Net worth is one of the best ways to measure your wealth. Net worth is assets (things you own) minus liabilities (obligations or things you owe). If you have a lot of assets and very little debt, you'll have a high net worth and, depending on just how high it is, you may be considered rich.
Your net worth typically increases as you get older (unless you were born rich) since you usually acquire more assets and pay off debt as you earn money. So, it can be helpful to compare your net worth to others in your age range to get an idea of whether you're on track or if you need to rethink your savings plan.
Here's what you need to do to make this comparison and get an idea of whether you're making the most of your income and building financial security.
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How does your wealth compare to other people your age?
Research from Fidelity will help you understand where you stand when it comes to wealth building, compared with others in a similar life stage. Here's what Fidelity's data shows when it comes to net worth by age.
| Age | Net Worth (on Average) |
|---|---|
| Under 35 | $183,500 |
| 35-44 | $549,600 |
| 45-54 | $975,800 |
| 55-64 | $1.57 million |
| 65-74 | $1.79 million |
| 75+ | $1.62 million |
Data source: Fidelity.
As you can see, there's a really big difference in wealth levels between the typical young person under 35 and the typical person 75+, who has over $1 million more than their younger counterparts.
This makes sense, because people under 35 may still be working on things like paying off student loans, while older people have had decades to contribute to retirement plans, earn 401(k) matches, build equity in their homes, and take control of their finances.
How can you improve your net worth?
Whether you are richer than your peers or not, it's worth trying to regularly improve your net worth to get closer to financial independence. You can do this by:
- Buying assets such as stocks, bonds, and mutual funds that will (hopefully) earn money for you
- Repaying money that you owe, especially high-interest debt
- Limiting the debt that you take on, and ideally borrowing only for things that will make you wealthier in the long run, such as earning a degree, starting a business, or buying a home
By focusing on acquiring assets and limiting liabilities, you can end up with a net worth that gives you the security you deserve.
