Your net worth is an important measure of how you’re doing financially. Simply tracking your net worth may not be enough though, you should see how you compare to others your age.
I’ve broken down the average net worth by age so you can see how you’re doing to help you make important decisions about your financial future.
What Is Net Worth?
Simply put, net worth is a dollar amount representing the total value of your assets minus your liabilities or debts. It can be positive or negative, depending on whether you have more assets or liabilities, and it fluctuates with every financial move you make.
Your assets include your investment and retirement account, home and other properties, vehicles, bank accounts, valuable items like art and jewelry, and more. Your liabilities include all your debts, including mortgages, credit card balances, and back taxes.
By calculating your personal net worth, you have a powerful metric. It is a dollar amount you can monitor over time, allowing you to check your financial health. Plus, you can compare your net worth to others in and outside of your age group, allowing you to see how you stack up against your peers and everyone else.
Why Net Worth Matters
Your net worth provides a holistic view of your financial situation. It could signify that you have too much debt if it’s not as high as you thought and prompt you to make better financial decisions. It helps you understand your level of financial stability and the necessary steps to reach your goals.
How to Calculate your Net Worth
It’s easy to calculate your net worth.
To start, you must know your total assets and liabilities. Include all bank, investment, and retirement accounts and the value of any physical assets, such as your house, cars, or other vehicles.
Your liabilities include anyone you owe money to, whether a mortgage, credit card or personal or vehicle loan.
Simply subtract your liabilities from your assets, and you have your net worth. If your liabilities exceed your assets, you have a negative net worth; if it’s the other way around, you have a positive net worth (which should be your goal).
What Is The Average Net Worth By Age?
The US Census Bureau does more than just track the population; they also collect a lot of other data that provides insights into the average net worth.
Here is a look at the average net worth by age:
- Under 35 – $30,500
- 35 to 44 – $126,900
- 45 to 54 – $186,000
- 55 to 64 – $276,000
- 65 to 69 – $341,400
- 70 to 74 – $373,900
- 75+ – $315,900
Net worth usually grows with time because there’s more time to contribute to retirement funds, income potential increases, home values increase, or individuals can afford more expensive homes.
However, the data is also a bit shocking. After all, most people have heard that they need $1 million (or even $2 million) set aside for retirement at a minimum to be comfortable in their later years, and those amounts showcase just how many people likely fall short.
You’ll have to save a lot less for retirement if you start in your 30s rather than if you start saving in your 60s. You can thank compound interest for that.
By monitoring your net worth, you can ensure you are financially healthy, and by working to improve it, you can make your financial goals a reality.
How to Build your Net Worth by Age
Building your net worth doesn’t happen overnight. It takes a good financial strategy and consistency to reach your financial goals.
Here are some tips for building net worth by age.
Building Net Worth in your 20s
There’s not much you can do to build your net worth in your 20s per se. However, this is when you set the precedence with good financial habits. Even if you’re just starting your career and getting settled, you can keep your costs down, implement great savings habits, and start contributing to your 401K.
Building Net Worth in your 30s
As you navigate to your 30s and real life starts happening, it’s important to remember your financial goals. As your income increases, it’s not a time to let lifestyle creep happen. Keep your wits about you, don’t become house-poor, and increase your savings percentage as your income allows.
Building Net Worth in your 40s
In your 40s, sticking to your financial plan is especially important. As your income continues increasing or you start a new career, remember it’s for the future you and not for instant gratification.
Grant yourself some luxuries every now and then, but don’t make them a regular part of your lifestyle. This is a key time to grow your retirement funds and focus on paying down debts as much as possible, potentially becoming mortgage-free before the next decade.
Building Net Worth in your 50s
In your 50s, you are closer to retirement than not. This is a time to give it your ‘all’ as you’ll likely start focusing on conserving the funds you have rather than taking risks. If you’re ready to retire, you may have other income sources, like side hustles or passive income investments that help cover your expenses, while you keep your retirement accounts untouched so you don’t outlive them.
Building Net Worth in your 60s and 70s
As you near retirement age, your focus changes. You’ll likely begin withdrawing from your retirement accounts, but budgeting is of utmost importance during this stage. While you don’t stop building your net worth, your income-producing days are likely behind you, at least the full-time gigs, and it’s time to preserve what you have and think outside the box for other income sources.
Ways To Build Net Worth
Now that you know the average net worth by age, here are some simple ways to build it and get you on the road to good financial health.
- Get in the right mindset: Look at your current saving and spending habits and decide if they work for or against your goal to build your net worth. Adopt a new mindset, one of frugality and not instant gratification, focusing on your future finances and not how you compare to everyone else today.
- Track your progress: You don’t know your net worth unless you track it. Use sites like Empower to track your net worth and make impactful personal finance decisions to help you reach your goals.
- Save an emergency fund: Always have a fully stocked emergency fund. This is even more important in retirement so you don’t have to use funds earmarked for your golden years unexpectedly.
- Increase your income: Don’t rely on a single income. Instead, have multiple income streams including passive income opportunities to ensure you always have a source of income, no matter what life throws at you.
- Get out of debt: Debt depletes your net worth. Pay off the debt you currently have and avoid getting into new debt.
- Contribute to your 401K: Take advantage of employer-match and the tax benefits 401K contributions allow, helping you increase your net worth and decrease your tax liabilities.
- Diversify your investments: Build a diversified portfolio that invests in stocks, bonds, real estate, and alternative assets so you aren’t dependent or vulnerable to a single market.
- Insure yourself: Protect your investments, such as your home and other assets with proper insurance so if disaster strikes, you don’t pay the financial consequences.
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