Your net worth, or the difference between your assets and liabilities, can be a helpful person in determining your financial health. Ideally, your net worth will grow over time as you earn more wealth and pay off your debts.
So. What should your net worth be at this point in your life? There is no correct answer, but it can be helpful to compare the national average and net worth of different age groups.
Your net worth is the value of what you owe (your liabilities) after deducting all of your possessions (your assets). This important financial metric helps you track wealth over time.
To calculate your net worth, add all your assets, including household capital, bank accounts, retirement accounts, investments, cash, and other valuables. Next, you add liabilities such as mortgage balances, car loan balances, student loan balances, other loans, and credit card liabilities. Finally, subtract the total liability from the total assets. This number is your net worth.
read more: What is Net Worth and why is it important?
According to Federal Reserve data, the average American family’s net worth was $1,059,470 in 2022. Consumer finance survey. Meanwhile, the median net worth was $192,700 for the same year (the median data could be more representative of “normal” because the average skewed net worth is so high).
Check out the following table to get an idea of how most people’s net worth changes over time.
Your net worth can be positive or negative. In fact, it is not uncommon to have a negative net worth, especially when you are younger. However, ideally, your net worth will increase over time as you acquire more assets, earn higher incomes, and pay off your debts.
For example, you can start your career with an entry-level salary and a high student loan balance. However, lower initial costs can help you quickly advance your loan repayments, investments and savings.
Later, you may start a family or buy a house. These and other lifestyle changes can come with significant costs, such as childcare, tuition fees, housing improvements, and property taxes. Such costs could lead to a temporary decline in savings rates or even new debt, in order to cover higher costs.
In later years, you may be able to accelerate your progress again. You can pay off your mortgage, stop paying off your child’s expenses, get massive promotions, and get rid of your debts. All of these will help you grow your net worth.
Finally, if you quit your job and start reducing your retirement savings, your net worth may start falling again. According to Empower data from Financial Services Company, your average net worth begins to decline until you reach your 60s.
Don’t be discouraged if you calculated your net worth just to find out that it’s not where you want to be. Similarly, do not move with the above average and median numbers. Everyone has different financial privileges and circumstances, as well as their priorities and goals.
If you are determined to increase your net worth, there are many ways to do so. Here are some tips to help you grow and protect your wealth over time:
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Except for emergencies: Emergency funds are part of a stable financial foundation, allowing you to cover unexpected costs without incurring debt. Working to save about six months of important expenses, we wait for a real emergency to touch this money.
read more: These are the two times you need to tap on emergency funds and general savings
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Pay off your debt: Paying off your debt will increase your net worth and open your room within your savings target and other expenses budget. Start by focusing on high-profit debts like credit cards.
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Cost reduction: Reduce unnecessary costs – for example, things you don’t use or enjoy – free up more cash to incorporate emergency funds, invest in debt, and invest in it. Recent bank and credit card statement scans can help you identify areas to cut back.
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Increase your income: You can cut that much from your spending, but you can always make more money. Whether it means negotiating a salary increase, starting a side hustle, or switching careers, increasing your income is a quick way to grow your net worth.
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Invest: Investment is an important part of wealth building and can make meaningful progress by growing your net worth over decades. Tax retirement accounts such as IRAS or 401(k)S may offer additional tax savings benefits, and in the case of workplace planning, employers will match your contribution.
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Protect your assets: It is equally important to protect it after working hard to grow your net worth. This means ensuring yourself, your family, your property and other assets. You should also consider real estate planning, such as naming beneficiaries into accounts and writing wills.
read more: Six ways to increase your net worth
