Welcome to BW’s Smart Money podcast, where we answer your real-world money questions. In this episode: Learn how to assess your net worth, compare it wisely, and build a financial strategy to meet your long-term goals.
What is net worth, and how do you calculate it? How can you use it as a tool to set realistic financial goals? Hosts Sean Pyles and Sara Rathner discuss how to define and calculate net worth, why it’s normal to have a low or negative net worth in your 20s, and how it evolves over time. They begin with a discussion of why net worth matters, with tips and tricks on assessing your current assets and liabilities, identifying realistic financial benchmarks, and staying focused on personal goals instead of comparisons.
Charlene, a listener from Texas, joins Sean and Sara to discuss comparing net worth to peers and using it as a motivational tool. They discuss how benchmarks vary by age and location, the difference between averages and medians, and practical ways to build wealth through strategic saving, retirement planning and investments. Charlene also shares her disciplined approach to saving and her aspirations for financial independence and an early retirement, and how net worth relates to her progress towards achieving her goals. Sean and Sara address the concept of net worth beyond just 401(k) balances and the potential pressure of societal expectations on financial milestones, with information that could serve as a guide for listeners aiming for similar goals.
Then, podcaster, social media influencer, and author Vivian Tu, also known as “Your Rich BFF,” joins Sean to discuss wealth-building through passive income and active career decisions. They discuss the importance of making your money work for you, the psychological barriers to seeking higher income, and the significance of securing a meaningful raise or position shift every two years. She shares her insights on transitioning from Wall Street to digital media, democratizing financial knowledge, and cultivating a mindset for wealth accumulation.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Welcome to BW’s Smart Money podcast. I’m Sean Pyles. It has been, in a word, a year. We had an election — you might have heard about that — but we also had quite a year in the economy. Fair to say, it was dominated by concerns over inflation, which affected everything from grocery bills to the housing market and beyond. It felt a bit like we were on a constant Fed watch as the Federal Reserve decided what to do about interest rates in its fight against inflation.
Today we bring you the final episode in our month-long special series featuring the best of Smart Money 2024: our conversations with you, as well as our coverage of the economy and your personal finances. Today we’re looking at how we define wealth and net worth this year and how you can take all of that into the start of the new year with new goals. Speaking of which, early happy New Year to all of you. Now, on with the show.
Welcome to BW’s Smart Money podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I’m Sean Pyles.
And I’m Sara Rathner. If you have a money question for the Nerds, call or text us on the Nerd Hotline at 901-730-6373. That’s 901-730-NERD, or email us at
[email protected]
.
Follow us wherever you get your podcast to get new episodes in your feed every Monday. And if you like what you hear, please leave us a review and tell a friend. This episode, we’re talking with a listener, Charlene, who’s 29 and lives in Texas. We’re going to talk with Charlene about net worth — what it’s good for, what it’s not good for, and how much you should compare yours to those of your peers. Charlene, welcome to Smart Money.
It’s great. I’m so happy to have you on. Before we get into the conversation, I want to just say on behalf of our legal team that we are not financial advisors. We’re not going to give you direct financial advice. This is just to talk about your financial circumstances for general educational and entertainment purposes. With that out of the way, Charlene, can you tell us about your financial life right now — like what you do for work, how much you’re able to save, current money goals, all of that fun stuff?
I am currently working as an environmental health and safety manager. I’m currently able to save about over, I think, half of my biweekly paycheck. And a lot of my financial goals — I’m thinking a lot about financial independence and ways that I can generate more
passive income
. I also really want to see how I’m doing on track to retirement.
So when you say you’re saving about half of your income — first of all, congratulations, that’s really impressive.
Do you mean that you’re putting that into a savings account? Are you investing that? In what way are you saving it?
I have some in my 401(k) that I put aside. I also have some deductions for my
employee stock purchase plan
with my employer — I put about 15% into that.
I have another 10% allocated to high-yield savings for emergency funds. It seems like a good balance. I was thinking about my net worth and how it compares to others my age. I did some home remodeling and had to reduce my retirement contributions, which made me wonder if I was on track financially. I did some research on average net worth by age and found it interesting. Net worth is a snapshot of your financial standing, comparing assets to liabilities. It’s common for young adults to have a negative net worth. Comparing net worth averages can be misleading, as circumstances vary. Location can also impact net worth. Later, when I returned home and heard stories from friends and family, I realized they would not understand the financial community in the Bay Area. The salaries there were beyond their comprehension. In your late 20s, it’s not uncommon to have a net worth that is zero or negative. However, as you pay off debts and start paying down your mortgage for your house, your net worth will begin to increase. Ideally, by the time you reach retirement, your net worth will be high enough that you have minimal debt obligations to worry about. Your body and mind may not be the best tools for making money because they can’t work around the clock like money can. Investing and making your money work hard for you is the key to financial success, allowing you to be a two-income household even if you’re single. By automating your finances and setting aside money for investing, you can gradually reduce the amount of time you need to spend working for money and increase the time you have for relaxation and enjoyment.
Increasing your income can provide you with resources and opportunities that you may not have otherwise. It’s important to understand your motivation for wanting more money, whether it’s for personal fulfillment, security, or freedom. Money can give you the ability to make decisions out of abundance rather than scarcity, allowing you to take advantage of new opportunities and escape from difficult situations. It allows you the freedom to get up in the middle of the night and confidently say, “I don’t need to stay in this toxic situation because I can support myself financially.” Financial abuse is prevalent, and having the means to leave is empowering. Let money be your motivation.
Flexibility and security are key. Research shows that switching jobs every two years with salary increases leads to higher lifetime earnings. If you’re not getting the raises and promotions you deserve, it’s time to move on.
Whether motivated by money or other perks like flexible hours or travel, ensure you’re getting what you need. In today’s economy, being money-motivated is essential. Make choices from a place of abundance rather than necessity.
Asking for a raise can be daunting, but showcasing your achievements in a “brag book” can boost your confidence. Forward positive feedback to create a record of your success when it’s time to negotiate.
Side hustles can be a sensible way to increase income. It’s about finding balance and maximizing your earning potential outside of your main job. In this discussion, the speaker emphasizes the importance of side hustles as a way to earn extra income for short-term financial goals. They suggest that side hustles do not have to be a permanent solution and can be a source of enjoyment and fulfillment if approached correctly. The speaker cautions against turning a creative passion into a job, as it may take away the joy and relaxation associated with that activity. Additionally, they encourage open conversations about money with friends to empower individuals to demand their worth and negotiate better benefits in the workplace. Overall, the speaker provides practical advice on increasing income and financial empowerment. following sentence:
“The cat chased the mouse around the house.”
The mouse was chased by the cat around the house. following sentence:
The cat was sleeping peacefully in the sunbeam.
The cat lay peacefully sleeping in the warm sunbeam.