Measuring Up

Tanvir Alam

AS I PULLED UP IN my used Subaru wagon to the high school drop-off line with two grumpy teenagers on the first day of school, I noticed something was different.

Because of the pandemic, our sleepy, semi-rural town in upstate New York had seen an influx of Manhattanites and Brooklyners over the past year. My Subaru was now bracketed by a shiny Tesla sedan and a polished Mercedes SUV. The usual collection of less flashy cars and trucks seemed to be missing.

The thought then buzzed through my head: Was our sacrifice worth it?

After arriving as a Bangladeshi immigrant on a snowy Boston evening in 1980, I had somehow managed to stumble, fall, get up, run, stumble, rumble, fall, rise, fall and then bootstrap myself into the American upper-middle class. I could afford a fancy car, but every sage piece of financial advice I’d read advised me not to fall into that trap.

As a result, I have sacrificed some markers of affluence. Those savings were plowed into investments that will hopefully allow me to reach retirement earlier. But was I fooling myself? Was the sacrifice worth it? Where was our household compared to similar households?

After a career negotiating commercial contracts, I knew the best way to answer that question was to benchmark myself. Federal Reserve data available online, combined with the incredibly helpful financial blogging community, would allow me to do so in a matter of minutes.

Every three years, the Federal Reserve publishes its Survey of Consumer Finances that contains a wide array of household financial data. From this information, we can painstakingly craft useful calculators, data sets, charts and graphs. Unfortunately, I have no idea how to do any of that. Fortunately, there are many bloggers who do.

For example, the smart people at, short for “don’t quit your day job,” have created a handy net worth calculator that will compute your net worth percentile based on the latest Fed survey. If you’re wondering, the median net worth in America is $121,411. Based on DQYDJ’s calculator, our net worth puts us in the top 5% of American households. Wow, I thought, we’re doing great.

On the other hand, we should be doing great. Our household income is far above the U.S. median of $67,463. My wife and I are a college-educated, dual-income household in our prime earning years. It makes no sense to compare our net worth to the average kid coming out of college or to a recent retiree. The question is, how are we doing compared to our peers?

Again, smart bloggers have already crunched the data. Over at OfDollarsAnd, one of my favorite bloggers, Nick Maggiulli, has spliced average net worth data to control for education and age. According to Nick’s numbers, the median net worth of a household headed by a college-educated 45-to-54-year-old is $488,000. This doesn’t take into account, however, the wide range of incomes that a college-educated person might enjoy.

It would make no sense to compare a working actor’s salary to that of an actuarial data scientist, even though both might have degrees from a top-rated college and be the same age. Here, Nick obliges us again by revealing that the net worth of a household headed by a college-educated 45-to-54-year-old is $1.3 million at the 75th percentile and $3.8 million at the 90th percentile.

For the tech-savvy, there’s a myriad of new apps that will not only calculate your net worth, but also do so on a daily basis. I’ve heard good things about Mint and Personal Capital. I use an app called Status that will calculate my net worth percentile compared to peers based on my region, homeownership status, credit score and income range.

As you can tell, the hard data exist to benchmark your financial condition. Everyone, regardless of income, should try it out. If you don’t feel like crunching numbers online, there’s a formula that I first discovered 20 years ago while reading The Millionaire Next Door by Thomas Stanley and William Danko. According to the book, your net worth should be your age multiplied by your gross income, divided by 10. If you’re age 45 and your household gross income is $100,000, your net worth should be $450,000 (45 x 100,000/10).

That’s your benchmark. If you’re close or above it, that’s great. What if you’re way below? That can easily happen if you’re early in your career and are just starting to save. But if you’re in your 40s or 50s and falling short, you need to come up with a plan.

Meanwhile, if you’re twice the benchmark, perhaps you should be imparting your financial wisdom to others. Stanley and Danko call these people PAWs, or prodigious accumulators of wealth. My goal has always been to reach the vaunted PAW status. I think I’ll get there in the next few years. That will have made the sacrifices worth it—and part of the thanks will go to my trusty used Subaru.

Tanvir Alam has been practicing corporate law for more than two decades, but you shouldn’t hold that against him. He lives in New York’s Hudson Valley with his patient wife and two skeptical teenagers. Tanvir is interested in personal finance and travel, and is trying desperately to become a runner.

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