When you take a step back and think about how much money you or your family has earned in total versus your net worth may be a very depressing way to inspire some lifestyle changes. I have said it before, but I believe that actually calculating and tracking net worth changes over some set time is an important exercise for anyone running their family’s finances.
I am not entirely convinced there was a point to creating the spreadsheets below since most people understand that it is all about what you save. Nonetheless I was curious as to what these numbers would add up to.
Examples of Cumulative Earnings
Obviously, everyone coming across this article is a different point in their life. Maybe you are just out of college, maybe you are married or have a partner, maybe you are 40 years into your working career and about to retire, etc. Notwithstanding, when I started playing around with the excel spreadsheet I became depressed and inspired at the same time.
Graduated College in 2003
You are about to be 15 years out of college and you have been steadily working since that faithful graduation day. You have had an average job with no lateral changes or meaningful raises. You currently make $60,000 and think it has just increased every year by 2 – 3%. Your best guess is that between all taxes you are paying about 20%.
Age | Year | Gross Income | Taxes – 20% | Net Income | Cumulative Net Income |
22 | 2003 | $42,094 | $8,419 | $33,675 | $33,675 |
23 | 2004 | $43,173 | $8,635 | $34,538 | $68,213 |
24 | 2005 | $44,280 | $8,856 | $35,424 | $103,637 |
25 | 2006 | $45,415 | $9,083 | $36,332 | $139,969 |
26 | 2007 | $46,580 | $9,316 | $37,264 | $177,233 |
27 | 2008 | $47,774 | $9,555 | $38,219 | $215,452 |
28 | 2009 | $48,999 | $9,800 | $39,199 | $254,652 |
29 | 2010 | $50,255 | $10,051 | $40,204 | $294,856 |
30 | 2011 | $51,544 | $10,309 | $41,235 | $336,091 |
31 | 2012 | $52,866 | $10,573 | $42,293 | $378,384 |
32 | 2013 | $54,221 | $10,844 | $43,377 | $421,761 |
33 | 2014 | $55,612 | $11,122 | $44,489 | $466,250 |
34 | 2015 | $57,038 | $11,408 | $45,630 | $511,880 |
35 | 2016 | $58,500 | $11,700 | $46,800 | $558,680 |
36 | 2017 | $60,000 | $12,000 | $48,000 | $606,680 |
Wow, over $600,000 earned net of taxes! According to CNN the average net worth of the class of 2003 is only about $20,000! Census.gov has the average net worth at $45,000. Granted these are two very different numbers, but both are a tiny sliver of the cumulative earnings of that individual; especially when you consider the compound growth that could have happened for those dollars invested in 2007 through 2016!
Average Dual Income Couple From 25 to 40
Who cares when, but lets say you have 2 earners making $50,000 a year or so gross; what would it look like then?
Age | Gross Income | Taxes | Net Income | Cumulative Income |
25 | $100,000 | $20,000 | $80,000 | $80,000 |
26 | $103,000 | $20,600 | $82,400 | $162,400 |
27 | $106,090 | $21,218 | $84,872 | $247,272 |
28 | $109,273 | $21,855 | $87,418 | $334,690 |
29 | $112,551 | $22,510 | $90,041 | $424,731 |
30 | $115,927 | $23,185 | $92,742 | $517,473 |
31 | $119,405 | $23,881 | $95,524 | $612,997 |
32 | $122,987 | $24,597 | $98,390 | $711,387 |
33 | $126,677 | $25,335 | $101,342 | $812,728 |
34 | $130,477 | $26,095 | $104,382 | $917,110 |
35 | $134,392 | $26,878 | $107,513 | $1,024,624 |
36 | $138,423 | $27,685 | $110,739 | $1,135,362 |
37 | $142,576 | $28,515 | $114,061 | $1,249,423 |
38 | $146,853 | $29,371 | $117,483 | $1,366,906 |
39 | $151,259 | $30,252 | $121,007 | $1,487,913 |
40 | $155,797 | $31,159 | $124,637 | $1,612,551 |
And if we extend that couple from 40 to 65?
40 | $155,797 | $31,159 | $124,637 | $1,612,551 |
41 | $160,471 | $32,094 | $128,377 | $1,740,927 |
42 | $165,285 | $33,057 | $132,228 | $1,873,155 |
43 | $170,243 | $34,049 | $136,195 | $2,009,349 |
44 | $175,351 | $35,070 | $140,280 | $2,149,630 |
45 | $180,611 | $36,122 | $144,489 | $2,294,119 |
46 | $186,029 | $37,206 | $148,824 | $2,442,942 |
47 | $191,610 | $38,322 | $153,288 | $2,596,231 |
48 | $197,359 | $39,472 | $157,887 | $2,754,118 |
49 | $203,279 | $40,656 | $162,624 | $2,916,741 |
50 | $209,378 | $41,876 | $167,502 | $3,084,243 |
51 | $215,659 | $43,132 | $172,527 | $3,256,771 |
52 | $222,129 | $44,426 | $177,703 | $3,434,474 |
53 | $228,793 | $45,759 | $183,034 | $3,617,508 |
54 | $235,657 | $47,131 | $188,525 | $3,806,033 |
55 | $242,726 | $48,545 | $194,181 | $4,000,214 |
56 | $250,008 | $50,002 | $200,006 | $4,200,221 |
57 | $257,508 | $51,502 | $206,007 | $4,406,227 |
58 | $265,234 | $53,047 | $212,187 | $4,618,414 |
59 | $273,191 | $54,638 | $218,552 | $4,836,967 |
60 | $281,386 | $56,277 | $225,109 | $5,062,076 |
61 | $289,828 | $57,966 | $231,862 | $5,293,938 |
62 | $298,523 | $59,705 | $238,818 | $5,532,756 |
63 | $307,478 | $61,496 | $245,983 | $5,778,739 |
64 | $316,703 | $63,341 | $253,362 | $6,032,101 |
65 | $326,204 | $65,241 | $260,963 | $6,293,064 |
Granted I didn’t take into account changes in taxes or inflation, but the absolute number of pure earnings is both inspiring and depressing. Inspiring because of what could be for so many people and depressing because so many people will squander their earnings.
Comparing Cumulative Earnings to Average Net Worth By Age
One of my current favorite sites is called Don’t Quit Your Day Job. Seems like there are at least two people running it, and they must have a background in statistical analysis and programming, because often they’ll take complex data sets and build 3 input calculators out of it (my favorite one is their dividend reinvestment history calculator which I have actually written about before – interestingly, I called that one depressing too). Well the folks at DQYDJ was able to put together a fantastic table which I am going to lift I hope they don’t mind to share below:
So our 2003 college graduate who, on average, has earned over $550,000 in income has, on average, only $40k. Interestingly, the median is significantly higher! That is a big more reassuring actually since it means 50% of the population will be over that robust $257,000 number and 50% below. Our next two examples of the 40 year and 65 year old have similar issues having a net worth of only a fraction of what their cumulative earnings were.
To me it seems like the average American has no idea what they are doing, but 50% of the population at least have a grasp of basic personal finance concepts.