My savings calculator helps you think big about growing your net worth.

Every personal finance book and blog tells you to spend less than you earn, then save and invest the difference. But how much wealth should you have, based on your age and income? There’s an equation for that, which I’ve turned into a savings calculator that you can download for free, no registration required.

Pants on FIRE

Many financial bloggers are pushing the Financial Independence, Retire Early, or FIRE, narrative. This myth–yes, it is a myth for most people–pushes the idea that if you merely save a majority of your money and cut your spending to the bone, you can become financially independent and retire early.

Don’t believe me? This guy actually started a sentence with, “If you save a reasonable percentage of your take-home pay, like 50%, and live on the remaining 50%…”

My blog is, in part, a reaction to the FIRE narrative. Technically, they’re right. Their advice doesn’t violate the laws of math and physics. Still, I think the FIRE story is financial porn for most people. Saving half of every paycheck, or more, isn’t reasonable for the vast majority of people who, by definition, earn close to the average household income.

Still, you want to know if you’re doing enough to build financial stability in your life.

How Much Money Should I Have?

In their book The Millionaire Next Door, Thomas Stanley and William Danko recap their research of high net worth individuals. Research subjects needed a household net worth higher than $10 million To qualify for the study. Their book strongly influenced me and I recommend it to anyone interested in personal finance.

Early in the book, Stanley and Danko present a simple formula to determine your expected net worth, based on your age and income. (Net worth is simply everything you own, minus everything you owe.) Here’s their formula, derived from their research:

Multiple your age by your income from all sources except inheritance. Divide by ten. The result is what your net worth should be.

This formula is genius, I think, because it lets you identify people with good money habits regardless of age or income. You can have two doctors, two attorneys, or any other high-earning occupation. Both may have more wealth than the average person, but one could still be comparatively poor and bad with money. This formula points out the difference.

Stanely and Danko found some people who possessed twice the expected net worth for their age and income. They labeled these people Prodigious Accumulators of Wealth or PAWs. They found other people who owned half the expected net worth, or less. These people were Under Accumulators of Wealth or UAWs.

Getting Your PAWs on Your Net Worth

Of course, you’d love to have the net worth of a PAW.  It’s okay to think big when growing your net worth. Simply hitting Stanley and Danko’s expected net worth takes knowledge and discipline.

My Expected Net Worth savings calculator is a Microsoft Excel spreadsheet that you can download for free (no registration needed!) to do Stanely and Danko’s calculations for you.

An example of my expected net worth savings calculator

I even give you a Net Worth Index score, to understand how your actual net worth compares to the expected value.

Don’t despair if you’re not a PAW, or not even at the expected net worth. The savings calculator includes some pointers for ways to increase your net worth. Of course, I’ll be offering more tips in future blogs, as well.



The Savings Calculator for Building Prodigious Wealth
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