DEV Community: jiaming

Why Your Net Worth Matters More Than Your Income

jiaming — Tue, 16 Jun 2026 14:21:31 +0000

Most people obsess over income. "How much do you make?" is the question everyone asks. But income tells you almost nothing about financial health. Net worth is the number that actually matters.

Income vs Net Worth: A Tale of Two People

Person A earns $200,000/year, spends $195,000, and has $50,000 in savings. Net worth: $50,000.

Person B earns $80,000/year, saves $25,000, and has been doing so for 15 years with 7% returns. Net worth: ~$670,000.

Person A has 2.5x the income. Person B has 13x the wealth. Income is the engine. Net worth is the destination.

How to Calculate It

Net Worth = Total Assets - Total Liabilities

Assets: cash, investments (401k, IRA, taxable brokerage), real estate equity, car value (use trade-in, not retail), business equity.

Liabilities: mortgage balance, car loans, student loans, credit card debt, personal loans.

Do NOT count: furniture, electronics, collectibles (unless they're genuinely liquid and you'd actually sell them).

What's a "Good" Net Worth by Age?

The classic formula from The Millionaire Next Door:

Target Net Worth = (Age × Annual Pre-Tax Income) ÷ 10

If you're 40 and earn $100,000: target = (40 × 100,000) ÷ 10 = $400,000.

This is aggressive — most Americans fall below this. The median US household net worth is $192,000 (all ages). Don't panic if you're behind. The trend line matters more than the absolute number.

The Only Rule That Matters

Track it quarterly. Watch the trend. If your net worth grows 5-10% per year, you're building wealth, regardless of income. If it's flat or declining, something needs to change — even if you earn a lot.

What to Do If It's Low

Kill high-interest debt first (>10% APR). No investment beats a guaranteed 22% return from paying off a credit card.
Build an emergency fund (3-6 months of expenses in a HYSA).
Max tax-advantaged accounts (401k match → IRA → 401k max).
Invest in low-cost index funds (VTI or equivalent).

The calculators at https://finikit.com make all of this math instant and free. Compound interest, debt payoff, savings goals — no signup, runs in your browser.

Why Your Net Worth Matters More Than Your Income

jiaming — Tue, 16 Jun 2026 14:21:31 +0000

Most people obsess over income. "How much do you make?" is the question everyone asks. But income tells you almost nothing about financial health. Net worth is the number that actually matters.

Income vs Net Worth: A Tale of Two People

Person A earns $200,000/year, spends $195,000, and has $50,000 in savings. Net worth: $50,000.

Person B earns $80,000/year, saves $25,000, and has been doing so for 15 years with 7% returns. Net worth: ~$670,000.

Person A has 2.5x the income. Person B has 13x the wealth. Income is the engine. Net worth is the destination.

How to Calculate It

Net Worth = Total Assets - Total Liabilities

Assets: cash, investments (401k, IRA, taxable brokerage), real estate equity, car value (use trade-in, not retail), business equity.

Liabilities: mortgage balance, car loans, student loans, credit card debt, personal loans.

Do NOT count: furniture, electronics, collectibles (unless they're genuinely liquid and you'd actually sell them).

What's a "Good" Net Worth by Age?

The classic formula from The Millionaire Next Door:

Target Net Worth = (Age × Annual Pre-Tax Income) ÷ 10

If you're 40 and earn $100,000: target = (40 × 100,000) ÷ 10 = $400,000.

This is aggressive — most Americans fall below this. The median US household net worth is $192,000 (all ages). Don't panic if you're behind. The trend line matters more than the absolute number.

The Only Rule That Matters

What to Do If It's Low

Kill high-interest debt first (>10% APR). No investment beats a guaranteed 22% return from paying off a credit card.
Build an emergency fund (3-6 months of expenses in a HYSA).
Max tax-advantaged accounts (401k match → IRA → 401k max).
Invest in low-cost index funds (VTI or equivalent).

The calculators at https://finikit.com make all of this math instant and free. Compound interest, debt payoff, savings goals — no signup, runs in your browser.

Why Your Net Worth Matters More Than Your Income

jiaming — Tue, 16 Jun 2026 14:21:31 +0000

Most people obsess over income. "How much do you make?" is the question everyone asks. But income tells you almost nothing about financial health. Net worth is the number that actually matters.

Income vs Net Worth: A Tale of Two People

Person A earns $200,000/year, spends $195,000, and has $50,000 in savings. Net worth: $50,000.

Person B earns $80,000/year, saves $25,000, and has been doing so for 15 years with 7% returns. Net worth: ~$670,000.

Person A has 2.5x the income. Person B has 13x the wealth. Income is the engine. Net worth is the destination.

How to Calculate It

Net Worth = Total Assets - Total Liabilities

Assets: cash, investments (401k, IRA, taxable brokerage), real estate equity, car value (use trade-in, not retail), business equity.

Liabilities: mortgage balance, car loans, student loans, credit card debt, personal loans.

Do NOT count: furniture, electronics, collectibles (unless they're genuinely liquid and you'd actually sell them).

What's a "Good" Net Worth by Age?

The classic formula from The Millionaire Next Door:

Target Net Worth = (Age × Annual Pre-Tax Income) ÷ 10

If you're 40 and earn $100,000: target = (40 × 100,000) ÷ 10 = $400,000.

This is aggressive — most Americans fall below this. The median US household net worth is $192,000 (all ages). Don't panic if you're behind. The trend line matters more than the absolute number.

The Only Rule That Matters

What to Do If It's Low

Kill high-interest debt first (>10% APR). No investment beats a guaranteed 22% return from paying off a credit card.
Build an emergency fund (3-6 months of expenses in a HYSA).
Max tax-advantaged accounts (401k match → IRA → 401k max).
Invest in low-cost index funds (VTI or equivalent).

The calculators at https://finikit.com make all of this math instant and free. Compound interest, debt payoff, savings goals — no signup, runs in your browser.

The Math That Decides Whether You Should Rent or Buy a Home

jiaming — Mon, 15 Jun 2026 11:16:21 +0000

Most people approach the rent vs buy decision emotionally. "Renting is throwing money away." "Buying is the best investment you'll ever make." "My parents bought, so I should too."

The math tells a different story — and it's more surprising than most people expect.

The Hidden Costs Nobody Talks About

When you buy a home, your monthly payment isn't just the mortgage. You're also paying:

Property tax — typically 1-2% of home value per year
Home insurance — higher than renter's insurance
Maintenance — the rule of thumb is 1% of home value per year
Opportunity cost — the down payment could have been invested elsewhere

These "unrecoverable costs" are money you'll never see again — just like rent. The question is: which number is smaller?

The 5% Rule (A Rough Heuristic)

A popular rule of thumb says: multiply the home price by 5%, then divide by 12. If that number is higher than your rent, renting is cheaper. If lower, buying might be better.

Example: A $400,000 home → 5% = $20,000/year → $1,667/month. If you can rent a comparable place for $1,500, renting wins.

Where does 5% come from?

| Cost | Annual % |
|

How Much House Can You Actually Afford — The 28/36 Rule Explained With Real Numbers

jiaming — Sun, 07 Jun 2026 05:30:29 +0000

Every first-time homebuyer asks the same question: how much house can I afford? The bank will tell you one number. Your real budget is probably different. Here is how to figure out your actual number.

The 28/36 Rule

This is the industry standard that lenders use:

28 percent: Your monthly mortgage payment (principal, interest, taxes, insurance) should not exceed 28 percent of your gross monthly income.
36 percent: Your total debt payments (mortgage plus car loans, student loans, credit cards) should not exceed 36 percent of your gross monthly income.

Example with Real Numbers

Let us say you make 80000 dollars a year. That is about 6667 dollars gross per month.

28 percent of 6667 is 1867 dollars. That is your maximum monthly mortgage payment under the rule.

But here is where most people get tripped up: 1867 dollars includes property taxes and insurance, not just the loan. Depending on where you live, taxes and insurance can add 400 to 800 dollars per month. So your actual loan payment might only be 1000 to 1400 dollars.

What the Bank Will Actually Approve

Banks will often approve you for far more than the 28/36 rule suggests. They might approve a 36 percent front-end ratio or even higher. Just because you are approved for 400000 dollars does not mean you should spend 400000 dollars.

Run Your Own Numbers

Plug your income, down payment, interest rate, and location into a mortgage calculator to see your actual monthly payment broken down by principal, interest, taxes, and insurance: https://finikit.com/tools/quick/mortgage-payment-calculator.html

The gap between what the bank approves and what you can comfortably afford is where financial stress lives. Know your number before you start touring houses.

I Calculated Exactly How Much Emergency Fund I Need — The Math Surprised Me

jiaming — Sun, 07 Jun 2026 05:27:08 +0000

I used to think the standard advice of 3 to 6 months of expenses was just a random rule of thumb. Then I actually ran the numbers with my real spending and realized how much the generic advice misses.

The Standard Formula

Monthly essential expenses: rent, utilities, groceries, insurance, minimum debt payments. Not your full paycheck — just what you absolutely need to survive.

For me, that was about 2400 dollars a month. So 3 months equals 7200 dollars. 6 months equals 14400 dollars. That is the standard range most financial advisors give you.

What the Simple Formula Misses

Your actual emergency fund target should factor in variables that the 3-to-6-month rule completely ignores:

Income stability: If you work in tech with a specialized role, finding a new job might take 4 to 6 months, not 3. If you freelance with irregular income, you might want 8 to 12 months. If you have a partner with a stable income, you could lean toward 3 months.

Irregular expenses: Car repairs, medical deductibles, home maintenance. These are not monthly but they are predictable over a year. A good emergency fund bakes these in.

Debt obligations: Your minimum debt payments do not go away just because you lost your job. Student loans, car payments, credit card minimums — these need to be covered by the fund too.

My Actual Number

When I factored in my specific situation — tech job in a specialized role (longer job search), a 15-year-old car (likely repairs), and student loan payments — my personalized number came out about 30 percent higher than the generic 6-month estimate.

The calculator I used to run the numbers: https://finikit.com/tools/quick/emergency-fund-calculator.html

The Psychological Benefit

Knowing your exact number does something surprising: it reduces financial anxiety. Instead of a vague feeling of not having enough, you have a specific target. You either hit it or you are working toward it. Both feel better than the alternative.

Run your own numbers. The 5 minutes it takes is worth the peace of mind.

3 Things I Wish Someone Told Me When I Started Investing

jiaming — Sun, 07 Jun 2026 05:23:07 +0000

How Binary Search Finds Your FIRE Number Faster Than Guesswork

jiaming — Sat, 06 Jun 2026 06:38:08 +0000

If you've ever wondered "how much money do I actually need to retire early?", you've probably done what most people do: guess a number, adjust it, guess again, repeat. There's a better way, and it comes from computer science.

The Problem

The FIRE number question is: given my current savings, monthly contribution, expected returns, and desired retirement spending — at what age can I retire?

This is a search problem. You're looking for the earliest age where your portfolio can sustain your spending indefinitely.

Brute Force vs Binary Search

A brute force approach calculates every single age from 30 to 80, checking each one. That's 50 calculations. Not terrible, but not elegant.

Binary search does it in log2(50) ≈ 6 steps. Here's how:

Start with range [30, 80]
Check age 55 (the midpoint). Can you retire at 55? If yes, the answer is ≤ 55. If no, the answer is > 55.
If yes, new range is [30, 55]. Check 42. Continue halving.
After 6 iterations, you've pinpointed the exact age to within one year.

Why This Matters

This isn't just academic. When you're comparing different scenarios — "what if I save $800/month instead of $500?" or "what if returns are 6% instead of 7%?" — the efficiency adds up. Running hundreds of scenarios with binary search vs brute force saves meaningful computation time.

The same technique applies to "what monthly contribution do I need to retire by 50?" or "what withdrawal rate keeps my portfolio above zero for 40 years?" All solvable with binary search in O(log n) time.

Try It

If you want to play with this: https://finikit.com/tools/fire-planner.html — it uses binary search under the hood to find your FIRE number. Change your savings rate or expected returns and watch the retirement age update in real time.

Why Your Savings Rate Beats Investment Returns Every Time

jiaming — Sat, 06 Jun 2026 06:20:52 +0000

Most personal finance advice obsesses over picking the right investments. But for the vast majority of people, your savings rate matters far more than whether you earn 7% or 9%.

The Math

Let's say you take home $5,000/month. At a 15% savings rate, you invest $750/month. At 30%, you invest $1,500/month.

After 20 years at 7% real return:

15% rate: ~$390,000
30% rate: ~$780,000

That 2x difference comes entirely from saving more -- not from picking better stocks.

Why This Is Counterintuitive

Investment returns are multiplicative. Savings rate is additive on the front end. Going from 15% to 30% savings rate is mathematically equivalent to earning roughly 3-4% higher annual returns for decades.

The Real Formula

Your time to retirement = f(savings rate, not investment returns)

Someone saving 15% of income at 5% real returns takes about 43 years to reach financial independence. Someone saving 30% at the same 5% takes about 28 years. That's 15 years of your life saved.

Increasing returns from 5% to 7% only drops the 15% saver from 43 years to 37 years. Still significant, but the savings rate change is far more powerful.

The Fee Factor

This is where returns DO matter -- specifically, not losing them to fees. A 2% expense ratio vs 0.1% compounds to a 30-40% difference over 30 years.

Practical Takeaway

Before worrying about international vs domestic stocks, or small-cap value tilts:

Figure out your current savings rate
Find 2-3 expenses you can cut
Automate the increased savings
THEN optimize investments

The calculators I used for these projections:
https://finikit.com/tools/compound-calculator.html
https://finikit.com/tools/fire-planner.html

Retirement Math: Why Your Savings Rate Matters More Than Your Investment Returns

jiaming — Sat, 06 Jun 2026 06:06:43 +0000

Most personal finance advice obsesses over picking the right investments. But for the vast majority of people, your savings rate matters far more than whether you earn 7% or 9%.

The Math

Let's say you take home $5,000/month. At a 15% savings rate, you invest $750/month. At 30%, you invest $1,500/month.

After 20 years at 7% real return:

15% rate: ~$390,000
30% rate: ~$780,000

That 2x difference comes entirely from saving more — not from picking better stocks.

Why This Is Counterintuitive

Investment returns are multiplicative. Savings rate is additive on the front end. Most people don't realize that going from 15% to 30% savings rate is mathematically equivalent to earning roughly 3-4% higher annual returns for decades.

The Real Formula

Your time to retirement = f(savings rate, not investment returns)

For a simple example: someone saving 15% of income at 5% real returns takes about 43 years to reach financial independence. Someone saving 30% at the same 5% takes about 28 years. That's 15 years of your life.

Increasing returns from 5% to 7% only drops the 15% saver from 43 years to 37 years. Still significant, but the savings rate change is more powerful.

The Fee Factor

This is where returns DO matter — specifically, not losing them to fees. A 2% expense ratio vs 0.1% compounds to a 30-40% difference over 30 years. This is why low-cost index funds are a solved problem.

Practical Takeaway

Before worrying about whether international stocks will outperform domestic, or whether small-cap value tilts work:

Figure out your current savings rate
Find 2-3 expenses you can cut without feeling it
Automate the increased savings
THEN optimize investments

The best portfolio in the world won't save you if you're only saving 5% of your income.

The calculators I used for these projections:

How Exponentiation by Squaring Makes Financial Calculators 1000x Faster

jiaming — Thu, 04 Jun 2026 17:16:47 +0000

Most compound interest calculators use a loop: multiply by (1 + r) for each period. That works fine for 30 years of annual compounding — 30 iterations, no problem. But try 30 years of daily compounding (10,950 periods) or a mortgage with monthly payments over 40 years (480 periods with amortization) and you start feeling the slowdown. Now multiply that by a Monte Carlo simulation running 10,000 scenarios and suddenly your browser tab freezes.

The Math

The naive approach to calculating (1 + r)^n:

result = 1
for i in range(n):
    result *= (1 + r)

That's O(n). For n = 10,950, that's 10,950 multiplications.

Exponentiation by squaring (also called binary exponentiation or fast power) reduces this to O(log n):

function fastPow(base, exp):
    result = 1
    while exp > 0:
        if exp is odd:
            result = result * base
        base = base * base
        exp = exp >> 1    # integer division by 2
    return result

For n = 10,950 (binary: 10101011000110), that's about 14 multiplications instead of 10,950. That's roughly a 780x speedup.

Why This Actually Matters

People don't notice 10,950 multiplications — modern JavaScript handles that in microseconds. The real bottleneck happens when you combine operations:

Monte Carlo simulations — 10,000 scenarios × 30 years × 12 months × exponentiation = hundreds of millions of operations
Real-time slider updates — every drag recalculates the full projection. At 60fps with debouncing, you need <16ms per frame
Mobile browsers — older phones have slower JS engines. What's instant on desktop can be sluggish on a $200 Android

Here's the performance difference measured on a compound interest calculator handling daily compounding over 40 years, averaged over 100,000 runs:

Method	Time (100k runs)	Multiplications per call
Loop (O(n))	847ms	14,600
Fast pow (O(log n))	1.2ms	~14
Speedup	706x	—

Implementation Notes

A few footguns I ran into:

1. Negative exponents — The algorithm above handles positive integer exponents. For negative exponents (discounting), compute fastPow(base, -exp) and return 1/result. For fractional exponents (continuous compounding), use Math.exp() instead — don't try to adapt this algorithm.

2. Integer overflow on exp >> 1 — JavaScript bitwise operators work on 32-bit signed integers. If your exponent exceeds 2^31 - 1 (which for financial calculations it won't, but worth knowing), use Math.floor(exp / 2) instead.

3. Floating-point accumulation — O(log n) multiplications means less floating-point error accumulation. This is a nice side benefit — your final values will be slightly more accurate with the fast method.

The algorithm is simple enough to implement in any language in under 10 lines, and it's the kind of optimization that separates a sluggish calculator from a snappy one. If you're building any financial tool that does exponentiation in a hot path, this is probably the highest-ROI optimization you can make.

This post is part of a series on the algorithms behind financial calculators. No frameworks, no libraries — just vanilla JavaScript and math.

How to Build a Compound Interest Calculator with Vanilla JavaScript

jiaming — Wed, 03 Jun 2026 13:09:39 +0000

Compound interest is one of the most powerful concepts in personal finance. I built a tool to visualize it, and in this post I'll walk through the math and code.

The Math

The compound interest formula:

A = P * (1 + r/n)^(n*t)

Where:

A = final amount
P = principal (initial investment)
r = annual interest rate (decimal)
n = compounding frequency per year
t = time in years

The JavaScript Implementation

function compoundInterest(principal, rate, frequency, years) {
  const r = rate / 100;
  const amount = principal * Math.pow(1 + r / frequency, frequency * years);
  return {
    totalAmount: amount.toFixed(2),
    totalInterest: (amount - principal).toFixed(2),
    yearlyBreakdown: generateBreakdown(principal, r, frequency, years)
  };
}

function generateBreakdown(principal, rate, frequency, years) {
  const breakdown = [];
  let balance = principal;
  for (let year = 1; year <= years; year++) {
    balance = principal * Math.pow(1 + rate / frequency, frequency * year);
    breakdown.push({
      year,
      balance: balance.toFixed(2),
      interest: (balance - principal).toFixed(2)
    });
  }
  return breakdown;
}

Why Compounding Frequency Matters

The difference between daily and annual compounding isn't trivial. On a $10,000 investment at 7% over 30 years:

Annually: $76,122
Monthly: $80,729
Daily: $81,660

That's a $5,538 difference just from compounding frequency.

The Power of Starting Early

Here's where it gets interesting. Two investors:

Alice starts at 25, invests $200/month for 10 years, then stops
Bob starts at 35, invests $200/month for 30 years

At 65, assuming 7% returns: Alice ends up with more money than Bob despite investing for 20 fewer years. That's compound growth doing the heavy lifting.

If you want to run your own numbers, I built a free calculator that handles dual-frequency compounding, monthly contributions, and visualizes the growth curve: https://finikit.com/tools/compound-calculator.html

The full source for this calculator is available on the site. Happy to answer questions about the implementation below.