How much of your net worth should your mortgage be?

The 28\% rule states that you should spend 28\% or less of your monthly gross income on your mortgage payment (e.g. principal, interest, taxes and insurance). To determine how much you can afford using this rule, multiply your monthly gross income by 28\%.

What is the proper asset allocation by age?

For years, a commonly cited rule of thumb has helped simplify asset allocation. It states that individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40\% of the portfolio should be equities.

How much of your net worth should be in cash?

A common-sense strategy may be to allocate no less than 5\% of your portfolio to cash, and many prudent professionals may prefer to keep between 10\% and 20\% on hand at a minimum.

What should my portfolio look like at 70?

If you’re 70, you should keep 30\% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.

What percentage of your net worth should be in your home?

There aren’t any rules explaining how much your net worth should exist in home ownership, but the general percentage should be from 20 to 30 percent. For many Americans, especially those who don’t hold stock or other major investments, owning a home is one of the most direct, significant and effective ways to increase net worth.

How much equity should you have in your home?

The more of your mortgage you have paid off, the more equity you have in your home, and the higher percentage of your total net value it is likely to represent. If your home represents between 25 and 50 percent of your net worth, this is considered a healthy range.

How is the net worth of my assets calculated?

Calculating net worth itself isn’t based on percentages; no asset is worth more of a weighted percentage than any other. Rather, your net worth is the sum total of your assets (including stock, bonds, cash and savings, retirement accounts, annuities, valuables, property and more) minus your debts (like mortgages, loans and credit cards).

Why should I factor home ownership into my net worth?

Factoring home ownership into your net worth not only helps you understand if your assets outclass your liabilities, it also helps you responsibly gauge your budget when you’re in the market for a new house.