Understanding your net worth is a fundamental step in assessing your financial health. It’s a straightforward calculation that gives you a snapshot of where you stand financially by subtracting your liabilities (debts) from your assets (savings, investments, property, etc.). Knowing your net worth helps you set financial goals, plan for retirement, and make informed decisions. Additionally, comparing your net worth to the average net worth by age in America can provide useful benchmarks, showing how you measure up against others in 2024.
How to Calculate Your Net Worth
Calculating your net worth is simple but crucial for understanding your financial position. First, list all your assets—this includes your savings, investments, property, and any other valuables you own. Next, identify your liabilities, such as mortgages, credit card debt, student loans, or any other outstanding debts. Subtract your total liabilities from your total assets. The result is your net worth:
Net Worth = Assets – Liabilities.
Let’s take an example of an American earning the median income in 2024, which is around $75,000 per year. Assume they have $50,000 in savings, $100,000 in retirement accounts, and a home valued at $300,000. These are their assets, totaling $450,000. On the liabilities side, they have a mortgage balance of $200,000, $10,000 in student loans, and $5,000 in credit card debt, totaling $215,000 in liabilities.
Using the formula:
Net Worth = Assets – Liabilities
Net Worth = $450,000 – $215,000 = $235,000.
This individual’s net worth is $235,000, giving them a clear picture of where they stand financially. Understanding this helps in planning future financial goals, like paying down debt or increasing savings.
Average Net Worth by Age in America (2024)
Net worth typically grows as people age, as they accumulate more assets, pay off debts, and build savings. Here’s a general breakdown of average net worth by age in America for 2024:
- 20s: Individuals in their 20s are just beginning their financial journey, often with limited savings and assets. Average net worth is typically low, often around $10,000 to $20,000.
- 30s: By their 30s, many have started building wealth through homeownership, savings, and retirement accounts. Average net worth increases to around $80,000 to $100,000.
- 40s: In their 40s, people often reach peak earning years and have more substantial savings. The average net worth ranges from $200,000 to $300,000.
- 50s: As individuals approach retirement, their wealth accumulates further. The average net worth in this age group is around $500,000 to $700,000.
- 60s and beyond: Those in their 60s are typically focused on retirement planning. Average net worth peaks at around $1 million or more, depending on assets and liabilities.
The Federal Reserve’s Survey of Consumer Finances (SCF) offers a comprehensive overview of American households’ income, assets, liabilities, and net worth. The latest survey was conducted in 2022, with findings published in October 2023.
Understanding these averages can help you benchmark your own financial progress and set goals accordingly.
Factors Influencing Net Worth
Several factors play a significant role in determining your net worth:
- Income level is a primary influence—the higher your income, the more potential you have to save and invest. However, it’s not just about earning;
- Spending habits and lifestyle choices are equally important. High earners who live beyond their means may still struggle to build net worth.
- Debt management is crucial. Reducing liabilities like student loans, mortgages, or credit card debt can boost your net worth over time.
- Smart investment strategies, such as contributing to retirement accounts, investing in real estate, or building diversified portfolios, can also accelerate wealth accumulation.
- Lastly, financial education and proactive planning play a major role in how you navigate these factors and ultimately increase your net worth.
How to Increase Your Net Worth
Increasing your net worth requires a combination of strategies focused on both reducing liabilities and growing assets. Start by paying off debt, especially high-interest debt like credit cards, which can significantly erode your wealth. At the same time, invest consistently in assets like retirement accounts, stocks, or real estate. Building an emergency fund and cutting unnecessary expenses also free up more money for savings. Boosting your income—whether through career advancement, side hustles, or investments—adds to your ability to grow wealth over time.
Final Thoughts
Calculating and understanding your net worth is an essential step toward achieving long-term financial health. It provides a clear picture of where you stand and helps you set realistic financial goals. Whether you’re working to reduce debt or grow assets through investments and savings, knowing your net worth allows you to track progress. Comparing your net worth with average benchmarks by age can be a helpful motivator, but the key is to focus on personal growth and improvement. Regularly reassessing and adjusting your financial strategy will help you build a stronger financial future.
