Image source: Getty Images
The latest Pew Research Center data shows that middle-income households experienced a rapid increase in their net worth during the pandemic, rising 29% from 2019 to 2021.
The result is that the median net worth of middle-income households is now $204,100.
For reference, Pew's definition of a middle-income household is one in which the income is two-thirds to double the national median income. Here's the median net worth of households across a handful of income categories, as well as information about how to boost yours.
In addition to the increase in net worth for middle-income households, Pew says wealth for lower-income households rose 105% during the pandemic and 15% for upper-income households.
Here's how the median net worth amounts look across households:
- Lower income: $24,500
- Middle income: $204,100
- Upper income: $803,400
Generally speaking, your net worth is calculated by taking your financial liabilities and subtracting them from your assets. What you have left over is your net worth.
But don't get discouraged if your net worth doesn't match the data above. There are some things you can do to improve your financial situation no matter how much money you have.
How to build your wealth
I personally don't think about my net worth, nor do I care about the net worth of people I meet. But we could all likely make a little more progress towards improving our financial situation. Here are a few general steps to get closer to your financial goals.
1. Pay off your debt
There are many kinds of debt (mortgage, car loan, credit cards, etc.), but let's focus on high-interest credit card debt since it's the worst kind.
The average credit card is charging 22.6% interest right now (yikes!), and of households with credit card debt, the average amount is $7,226. If you made a minimum monthly payment of $219, it would take you nearly five years to pay it off.
That's why paying more than the minimum amount and finding any extra money in your monthly budget to pay down your credit card debt is important. It also pays to contact your credit card issuer and ask them to lower your rate.
2. Save money
Putting some extra money into a savings account is just as important as working on your high-interest debt. Life tends to throw us all some financial curveballs, and without emergency savings to lean on, most of us reach for the credit card.
Automating your monthly savings is the best way to do this. Start small if needed, with $25 per month going into a high-yield savings account . If you can't afford that much, comb through a few months of your spending and see if there's anything you could have cut out that would equal that much (or more).
You won't get rich putting money in your savings account, but it'll help you stay out of debt.
This is, of course, the best way to build wealth. Investing can seem overwhelming, but using an investing app and starting with a small sum of money will make the process much easier.
Just remember that you don't have to be an investing guru to buy stocks. You can buy an inexpensive index fund that tracks the S&P 500 and simply let your money grow over time. While there will be ups and downs along the way, the S&P 500 has a historical average annual rate of return of over 10%, making it a fantastic place to put your money and let it be.
No matter what your net worth is, you can take the steps above to help put yourself on a better financial footing. While it's tempting to compare your financial situation to others, think instead of where you want to be and the steps you'll take to get there.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy .
Most Popular
Comments / 0