Your net worth is the cornerstone of understanding your financial health. It provides a clear, quantifiable measure of where you stand financially, offering insights into your ability to handle debt, save for the future, and build wealth over time.
Net worth is calculated using a simple formula:
Assets are things of value that you own—like cash, investments, or real estate. Liabilities, on the other hand, are what you owe, such as loans, credit card balances, or mortgages. The difference between these two sums reveals your financial standing at any given moment.
Understanding your net worth helps you:
• Set realistic financial goals. Whether it’s saving for retirement or buying a home, knowing your net worth provides a baseline for planning.
• Track progress. Over time, monitoring changes in your net worth can highlight financial growth or reveal areas for improvement.
• Make informed decisions. Knowing your net worth can guide choices about spending, saving, and investing.
Comparing net worth by age is one way to gauge your financial health, providing benchmarks to help you determine if you’re on track. However, it’s equally important to understand that everyone’s financial journey is unique, and comparisons should serve as inspiration rather than a source of stress.
This blog explores average net worth by age in the U.S., how to calculate your own, strategies to improve it, and the common pitfalls to avoid along the way.
Net worth benchmarks vary widely based on age, income level, and life circumstances. The Federal Reserve’s Survey of Consumer Finances provides a valuable snapshot of average and median net worth figures by age group in the United States:
• Under 35: Average net worth: $76,300 | Median net worth: $14,000
• 35-44: Average net worth: $436,200 | Median net worth: $91,300
• 45-54: Average net worth: $833,200 | Median net worth: $168,600
• 55-64: Average net worth: $1,175,900 | Median net worth: $212,500
• 65-74: Average net worth: $1,217,700 | Median net worth: $266,400
• 75+: Average net worth: $977,600 | Median net worth: $254,800
Source: Federal Reserve’s 2022 Survey of Consumer Finances
1. The gap between average and median figures reflects wealth inequality. The average net worth skews higher due to extremely wealthy individuals, while the median is a better indicator of where most people stand.
2. Net worth tends to grow with age as individuals pay down debt, invest in appreciating assets, and benefit from compound growth in retirement accounts.
3. Declining net worth in later years often reflects retirees drawing down their savings.
While averages and medians provide useful benchmarks, it’s essential to consider the context of your unique situation when comparing net worth by age. Here’s how such comparisons can be helpful:
• Gauge Progress Toward Retirement Goals: If you’re 45 and your net worth is significantly lower than the median for your age group, it might signal a need to save more aggressively.
• Evaluate Financial Habits: Comparing your net worth can inspire changes, such as reducing debt, cutting unnecessary expenses, or investing more consistently.
• Stay Motivated: Seeing how others in your age group are building wealth can motivate you to take action without feeling overwhelmed.
However, comparisons can also be misleading if they fail to account for personal circumstances, such as income potential, career disruptions, or geographic cost of living.
Calculating net worth is simple, but understanding the components can provide deeper insights into your financial habits and opportunities for improvement.
1. List Your Assets
Start by listing everything you own that has monetary value:
• Liquid Assets: Cash, checking/savings accounts, and money market funds.
• Investments: Stocks, bonds, mutual funds, and retirement accounts (e.g., 401(k), IRA).
• Real Estate: Market value of your primary home, rental properties, or land.
• Tangible Assets: Cars, jewelry, art, or collectibles (current market value).
2. List Your Liabilities
Next, account for everything you owe:
• Short-term Liabilities: Credit card balances and personal loans.
• Long-term Liabilities: Mortgages, auto loans, and student loans.
3. Subtract Liabilities from Assets
Once you’ve totaled your assets and liabilities, subtract liabilities from assets to determine your net worth.
Example Calculation:
• Assets: $400,000 (home equity: $200,000, retirement accounts: $150,000, cash: $50,000)
• Liabilities: $120,000 (mortgage: $100,000, car loan: $20,000)
• Net Worth: $400,000 - $120,000 = $280,000
If you’re using a financial app like Bountisphere, these calculations can be automated and updated in real time, allowing you to track your progress without manual effort.
In Your 20s: Building the Foundation
• Focus on Debt: High-interest debt can be a net worth killer. Pay down credit cards and consider refinancing student loans.
• Build an Emergency Fund: Start small—saving even $500-$1,000 can provide a buffer against unexpected expenses.
• Start Investing: Contributing just $50 a month to a 401(k) or IRA in your 20s can grow into significant wealth over time, thanks to compound interest.
In Your 30s: Growing Momentum
• Increase Retirement Contributions: Aim to save 15-20% of your income.
• Invest in Real Estate: Buying a home can be a smart long-term investment if done wisely.
• Be Strategic About Expenses: Avoid lifestyle inflation by channeling raises into savings or investments.
In Your 40s: Maximizing Growth
• Diversify Investments: Include a mix of stocks, bonds, and alternative investments to balance risk and reward.
• Plan for College: If you have children, start saving in a 529 plan or similar account to minimize future debt.
• Reduce Debt: Pay off significant obligations like your mortgage or any lingering credit card debt.
In Your 50s and Beyond: Preserving Wealth
• Catch-Up Contributions: Take advantage of higher contribution limits for retirement accounts.
• Plan Withdrawals Carefully: Optimize tax-advantaged accounts and Social Security to sustain your wealth through retirement.
• Reassess Insurance Needs: Ensure adequate health, life, and long-term care insurance.
1. Obsessing Over Averages: It’s more useful to focus on your progress rather than competing with statistical benchmarks.
2. Ignoring Non-Monetary Assets: Your earning potential and professional skills are assets that don’t show up in net worth calculations.
3. Neglecting Personal Goals: A high net worth is meaningless if it doesn’t align with your life goals and values.
Bountisphere offers tools to take control of your finances:
• Track Your Progress: Automatically calculate and monitor your net worth.
• Create a Plan: Set actionable goals and track your progress.
• Daily Reconciliation: Keep your accounts up to date by syncing them with your financial institutions.
• Insights & Guidance: Receive recommendations tailored to your goals, helping you reduce debt and increase savings.
Your financial journey is unique, and there’s no one-size-fits-all approach. Whether you’re starting out in your 20s or preparing for retirement in your 60s, focusing on consistent, incremental progress is key.
Take charge of your financial future with tools like Bountisphere to automate, track, and improve your net worth over time. Remember, it’s never too late—or too early—to build wealth and confidence.