In 2020, more people than ever before contributed to their retirement and saw their net worth grow. And, even more people, including those under the age of 35, found themselves investing for the very first time. But, what is supposed to be the average net worth by 30?
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Average Net Worth By 30
The average net worth is a little over $600,000. However, the average net worth by 30 is $174,000.
Some experts disagree on what your net worth should be by age 30. Some believe twice the amount of your annual salary. So if you make $50,000 a year, they believe you should have $100,000 saved.
However, many think that you’re still on the right path if you have half of your salary in a retirement account. So again, if you make $50,000, some experts believe you should have $25,000 saved. For many people, that is obviously an easier goal to achieve.
It’s important to remember not to let these numbers and what experts say overwhelm you. Based on your living situation, education, when and how you plan to retire, etc., you may need less than the average net worth by the time you retire. There is no hard or fast rule on how much you need to have saved by 30. Instead, use the guidelines to help you save.
How to Calculate Your Net Worth
Not sure if you’re on the right track in saving and investing? Calculate your net worth!
Basically, your net worth is your assets minus all liabilities. Here’s a simple formula you can use to calculate yours:
Assets – Liabilities = Net Worth.
Seriously, it’s as simple as what you own minus what you owe.
What are assets and what are liabilities? Here’s a quick list.
There are two different types of assets; liquid and illiquid.
- Liquid assets are your investments or possessions, including bank accounts, stocks, bonds, mutual funds, etc.
- Illiquid assets are investments like your home or other real estate holdings, your vehicle (if worth more than what you owe, or paid off), etc.
Assets could also include:
- High-value art
- Certificate of Deposit (or CD)
Your debts are known as your liabilities.
- Your mortgage
- Car loans
- Credit card balances
- Personal loans
- Student loans
- Back taxes
Want to calculate your net worth easily? Sign up for a service like Personal Capital and connect your accounts. They will tally up your net worth for you. If not, add up all of your assets and liabilities, and follow the formula above!
The Ideal Net Worth Number
So, what does your ideal net worth number look like? Luckily, there is another formula you can use to calculate if you’re on the right path for your own personal finance situation.
Net worth = (Your age – 25) x (Annual Income) / 3
So, if you’re 30 and your income is $25,000, you would want to at least have a net worth of:
(30-25) x ($25,000) / 3 = $41,667
Of course, this number will fluctuate based on your current income and your age. Many people earn more money as they get older, and no one expects you to have hundreds of thousands of dollars saved by 30 (especially if you took out student loans or worked lower income jobs for years). However, this formula has proven effective and was derived by our very own Derek Sall! 🙂
How Can You Save And Invest More?
Of course, everyone has different retirement goals. However, if you’re looking to start catching up on your retirement goals, you may be looking for more ways to invest and save your money.
There are so many ways to get started with investing, but here are some of the site’s best articles that you can use right now:
And, if you’re looking to earn more money to start investing, there are so many different side hustles that you can start (even if you work full-time!) that will give you the opportunity to save more.
Also, don’t miss this awesome free resource to win financially in just 15 steps – equipped with TONS of articles to help you along the way!
For the most part, your net worth won’t change drastically from month to month. But if you find yourself investing heavily, or paying off debt aggressively, you may want to track at least once a month.
If you’ve paid off all of your debt (besides your mortgage), or if you’re not investing much each month, you may be able to get away with checking your net worth quarterly.
However, it’s important to keep regular tabs on your net worth.
Don’t go longer than a few months without checking. I like to set a task for myself on my Google calendar to check my net worth at the beginning of every new quarter. Of course, choose the time and check-in process that works best for you.
Again, a site like Personal Capital (or even Mint) can help you track your net worth easily. Since these sites connect to your accounts, they can calculate your net worth easily. You can also use a spreadsheet or even just a pen and piece of paper and calculate your net worth yourself.
Does Your Net Worth Really Matter?
Yes and no. Yes, because your net worth can show if you’ll be able to retire and/or be financially comfortable. But, at 30, it’s not the end of the world if your net worth isn’t as high as others or the national average.
At 30, there are other numbers that may be more important for you.
Your Credit Score
Check your credit score for free with Credit Karma.
It’s an important number, especially if you’re looking to buy a home or anything that requires credit, your credit score will be more important than your net worth. Your credit score shows lenders if you’re worthy of borrowing large sums of money and paying it back responsibly.
Your Debt-To-Income Ratio
Your debt to income ratio will show if you’re stretching your income too far or not.
- In other words, do you have more month than money?
- Can you afford to pay off your debts?
- Are your expenses way too high, which leaves little to no room to invest?
By keeping a lower debt-to-income ratio, you’ll be able to focus on other money goals, like investing and increasing your net worth.
Average Net Worth By 30: The Bottom Line
These guidelines are here to show you what you may want to aim for. However, the most important thing to remember is that as long as you’re saving and trying, that’s a positive sign.
How are you doing with your net worth? Do you feel like you’re on track??
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.