We receive the following question quite a bit
“How much should I make and how much should I be worth by age X”
First lets start with income and second move on to your net worth. Before we jump into what we believe is “a good goal” we’re going to start with a philosophical backdrop.
Income to Obtain Happiness: Nowadays everyone is citing a study that claims the following: Happiness flat-lines after $70K a year. From experience, this is entirely false. There are a few people who will not see an increase in happiness after they clear this figure however, lets go ahead and use the following as a high level view of income derived happiness.
“Income derived happiness occurs when you no longer feel the need to chase income”
What does this mean? As soon as you reach $X per month, incremental income will only come when you personally feel the need to work harder. For some this might be $2K a month and for others $20K a month. We recommend a life of minimalism so we view the $20K marker as extreme. That is not up to us. It is up to you to determine a level that makes you content.
Net worth Derived Happiness: Once you have locked into your monthly income that derives the most happiness, the final goal is to have a net worth that supports this income. If you’re an extremely ambitious person with a lot of talent, your annual income to derive maximum happiness will likely be high. As high as $200,000+. (@financialsamura)
It will be quite difficult to run up to this number in a short period of time so we breakout net worth derived happiness as follows:
Level 1: Replacement of Utilities and miscellaneous expenses
Level 2: Replacement of Utilities + Miscellaneous + Food expense
Level 3: Replacement of Rent and Utilities
Level 4: Replacement of Rent and Food
Level 5: Replacement of Rent + Food + Utilties
Level 6: Replacement of Rent + Food + Utilities + Entertainment
With the philosophical overview out of the way, you find that a lot of the numbers will depend on your lifestyle. Some people will splurge on cars and jewellery; others may splurge on international travel. Again. The choice is up to you. However… We have received this question many times so we are going to go ahead and put cold hard numbers on the screen at this point.
Lets start with income.
How much should I make?: For both income and net worth, you should take into account your current age and where you live. Please note that our opinion is heavily biased towards large metropolitan cities.
Age 22-25: If you’ve made intelligent decisions while you were in college we are going to peg the number at $80K per year. If you can average an income of $80K, this is roughly $4,200 after tax on a monthly basis and you have the opportunity to save ~$1,200 a month. Since you are making smart decisions, you’re making a lot of money for your age. The career you choose will likely see income acceleration at a young age. A good proxy? ($60K, $80K, $100K+). A good employee will get a relatively large bump once he is promoted 3-4 years on the job.
Age 26-30: Running off of the same assumption, when you get into your mid to late twenties the expected increase is quite large. You followed the rules appropriately and now make quite a bit more on an annual basis. We will go ahead and ear mark $160K+ as a sizable increase at this age. This is a large jump. We expect your income to doubleover the course of 5 years as you built out other streams of income, invested wisely and continued to pay close attention to your career.
Age 31-35: You’re hitting your stride now. You’ve got a good handle of your niche, you’re not as worried about running on all cylinders and you’re in cost cutting and alternative investment mode to keep your brain sharp. At this point if you’re in the ~$250K ballpark, we say you’re doing well for yourself.
Age 35-40: At this point we’re going to give you some good luck, you are able to make that last jump to a heavy revenue generation role. You’re not working anywhere near as hard as you did in your 20s but each hour counts. You’re clearing $325K+ per year.
Age 40+: Generally speaking, at 40+ your income has peaked. There are always exceptions and we hope you’re one of them. With that said we’ll say anything above $350K and you’re coasting.
So there you have it. For an astute reader the message is clear: “Learn in your twenties to earn in your thirties”. To obtain these marks you need to start off on the best foot possible, this means prioritizing your life over what everyone else is doing… Drinking and partying 4 days a week. You can still have fun and we guarantee you, if you’re on the path laid out above, you’ll be sitting pretty without a care in the world by 32-34 years of age.
Before we move on, for those that are interested in how we determined the ear marks we simply estimated the top 5% in terms of income within a major city (it is estimated to be between $275-400K and we took a number slightly above the mid-point).
How much should I be worth? Now the fun stuff. Anyone who has ever accumulated a large hoard of cash knows one thing. Life is not about how much income you have, it is about how many assets you own that produce income. If you had to choose between a $250K a year job or a set of assets that produce $4K per month in guaranteed returns…
You run, no you SPRINT, straight to the assets.
Lets go ahead and break down your networth (ie: income producing assets) into buckets as well.
Age 25:Assuming you played your cards right in college, you’re going to be debt free before you’re 24. Even with debt payments you should have maxed out your 401K (free money from the match and $17K total). With this in mind, you can accumulate at least $60K in total net worth by the time you are 25.
Age 30:At this age, you’re still burning the candle at both ends. Everyone thinks you’re a bit too high strung. This is perfect, because you are actually maximizing your social time and no longer feel stressed out. In fact, you feel relaxed at work and have a wonderful social life, even though people assume you’re unhappy. They couldn’t be more wrong. While they make these incorrect assumptions, you’re throwing 50%+ of your income into assets. $80K+ per year gets you to ~$400K by 30. Everyone else is getting married, buying cars and spending. You’re reinvesting and clearing out 2 days a week for fun.
Age 35:You’re feeling comfortable at this point. Once you get to ~$500K in net worth, you realize you can survive 10+ years unemployed… If needed. You will spend more of your raise (not all of it) on entertainment, travel or hobbies (golf is quite popular). While your income likely rose by ~$50-70K, you’re going to continue saving $80-100K a year. You are smart enough to realize life is short, so you can spend your time having more fun in your mid 30s as your value as a man is quite high. By the end of this your net worth can range from as low as $500K to as high as $1.0M+
Age 40:Why are you reading this? You’re a millionaire, you can do what you want at this point.
Concluding Remarks: For those of you that are highly motivated (we’re looking at you direct hires to Hedge Funds) these numbers are likely low. Finally, no matter who you are we believe there are still many ways to obtain these net worth figures. You need to put in the time.
Good article. I think it’s important that guys be fair to themselves and adjust the numbers accordingly depending on their income and city they live in (for example, $70k in Chicago goes a lot further than $80k in NYC).
These goals are way too incremental…
There’s better ways to get to a higher income level faster.
100% agreement over here. Just laying down guidelines for age. The truth is when you start making over $150K+ it really does turn into leaps and jumps in pay instead of steady increases. (Even more so for a business owner) Didn’t want to create an article explaining that as it has been harped on by us in the past. Simply adding actual brackets can be a good bookmark.
“Life is not about how much income you have, it is about how many assets you own that produce income.”
Any advice on acquiring income-generating assets?
Here is the post – Passive Income
http://wallstreetplayboys.com/passive-income/
…and avoiding overspending on depreciating assets. Overspending on cars tops the list here.
How many people actually reach these levels? I don’t know many people who make over $200K a year unless they are on Wall Street or operate their own business…
Most people do not come close to any of these levels (assuming we are speaking about averages).
However, if you make smart decisions and intelligently invest in yourself, you will be surrounded by many people who are at or above these levels.
Huge fan. Great post.
I’m aware you said before to not pursue medicine as a career but now as I’m finishing medical school at 29 years old I wonder if it’s too late for me to move into high finance. (Debt = $0)
Can you give some insight as to which path would be more lucrative?
A) MBA (2 yrs) [student loan] –> High finance (hedge fund, hopefully)
B) Medical residency (7 yrs) [resident’s salary ~ $50 K]–> Spine surgeon (annual starting salary ~ $600 K )
Assumptions:
Either way I’ll be working ~100 hrs/week for the next 10 years.
High performer
Top 5 MBA
Based on your set up it sounds like medical is your best bet (financially speaking).
With no job experience even with an MBA from a strong school, you’re going to be extremely hard pressed to get into a top hedge fund or into the buy-side in general.
Go for saving lives if you’ve already spent your entire 20s going to medical school.
Hahaha can smell the bitter banker/wall street syndrome from here. Got a legit LOL over here.
But yes agree he should stay on that path given his circumstances.
Never swallowed the financial freedom path till finance was too late of a choice. Also a huge fan of this site.
26.
Just finished a PhD in the sciences.
net worth ~100k from hustling and being frugal.
Should I try to get into wall street or take a job as a professor, which would pay around 100k?(but max out at like 150) Entering finance from a non-traditional path, where would I start at, salary-wise?
We do not know much about your PHD or the topic you studied, with that in mind if you want to break into Wall Street your best path would be an associate level position in Banking/Research/S&T
You would have to spin your niche knowledge to break into a specific sector. If your degree is related to Oil and Gas then your resume would have a chance (although low to be honest) of getting into the Oil and Gas field in Research/Banking etc.
Target boutique banks.
Associates make ~$150-300K (wide range depends on what firm you enter and what part of wall street).
This advice is pretty strong.
My own additional point and where this article would be stronger is a run down of different asset classes and investment strategies (top level overview) on what people can do. Some hard examples would do the readership of the site well.
I’m 26 years old now, working for european fund (tech focus). I’m glad to see I’m ahead of schedule according to your age list. Started trading my own money age 16 and started using CFDs, made a ton of money as the market roared and lost a lot as it went down. Thankfully made a handsome chunk of change to take out student loans at a low interest rate and low amount at 18. I managed to buy my first home at age 20 (no mortgage) and it has 3 bedrooms and i’ve letted this out to two brilliant tenants. Overall net worth is approx $500k depending on what the market does including cash, small equities portfolio and the house making up most of my net worth. As a result my costs are super low, renters cover all bills, no mortgage, no credit card debt (I have one amex for airmiles) and thats about it.
Hopefully the next five years are equally profitable and set me up for later in life.
Great moves. You’re basically speaking the same tune, once you cross the $500K level you’re covering most if not all of your living costs (assuming you don’t have a spending habit because you have equity etc etc.
We did cover a high level view – search for the following in the top right:
Investing as a bachelor
Overall good work, the numbers laid out are certainly attainable.
I’m actually pretty modest about my goals by 40 I just want a net worth between £3-5m. This for me represents enough to “slow down” working and take more control over my life, when i wake up, when i turn up for work etc. I know many directors still pushing very very hard hours in London after 40 so they can attain their magic “FU number”.
I personally want to in future set up one organisation that does two things
1. Non-Profit/Philanthropy – offer low income ethnic minority kids entering top schools scholarship and full access to my net work
2. Angel Investing/charitable investing – so early stage tech investing plus things like charity bonds for charities with a good focus and solution to a widely accepted problem.
As for personal life well a nice girlfriend/partner is desirable. Everyone likes company but unless I see something special marriage is completely off the table for me. I’ve also spent the week looking after my niece (3 y/o) was glad to give her back to my family, far too much work/energy and as much as I love the kid its just not for me lifestyle wise.
I intend to do very little to change my spending patterns apart from do more travelling, attain my sailors licence, see more of the world etc.
Apols if this seems quite ‘mellow’ but I’ve almost no desire to work/run a mega fund I’d rather have the complete control over my lifestyle.
That sounds like a solid balance.
Once you’re in the low 7 figures you should accomplish all of your goals.
My biggest regret however and I urge all readers who are at high school. Please focus your skills and qualifications (but skills first) on something that leads you to create things. You must absolutely learn things like making things with your hands, this can be wood work, this can be writing code, this can be being a world class pro at photoshop and illustrator. The point is being focused explicitly on creating and making things that are hard/difficult to do.
Also, study for a STEM related subject with a strong quantitative edge and make sure you absolutely master the english language in written and oral format. Take a business writing class if needs be and definitely do improv, stand up and toastmasters. You will find as you progress in your career you will move from doing work to actually presenting you work and findings. You’ll also be expected to confidently defend any opinion you have against people who are 20 years into the game. I have stood up infront of a board of non-executive directors and had to defend an investment memorandum almost sentence by sentence and I managed to get through unscathed with lots of positive critical feedback because I’d practiced for 2-3 years doing toastmasters before hand.
Absolutely try and avoid arts subjects (I think you can do this and do well in life if you go to a top uni i.e ivy league in the us or g5 in the uk but its not the best solution). I did a social science, I don’t regret it, it has served me well but if I were 16 again I’d be absolutely focused on getting into an engineering school or focusing on compsci (and learning to code, contributing to open source projects). Many of the CEOs my fund backs are all ex-engineers or people who can make things. I’m absolutely convinced this is the way to go. There are of course other ways to skin a cat but I must stress this is ultra important.
Also, everyone if possible at college should do a year abroad. It is utterly humbling as an experience to go to a foreign country where it is not english and have to get by for an entire year. Believe me it is a worthwhile year of your life in college.
I’m 31.I’m an engineer. I work for an Oil & Gas service company. I intend to go for an MBA at the University of Houston, and specialize in Energy finance. My goal is to stay with my company, but be exposed to finance. If the opportunity comes up to do some investment banking, mergers and acquisitions advisory, in Oil & Gas, Energy etc I will take it. What do you think of this approach? The school is not highly ranked, but the MBA costs 40k,vs University of Texas or Rice University whose MBA program costs 100K. I’m looking at the ROI. What about my age? Is it too late to spin my way into high finance? Not necessarily Wall Street. I prefer to stay in TX. If so what steps do I need to take?.
Lots of questions here and better suited for the ask us anything section.
#1… Are you going to earn $40K+ more per year after you graduate from the school you intend on going to? If not why are you going?
#2… We only give Wall Street advice, in that situation University of Texas and Rice are significantly better as they will have targeted recruiting for Wall Street.
#3… Age is getting up there, you want to break in before you turn ~35.
Your spin is fine, IE Oil & Gas experience –> Oil and Gas Wall Street work. The school you’re attempting to go to does not sound right (on a glance).
I doubt the U of Houston MBA alone will boost my salary by 40K. That being said, Getting the UT or Rice MBA, and switching companies, will increase my salary by 40K, but then I have to take out a 100k tuition loan if I go part time, other alternative is to leave work for 2 years, pay 40k, full time tuition. In that case, I may as well go to Haas or Booth or Wharton. Anyways, I got the answer I was looking for. UT or Rice it is.
Your request for posting in the ask us anything section is noted.
Sounds good, you need to run the math and find a way to make the cost of the MBA come down.
As we noted above, you need to find a way to make the salary increase = to total debt load.
Maybe this means a part time program etc etc. You have the idea though.
As a side note do not understand how the part time program will lead to more debt if you continue working full time. But you have a better grasp than us since we are not in your particular situation.
Do u guys really believe in “coasting”. Normally, coasting means the start of decline and regression of a person’s career. Look at bill gate and steve Jobs, they made hundreds of millions and even billions late 20s and 30s, however they did not stop there, but worked harder to reach new heights like , creating a cartoon company, recreating the apple company for jobs, and creating one of the biggest foundation in the world.