too much on entertainment and dining, but have also resisted the temptation to drive $70k vehicles and buy other toys. No car payments, no debt other than an annual property tax bill.

Gonna need pics to evaluate, OP.

As for the 529 plan, my wife and I will never have one. They can pay for their own college. I was on my own and found an NAIA school that was willing to give me a full ride for running (mostly athletic money, partially academic, but full ride). $40k/yr education for free. My kids can decide and take care of themselves. If they decide to go into debt, that's their deal. They will be adults at that time.

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@$$Hole. You and your wife make $165K+ not including your rental income and won't even consider putting money aside for your kids college? If I were your kids and eventually discovered this then I probably would resent you the rest of your life. You have less money in retirement than people half your age who make 1/3 of your income.

It does fascinate me how people live well beyond their means. Last time I looked, ~78 % of people live paycheck to paycheck. You are making $165k a year and your just above broke.

Sell your house and downgrade

Start maxing out your retirement

Start saving.

Not until you evaluate mine:

Married mid 40s with 3 young kids (11,9 and 7)

I make $200K a year (with a redic pension for life excluding deferred comp below if I stick it out to 60ish)

Wife makes $300K a year (but will only work for 10 more years tops)

House worth approx. $900K; owe $450K on it

Deferred comp for both of us: $1.1 million (will be taxed on back end)

Roth: $50k

Own approx. $200K worth of stocks

Kids 529 is approx. $100k (for all 3)

Other savings and assets: $150K

Owe approx. $30K on our cars

That's about it. How we looking?

For comparison.. wrote:

47 yo

Combined household of about $200k

Home value $500k no mortgage

Retirement savings $800k

Liquid savings $130k

Annual savings are $30k retirement and about $40k liquid.

Plan to retire at 57 and begin a second career of some kind. Hoping to sell house in 2-3 years, downsize, and put $150-200k in bank.

We spend way too much on entertainment and dining, but have also resisted the temptation to drive $70k vehicles and buy other toys. No car payments, no debt other than an annual property tax bill.

See THIS is where I'll be at your age. I've only been working 2 years but:

30 yo

Income $100k

Mortgage $240k

Retirement $35k

Cash savings $10k

Annual retirement savings $16k

Annual debt repayment $9k

No auto loans and only $17k left on student loans. Will pay those off in 2 years at which point all debt repayment goes to retirement/house payoff.

Able to spend ~$4k on vacations and otherwise live modestly. Young kids at home, so not much opportunity to go out and about anyway.

JCCB wrote:

I make 65k.

Husband makes 100k.

We rent out our guest house and make approx. 24k a year on that.

House worth 1.2 million.

390 mortgage.

140 K owed on Heloc.

85k in retirement fund.

20k in savings.

We are in our mid 40s. 3 kids. Little has been saved for college.

This is a total disaster. You're in a crisis.

I hope this is what kids these days call a "troll" thread - if not you should be ashamed.

Seriously you are one recession away from living on the street.

In my area a high school grad with any decent act or sat scores can pretty much go to our local juco for free. Stay at home for the first two years and work a part time job and sock away some cash to finish up at a four year college. Knocking out the first two years with an associates degree and then moving right into your major field is pretty easy. All these kids racking up huge college debt for a basic bachelors degree is insane. We have helped our kids navigate through this mess and come out with a couple thousand dollars of debt and an easy path to being debt free. We also had a college savings account for each kid but no where near the crazy 20 to 50K per year that many kids are looking at. Just not necessary in most cases.

You have a net worth of $775K and most of it is in your home - and leveraging the roof over your head is not wise in my opinion. It's a sellers market right now, and I'd downsize and start investing the profit.

You didn't mention your kids' ages, but having little saved for college really is lame.

Your lack of retirement and savings will soon haunt you.

Comin' to Reality wrote:

Seriously, time to come to reality.

Sell the house. Invest at least 200k of that. Add 1k per month to a retirement fund of some sort. If you can average 8% return over the next 20 years you can have about $2,000,000 to retire with. Get rid of the helicopter. You make 165k/year, not 1.65mil/year.

F this guy!

OP: Do NOT give up your helicopter. Keep that bad boy. Peeps be jelly is all.