• Date Started: Jan 1, 2007
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Journey to BA: Current Number and Goals

12 Responses to “Journey to BA: Current Number and Goals”

1. Ima saver Says:
   May 5th, 2007 at 02:39 pm
   Where did you get the number 2? Yes, I am a BA and I know you will be one too! I didn't really even start investing until I was 44!

2. scfr Says:
   May 5th, 2007 at 05:35 pm
   If you have double (2 times) your Expected Net Worth, then you are BA. That's why I chose the number 2. I know I could have chosen a higher number, but for us I think that just barely BA by age 60 will be enough.
   Thanks for the positive words!

3. Dido Says:
   May 5th, 2007 at 06:16 pm
   Hey, I'm also at 1.32 Net Worth! I also have variable income and used a 5-year average, and I track my net worth on NetWorthIQ, using Zillow for Home Value and KBB for car value.

4. Broken Arrow Says:
   May 5th, 2007 at 11:22 pm
   I'm BA! Oh wait, I guess you didn't mean my alias in shorthand.

5. PauletteGoddard Says:
   May 6th, 2007 at 07:15 am
   I'm at 1.34. My yardstick for "doing all right" was if my net worth went up by at least 10% each year. Not sure how that would work in a recession though... this isn't one of those Stanley/Danko formulae where most people under 40 fail and most people over 60 do well, is it?

6. monkeymama Says:
   May 6th, 2007 at 07:23 am
   With cash and investments we are right on. With our house we are double. It will be hard to keep up though. I took our average income for last 5 years for same reason. But I am making a lot more this year so will be harder to stay ahead of the curve. We'll see. Interesting.

7. monkeymama Says:
   May 6th, 2007 at 07:40 am
   Oh, I found these numbers a little overwhelming, but looking at progress as I always do, I only need to build my net worth $16k/year to stay a BA. Easy peasy. I noticed this because out of curiosity I looked at where I should be at retirement, assuming this income, and it was only $1 mil to be a BA. Since I am only 30 and don't expect social security, etc., my retirement goals are in the $3-$5 mil range. So interesting, like most of these net worth measures, it is hard to exceed early on, but if you are, well, you are doing darn good!

8. Dido Says:
   May 6th, 2007 at 12:01 pm
   I made up an Excel spreadsheet and put in the formulas, including an expected COLA raise in income. The numbers for early ages really don't seem to make sense for early ages. Suppose you're just starting out as a college graduate, age 22, and you've landed your first job for $35,000. Your expected Net Worth is over $86,000??? Not unless you have a huge inheritance, it's not! I don't see how you can use the same constant across the lifespan. I'm curious now to see if Stanley says how he derived this number, or if he just asserts it.

9. scfr Says:
   May 6th, 2007 at 10:08 pm
   Broken Arrow (aka BA): Since there is only one you, my personal journey to BA will have to be not about trying to become you, but about merely becoming "Balance Sheet Affluent!"
   Dido & Paulette: Nice to know there are some fellow 1.3-somethings out there!
   
   Monkeymama: Way to go being BA already with the home equity included ~ Very impressive! Maybe we'll need to come up with a special new term for "3-times expected net worth" just for you!
   
   In my previous (long and somewhat rambling) post in this category http://scfr.savingadvice.com/2007/04/28/the-millionaire-mind-balance-sheet-afflu_25416/, I discussed some of the questions raised:
   
   - In his book, Dr. Stanley does NOT define exactly what he means by some very important terms (such as "net worth" and "total annual realized income") ~ That is quite frustrating.
   
   - The people profiled in "The Millionaire Mind" have much, much, much, much, much higher incomes and net worths than I have or ever will have. Also, their average age is 54.
   This is why I don't beat myself up over the fact that I'm not BA yet. I know that compared to our peers (same age and income), my DH and I have saved considerably more than average.
   
   - Nevertheless, as explained in my previous post, for me I believe becoming BA by age 60 is a really useful goal. For me it is not only about a certain number that I want to reach each year, it is also about knowing how much is enough (knowing when I can ease up a bit).
   
   
   Next Steps: Well, I just estimated (using same average income figure) how many dollars we need to add to our net worth to get to 1.36 by the time we are a year older ... Yowza!!! Looks like "easing up" will have to wait for awhile! My next job is to come up with some steps that will help us reach that number.
   

10. monkeymama Says:
    May 9th, 2007 at 09:04 am
    LOL. I just saw your comment. No, I think I just have to pray that I get to keep my equity and someday we get the guts to move and cash out - LOL. Otherwise just don't mean that much. In general I track our net worth based on the purchase price we paid for our house. Since we put so much sweat and tears to the down payment, have to include it.
    
    But your post inspired me for an article here:
    
    http://www.pfadvice.com/2007/05/08/the-confusing-process-of-measuring-net-worth-financial-progress/

11. scfr Says:
    May 9th, 2007 at 07:21 pm
    Monkeymama - I enjoyed your article very much! Just one not-so-little clarification about Dr. Stanley's formula --- The income he refers to is total realized annual income, so you have to include not just wages but Schedule A Income, etc. As we get older, our passive income becomes a larger percentage of our total income, so even if wages stayed at $75K, the figure you would need at retirement to be BA would be much higher when you factor in that passive income.

12. baselle Says:
    May 12th, 2007 at 08:09 pm
    1.12. However, you have to remember that the formula you presented is linear, while most economic forces (for example, compound interest) are not. It means that at early earning ages you will be way under (as Dido pointed out) while at older ages and close to retirement you'll hit it or overshoot it.

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