Ramit Sethi Shares a ‘Brutal Truth’ About Net Worth — and What It Means for Your Money

©Ramit Sethi

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Many people obsess over how their net worth compares to others their age. But personal finance expert Ramit Sethi says that’s the wrong way to think about money. In one of his YouTube videos, he breaks down what a healthy net worth looks like in every decade and how to actually act on it.

Your 20s: Getting Smart

Sethi’s first brutal truth? Most people in their 20s have a negative net worth, and that’s actually OK. This is because of student loans and entry-level jobs, which leave many people feeling like they’re barely scraping by.

Sethi says knowing your net worth, even if it’s negative, will help you make a plan to improve it. If your net worth is negative or under $5,000, you’re not alone. Around $12,000 puts you at the median, while $75,000-plus means you’re way ahead of the curve.

Many people in their 20s make the mistake of saying, “I’ll deal with it later.” According to Sethi, that decision will cost you tens of thousands of dollars. Here’s his advice:

• Track your net worth and know where your money is going. 
• Make investing a habit, even if it’s a small amount.
• Surround yourself with people who want to get better with money.
• Pick one or two things you love spending money on and cut costs on everything else.
• Stop chasing trends and build your foundation.

Your 30s: Build Systems, Not Just Savings

Being in your 30s can often feel overwhelming. You may be juggling a career, marriage, kids, student loan guilt trips and pressure to buy a home. “In your 30s, if your net worth is under $30,000, you’re below typical,” Sethi said. “Around $100,000 puts you at the median for your age group. And if you have hit $250,000 or more, that’s quite impressive.”

Sethi recommends learning how money works in your 30s and, most importantly, not comparing yourself to others. Remember that you’re running your own race. Here are some of the things Sethi suggests to focus on:

• Automating all your finances.
• Maxing out your 401(k) employer match because it’s free money.
• Growing your income, learning how to negotiate your salary and building high-value skills.
• Increasing your investments by 1% every year.
• Talking about money early and often, especially if you’re dating or married.

Your 40s: Take Control or Fall Behind

This is the decade when people start becoming intentional with their money and retirement starts to feel real. Sethi says that “if your net worth is below $75,000, you’ve got some catching up to do. Around $220,000 puts you at the median. And if you are sitting at $500,000 plus, you are ahead of the pack and potentially in striking distance of real freedom.”

Sethi reminds people in their 40s that it’s not too late. Here’s what he recommends to do:

• Calculate your crossover point. This will help you know if your investments will generate enough income to cover your lifestyle.
• Do a financial spring cleaning. This involves auditing your spending leaks and cutting back where you can.
• Talk about financial freedom, especially if you’re married or are in a relationship.
• Talk about money with your friends.
• Switch from reactive to intentional when it comes to your finances. Don’t wait for things to spiral out of your control.

According to Sethi, many people in their 50s regret that they didn’t start earlier. “They ignored the clues in their 40s.”

Your 50s: Get Strategic or Risk Running Out

In your 50s, the countdown toward retirement begins. “If your net worth is under $125,000, you are behind, and it’s time to take action. Around $325,000 is the median. And if you are at $725,000 or more, you’re in good shape,” said Sethi. 

At this age, many people are panicking while scrambling to catch up. But Sethi says it’s not too late if you make fast, bold changes as soon as possible. And this is the decade that has some of the best financial levers available, like catchup contributions, tax optimization and estate planning. 

Sethi recommends focusing on these things if you’re in your 50s:

• Max out every tax-advantaged account, including catchup contributions for your 401(k), IRA and health savings account (HSA).
• Make a plan for retirement. Be specific on when you plan to retire, how much you need for a comfortable retirement and what life is going to look like.
• Get clarity on what rich means later in life. Where do you want to live? What do you want your days to be like?

Your 60s and Later: The Stage That Most People Get Totally Wrong

According to Sethi, many people in their 60s (and older) think that now that they’ve worked, saved and invested, it’s time to actually use their money. This is what they get wrong. “If you’re in your 60s, a net worth around $375,000 puts you right around the median. In your 70s, it tends to dip a bit to $335,000.”

If you’re in your 60s or beyond, here’s what Sethi suggests you do: 

• Put your withdrawal strategy into action. The 4% rule is a great place to start, but you can tailor it to your lifestyle.
• Simplify your accounts. He recommends having fewer accounts to avoid confusion.
• Update your estate plan and talk about it openly with your loved ones.
• Define your rich life in this chapter. 
• Spend with intention. Use your money to create the joy you want in your golden years.

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