Your net worth is a measure of the financial assets you hold and can help give a sense of your overall financial picture.
The average American family’s net worth sits was about $748,800 in 2019, according to Federal Reserve data. But the median net worth was just $121,700, reflecting the midpoint of the data. (High net-worth households skew the average.)
It’s also worth noting that the Federal Reserve calculates net worth by family or household. So there may be additional revenue streams from multiple working individuals.
If you’re young and just entering the workforce, you probably don’t have many assets, while someone who is more established in the workforce may. For better reference, we’ll break down average net worth by age.
- What is net worth?
- Average net worth by age
- Median net worth by age
- Why you should know your net worth
- 5 steps to grow your net worth
- Your net worth and future financial goals
What is net worth?
Your net worth is the value of all your assets (i.e., savings, your home and retirement investments) minus the liabilities you owe (i.e., loans, mortgage debt and credit card debt).
If your net worth is positive, you can conclude that you have more assets than liabilities, while a negative net worth would indicate your liabilities add up to more than your assets.
Average net worth by age
The Federal Reserve’s Survey of Consumer Finances released in 2020 (using data collected in 2019) revealed the following picture for average net worth by age.
Average net worth by age
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Median net worth by age
While the average net worth numbers tell one story, the median net worth by age tells another.
When you take the average from a large data group, any outliers will highly affect it. In this case, the outliers would be extremely wealthy or impoverished. These outliers drive the average up, creating a somewhat unrealistic picture of the typical American family’s net worth.
The median, the middle number of all the data, may be more realistic.
Median net worth by age
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Why you should know your net worth
Knowing your net worth isn’t just about being aware of your debt versus assets. It’s also about giving you a quick overview of your financial situation at any time.
Think of your net worth as a report card. Are you staying the same, improving or slipping backward? Take this information to figure out your next steps for improving your financial picture.
How to calculate your net worth
Calculating your net worth is as simple as adding up your assets and liabilities and then subtracting your liabilities from your assets.
To get you started, here are some examples of assets.
- Your home
- Checking accounts
- Saving accounts
- Retirement savings
- Investment account balances
- Valuable personal possessions
Here are some common forms of liabilities.
- Auto loans
- Student loans
- Personal loans
- Credit card debt
- Back taxes owed
- Co-signed loans
5 steps to grow your net worth
1. Pay down your debts
Since your net worth is partly dependent on the debts you owe, it’s essential to pay down your liabilities. One efficient way to pay off debts is to begin by paying off your smallest debt while making monthly payments for other debts.
Once you pay off your first debt, use the money you were putting toward its payments and roll it onto the next-smallest debt owed. This is known as the snowball method.
2. Max out retirement contributions
If the company you work for offers any type of retirement benefits, try to use them to the fullest extent, particularly if your company will match part of your contribution. These funds play a large part in your net worth. It’s not a bad idea to contribute more to your retirement and watch it grow.
3. Put money in high-yield savings
Did you know that the standard savings account at your bank may not be giving you the highest possible interest rate?
You can find different types of accounts, including high-yield savings, money market accounts or certificate of deposits. These savings accounts may come with certain qualifications, but they can also provide you with a higher return on your investment than a typical savings account. Research to see what other options you may have.
Try a high-yield savings account with above-average rates with Credit Karma Money™ Save.
4. Create multiple revenue streams
If you’re interested in making more money, you may consider creating new revenue streams. Whether it’s taking on freelance clients, investing in real estate or starting a podcast, there are many options to make money on the side.
Just remember, this option will likely take the most time and effort (and possibly your own money at first) compared to other suggestions.
5. Cut expenses
One way to maintain your assets is to cut expenses where you can. Start by determining how much you’re spending in the different areas of your life, such as groceries, going out, entertainment, subscription services and more. You can use our budget calculator to run some scenarios.
Your net worth and future financial goals
Just like everyone’s net worth will look different because of their age, so will their financial goals. Here are some healthy money habits and goals to strive for based on age.
Goals for ages younger than 35
For this age group, your focus might be establishing a budget and learning to stick by it. Other goals may include paying off debts, building credit, establishing an emergency saving account and starting a retirement fund.
Goals for ages 36 to 45
At this point in your life, you may be making more in salary and see your net worth growing. Some financial goals may include buying a home, starting a college savings plan for children and contributing more to your retirement fund.
Goals for ages 46 to 55
In your late 40s and mid-50s, it may be time to start getting more aggressive with your retirement plan as your net worth grows. If you haven’t already, you may consider maxing out your company-offered 401k and opening an IRA or Roth IRA.
Goals for ages 56 to 65
As you’re reaching retirement age, you may want to consider what life will look like after retirement. Do you want to travel more? Downsize your home? Are you looking to move to another state to be closer to family?
The answers to these types of questions will help give your financial planning direction.
Goals for ages 65+
Since you may not be working or working as much, you may start to see your net worth decrease, but that doesn’t mean you should stop setting financial goals. For instance, you should always have an emergency fund just in case your home needs a repair, a car needs replacement, or you incur an unexpected medical bill.
Consider what age you’ll start receiving your Social Security payments. While you can start receiving some benefits at age 62, you will only receive your full retirement benefits if you delay taking them until your official retirement age.