When it comes to keeping tabs on your money, net income often steals the spotlight. While knowing your income is important, tracking your net worth is a crucial step to ensure you are progressing toward your financial goals. Essentially, you can think of your net worth as your personal balance sheet. It's the sum of all your assets -- everything you own, such as cash savings, certificates of deposit, and retirement accounts --minus your liabilities, which include everything you owe, such as credit card debt, car loans, and student loans.
For example, if your assets add up to $350,000 and your debts total $300,000, your net worth would be $50,000. Net worth, not net income, can reveal how close you are to becoming a millionaire. Someone could earn a million dollars in a year but end up with a net worth of only $25,000 due to significant expenses and debt dragging their net worth down.
If you're curious about how other Americans in your age group are really doing, I've pulled the numbers so you can look under the hood.
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Compare your net worth to your peers
The Federal Reserve's 2022 Survey of Consumer Finances shows that the average net worth for American families is roughly $1.06 million, while the median sits at $192,700. Some of the wealthiest people in the country, such as Elon Musk and Jeff Bezos, have a net worth so large that they skew the average higher. Therefore, the median net worth, which represents the middle number in a data set, might offer a more accurate reflection of the typical American family's financial situation.
When you dig into net worth by age group, you'll notice it tends to increase as people get older, which you might expect, but it falls as people settle into their retirement years. For example, people over 45 typically earn more than younger generations because they have more experience under their belt, increasing the likelihood that they can save and invest more. Over time, they benefit from the power of compounding to grow their investments and increase their net worth. Also, they are less likely to be burdened by debts such as student loans and may be closer to paying off mortgages. However, as people settle into retirement, they often close the door on their careers and start to spend down their savings, which decreases their net worth.
With this in mind, it's probably more meaningful to compare net worth among individuals in the same age cohort. Take a look at the table below to see where you stand among your peers.
|
Age |
Average Net Worth |
Median Net Worth |
|---|---|---|
|
18-34 |
$183,380 |
$39,040 |
|
35-44 |
$548,070 |
$135,300 |
|
45-54 |
$971,270 |
$246,700 |
|
55-64 |
$1.56 million |
$364,270 |
|
65-74 |
$1.78 million |
$410,000 |
|
75+ |
$1.62 million |
$334,700 |
|
All Households |
$1.06 million |
$192,700 |
Data source: Federal Reserve 2022 Survey of Consumer Finances.
The secret to increase your net worth
The secret to increasing your net worth is to understand where you are on your journey and make the most of the resources around you.
For example, if you're in college, consider applying for scholarships or finding profitable internships to reduce the amount of loans you need to take out. If you've already started your career and have access to an employer-sponsored retirement plan like a 401(k), try to contribute enough to at least snag the company match if they offer it. Essentially, that's free money you get for saving toward retirement, and that extra money contributes to your net worth.
Your net worth plan will largely depend on your age, income, and goals. However, you can use the average and median net worth numbers to help you set targets that work best for you. After all, tracking your net worth isn't about comparing yourself to others. It's more about ensuring you can live a life free from constant financial stress. By keeping tabs on your net worth, you'll be able to set yourself up for a comfortable financial future.
