This Is the Average American Family's Net Worth. How Does Yours Compare?

You may be well aware of exactly how much money you have in your savings account. And you might know that you currently owe $1,000, give or take, on your credit cards.

But when's the last time you stopped to calculate your net worth? If the answer is "never," you may be in good company. 

A lot of people don't really stop to think about their net worth, but they should. Your net worth is a snapshot of your total financial picture. 

Net worth is calculated by taking the total of your assets and subtracting your liabilities, or debts. So let's say you have the following assets:

• $20,000 in savings
• $30,000 in your IRA
• A $400,000 home

That's a total of $450,000 in assets. But let's also say you owe:

• $260,000 on your mortgage loan
• $30,000 in educational debt
• $10,000 on a credit card balance

That's a total of $300,000 in liabilities. So all told, you're left with a net worth of $150,000.

Recent data from the Federal Reserve found that the average American family has a net worth of $1,063,700. And if you're thinking "Well shucks, my family's net worth is nowhere close to that," you're actually not alone. But before you stress out about that point, let's do a deeper dive into that data.

Median net worth is much lower

It's time for a quick statistics lesson. Some people use the terms "average" and "median" interchangeably, but they're very different.

In a given data set, an average is calculated by taking all of the numbers in that set and dividing it by the number of inputs. A median is determined by taking the middle value of a given data set. 

So let's say you have the following data set:

10

12

14

16

18

20

22

24

26

88

90

To calculate the average, you'd take these 11 numbers, add them up, and divide their total by 11, arriving at roughly 31. But the median (or middle) number in this data set is 20. 

Here's why this is important. We just learned that the average American family has a net worth of $1,063,700. But you should know that the median net worth among American families is $192,000. Given this discrepancy, we can infer that $192,000 is a better representation of Americans' net worth than $1,063,700. 

It's similar to our data set above. Most of the numbers in that set are closer to 20, the median, than 31, the average. The reason the average is 31 is because we had two larger numbers -- 88 and 90 -- to bring it up.

That's what's happening with net worth. The Federal Reserve is trying to capture assets and liabilities across all Americans. The wealthy are likely to have more assets, leading to a higher net worth. 

But what's likely happening is that a small percentage of wealthy folks are driving the average up substantially. It's not as if the typical American household is walking around with $1 million and change in assets after their debts have been accounted for. 

How do you feel about your net worth?

It's not a bad idea to calculate your net worth and see where it leaves you. But one thing you shouldn't do is take a look at the average net worth and think you're horrendously behind. If your net worth is more in line with the median, it could indicate that you're doing just fine.

Of course, if you feel there are certain areas of your finances that need work, that's something to certainly address. Maybe you'd have a larger net worth if it weren't for your $24,000 credit card balance. If so, it pays to look at ways to whittle that debt down. You might consider moving credit card debts to a card with a 0% APR intro offer, so it'll be cheaper to pay it off. And if you're struggling to pay your mortgage, you should consider downsizing to a less expensive home to alleviate some financial stress and ensure you don't end up in foreclosure. 

But don't sweat it if your net worth is nowhere close to $1 million. Over time, you can work on growing your net worth by doing things like paying down debt and investing in stocks and other assets that have the potential to gain value over time. Buying a home could also help you grow your net worth, though that's not an ideal option for everyone. 

Rather than stress about what your net worth is compared to other people's, you may want to instead focus on seeing your net worth rise over time. If you can build on your own personal wealth year after year, it means you're doing a lot of things right.