Famous “Age Times Income Over 10” Rule (Explained In A Minute)
00:00:00.000 | the age times income over 10 rule.
00:00:02.440 | Can you talk about this one?
00:00:03.400 | - This one was popularized by the wonderful book,
00:00:06.140 | "The Millionaire Next Door," which came out in 1995 or 1996.
00:00:11.040 | The idea here is to figure out what your net worth
00:00:14.920 | should be given your current age and income.
00:00:18.800 | So the way that this rule works is you take your age
00:00:22.280 | and you multiply it by your pre-tax income,
00:00:25.680 | and then you divide that total by 10.
00:00:28.720 | This is a rough proxy for what your net worth should be.
00:00:32.240 | It was an example, let's say you were 50 years old
00:00:35.080 | and you make $100,000 per year.
00:00:37.160 | Multiply those two numbers together, you get 5 million.
00:00:40.040 | You divide that by 10 and you get 500,000.
00:00:44.160 | Your net worth should be $500,000.
00:00:48.160 | And then from there, you can actually compare it
00:00:50.120 | to what your net worth is to figure out
00:00:51.860 | if you are doing better than the average person
00:00:54.600 | given your age and income,
00:00:55.960 | or worse than the average person given your age and income.