Many factors can paint a picture of your current financial status, but your net worth is one of the most straightforward figures to see where you stand.
Your net worth is essentially a personal balance sheet, accounting for all of your financial assets and liabilities. To calculate your net worth, you'll first need to add up all your assets -- such as cash savings, your home value, and retirement accounts. Then, subtract your liabilities -- such as student loans, a mortgage, and any other debts.
While your net worth isn't everything, it can help gauge whether you're making financial progress over time. If your net worth decreases consistently, it could be a signal that you're spending more than you're earning -- which could spell trouble for your financial future.
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Net worth can vary widely between individuals, and a high net worth is not always a sign that someone is better off financially. For example, a large inheritance can significantly boost a person's net worth, but if that person has poor spending habits, that doesn't necessarily mean they're in a stronger place financially. Likewise, someone could have fantastic spending habits but is saddled with student loans or a mortgage, which may lower their net worth.
That said, it can still be helpful to see where you stand among others your age. Here's how to see how your net worth stacks up to American adults at various ages.
How does your net worth compare to the average?
The Federal Reserve's Survey of Consumer Finances regularly catalogs various financial data from households across the U.S., and its most recent report is a snapshot of household data from the end of 2022.
The report includes both the average and median net worth of U.S. adults across various age groups. While the average data may be more compelling, it's often skewed by a few extremely high-earning individuals. The median figures, then, may paint a more realistic picture of where others in your age group stand financially.
| Age Group | Average Net Worth | Median Net Worth |
|---|---|---|
| Under age 35 | $184,000 | $39,000 |
| 35 to 44 | $550,000 | $136,000 |
| 45 to 54 | $976,000 | $247,000 |
| 55 to 64 | $1,567,000 | $365,000 |
| 65 to 74 | $1,795,000 | $410,000 |
| 75 and older | $1,624,000 | $336,000 |
Data source: Federal Reserve. Table by author.
Again, your net worth is only one part of the equation when it comes to your financial health. While it can be helpful to see how your net worth stacks up to others your age, it's more important to gauge how your figure has changed over time to determine whether your financial health is improving.
A simple way to increase your net worth
There are plenty of ways to build wealth and increase your net worth, but investing for the future is one of the simplest and most straightforward methods.
If you have access to a 401(k) or IRA, contributing consistently can put you on the path toward generating long-term wealth. These types of accounts experience compound growth, meaning your money grows faster the longer it sits in your accounts. By saving as much as you can as early in life as possible, you can dramatically increase your net worth.
It's especially smart to contribute to a 401(k) if you're earning matching contributions from your employer. The employer match is essentially free money that can instantly double your savings with next to no effort on your part, making it a simple way to boost your account balance.
It's also wise to pay down as much of your debt as you can, particularly high-interest debt like credit cards. Building net worth involves increasing your assets while reducing liabilities, so if you're able to pay down debt while also investing for the future, you can supercharge your net worth over time.
Knowing your net worth can make it easier to determine whether you're in good financial shape, and investing is one of the easiest ways to increase your wealth over time. By getting started investing now -- whether it's through a 401(k), IRA, or other investment account -- you could earn more than you might think.
