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Excerpted from The Modern Couple's Money Guide by Lesley-Anne Scorgie © 2016, Lesley-Anne Scorgie. All rights reserved. Published by Dundurn Press.

Almost every week I get asked "What should my net worth be?" The answer just isn't that simple, because it's based on what your goals are for the future.

If, for example, you came to me and said you wanted to live on a beach in Bali and sell T-shirts for the rest of your life, I would tell you that you would need much less than someone who wants to take luxury cruises, play golf in warm climates, and shop for expensive jewellery in retirement. The person heading to Bali may need only $100,000 to live comfortably for the rest of their life, whereas the person heading down luxury lane would need closer to $4-million.

However, as a general rule of thumb, the average 30– to 50-something Canadian household will need approximately $2-million for retirement. So if you work that back, starting at the age of 25, and assume that as you age you'll make more and can afford to grow your net worth more aggressively through asset growth and debt reduction, you would need to reach the following net-worth milestones at these ages:

Net worth milestones for the average Canadian

Age Net worth
25$0
30$70,000
35$165,000
40$300,000
45$465,000
50$700,000
55$1,000,000
60$1,400,000
65$2,000,000

Okay, I know that these numbers seem downright massive! But there are a few things that will work in your favour and push you much closer to achieving these targets.

1. Compounded interest and reinvested returns: The most powerful asset you have is time. The more time you have to save and invest your money, the more it will grow through the power of compounded interest and reinvested returns. Compounded interest and reinvested returns mean that you earn interest and returns on your initial investment (the principal), which is then reinvested, allowing you to earn more interest and returns on it. So now you're earning interest and returns on the existing interest and returns. The more time you have to allow compounded interest and reinvested returns to actually compound, the more money you'll have in the end.

Think of it as piling rocks at the top of a mountain. You push the pile over the side of the mountain. On their way down, your rocks hit more rocks, which hit even more rocks. Before you know it, your little pile of rocks has started a landslide. That's how compounded interest and reinvested returns work: as time passes, your portfolio grows into something quite huge and all you needed to do was gather those initial rocks at the top of the mountain.

The longer you wait to invest your money, however, the less powerful compounded interest and reinvested returns are. Why? Because the less time you have, the less opportunity you give compounded interest and reinvested returns to compound themselves. Time is the magic ingredient that grows your money.

2. Mortgage as a forced savings plan: More than likely you will own a home in your lifetime. The act of repaying a mortgage forces you reduce your outstanding mortgage balance, thus pushing your net worth higher every month. The only reason this would not work in your favour is if you borrow back the equity – typically through a low-rate line of credit or consolidation loan – you've put toward your house.

3. Inching your way to debt freedom: Every month you will reduce your consumer debt (debt that isn't your mortgage) as long as you don't accumulate more. Again, this builds your net worth through regular debt repayment. When you become debt-free, your cash flow will improve dramatically, allowing you to put more money toward assets.

4. Automation: Would you believe me if I said that you can build your net worth with your eyes closed? It's true. Through regular automatic contributions to your investment plans and the outstanding balances on your debts, including your mortgage, you can watch your net worth grow without having to do too much. Set up the transfers to come out of your chequing account on payday, before you've had the chance to spend the money.

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