When you’re tracking your net worth, you’re tracking your future financial security. But do you know what your net worth is? And, are you on track based on the average net worth in America? Now is the perfect time to check.
What Is Your Net Worth?
First, let’s calculate your net worth. You won’t know if you’re on the right track for saving and investing if you don’t even know where you’re starting.
So, how do you calculate your net worth?
Calculating your net worth is actually fairly simple.
All you need to do is add up the value of your assets (this could include your home) and subtract the total of your liabilities (debts).
It’ll look like this:
Assets – Liabilities = Your net worth
It is really easy to calculate your net worth, but if you need more help, you can refer to this post for a better explanation.
Knowing and growing your net worth is important because it can show you were you’re at and help you plan properly for retirement. Your net worth can be what helps you live comfortably if and when you stop working. Essentially, the higher your net worth, the more options you’ll have in retirement.
What Is The Average Net Worth In America?
Now that you have your net worth in hand, are you on track to fit with the average net worth in America?
The average net worth in the United States is broken down by age.
According to the Federal Reserve, it breaks down roughly to these numbers:
- 34 years old and under: $76,340
- 35 years old – 54 years old: $437,770
- 55 years old – 69 years old: $1,176,520
- 70 years old and older: $958,450
Of course, these numbers are just the average, and there will be outliers on both ends of the spectrum. However, based on these numbers, do you know where you stand?
Net Worth Before 35
During this time, you most likely went to college, trade school, or started working right after high school. It’s fairly normal to have a lower net worth in your 20s and early 30s, especially if you haven’t started investing.
- Paying off student loans,
- starting a new (and often lower paying) career,
- starting a family, and so much more can effect your net worth at this age.
However, it is important to start looking at investing as soon as possible. Even if it’s just a few dollars per paycheck, it’s worth it. The longer your money has to sit and grow, the better off you could be in retirement.
By this point, you can see a fairly large jump in net worth. This is usually due to more and better investments, giving your money time to grow, and focusing more on growing money vs. paying off debt.
Net Worth Before 70
Around this time, many workers are starting to think about retirement or have retired. By 65, you’ll qualify for Medicare, social security, and even items like your pension (without the penalties). And, experts say that you should have 6 times more than your salary by this age.
Net Worth After 70
As you can see, the average net worth dips after 70.
This could be due to:
- spending money in retirement and not making much of it back,
- medical bills, and more.
However, many retirees are living on less than a million dollars, which is a little lower than what experts recommend.
How to Start Building Your Net Worth
If you’ve found yourself below the average net worth for your age range, or if you’re looking to grow your net worth faster, there are steps you can take to do so.
Of course, you can’t grow your net worth if you’re spending more than you’re saving and investing. In order to know your incoming and outgoing expenses, you need to make a budget.
Also, it’s important to save and invest as much as you possibly can.
There are many ways to save more money, including savings challenges, side hustles, and more. But of course, the most important thing is to keep your budget in check and save what you can. And, the earlier you start saving and investing, the better.
Pay Off Debt
It’s hard to save and invest if you’re paying off debt. Plus, your debt (aka liabilities) affects your net worth as well.
The higher your liabilities, the less your net worth will be. And, if your liabilities are higher than your assets, you should know that you have a negative net worth. Needless to say…that’s not good.
So what do you do if you have debt and you’re trying to grow your net worth?
Well, the best thing to do is to pay off the debt (at the very least, the high interest debt) as fast as possible. Debt like a mortgage may not hinder your net worth as much, so it’s most important to pay off debt that is high interest or that could be considered “bad debt”.
Sure, all debt can be considered bad, but there are some debts that are worse than others. Focus on paying those off first so you can start investing more and faster.
To keep yourself from getting into more debt, or having to dip into your investments, you may also want to build a larger emergency fund. Experts say at least three to six months of expenses, but of course, do what’s best for you.
It may also be the time to have other savings accounts or sinking funds, so you don’t have to dip into your regular checking or savings accounts. For example, you could also save for…
- short-term goals (like vacations),
- a house down-payment,
- renovations, etc. in separate accounts.
Related: 15 Steps to Winning Financially
Invest For The Long Term
While investments like cryptocurrency and random stocks can seem appealing, they may not be the best bet for long-term investing. Sure, you could become uber rich, and quickly, but you could also potentially lose a lot of money.
So instead, play the long game and invest for the long term.
There are plenty of ways to invest and build your money, while also mitigating your risk as much as possible. Nothing is guaranteed, but it’s okay to play it safer.
Also, make sure your portfolio is balanced.
Don’t put all of your hopes and money into one type of fund or investment (like real estate). Instead, dabble in multiple funds, industries, and investments. It’s better to put your eggs in multiple baskets than just one.
Related: Where to Invest Your Money in 2021
The Average Net Worth in America: How Are You Doing?
While you should know your net worth and try to make a plan to retire comfortably, it’s also important to remember that it’s just a number. There are many people who live on less than a million dollars in retirement, and there are others who work their entire lives because they want to.
Don’t feel bad if your net worth isn’t as high as the average, or if you’re not where you want to be. Stay the course, and live your life. It is possible to build your net worth while also enjoying yourself.
Were you surprised by the average net worth in America? Are you doing better or worse than the average?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant, product launch expert, and mastermind behind the www.theentrepremomer.com. 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.