Here's How Your Net Worth Stacks Up With the Rest of Americans Your Age

Tracking your net worth is a great way to determine if you're making progress toward strengthening your finances over time.

Your net worth sums up your entire financial profile into a single number. It accounts for all of your savings, investments, and other assets, plus any debt you might carry. And that can be a lot more informative than simply looking at your brokerage statement or how much you have left to pay down on your student loans .

Improving your net worth is simple but not easy. It requires the discipline to spend less than you earn, pay down your high-interest debt, and invest what's left over. Doing so consistently, though, should lead to a high net worth .

But everyone's finances look different. You may be just starting your career, sitting on a massive pile of student loans and a negative net worth. Or you might be nearing retirement and wondering if you've saved enough. The best benchmark you can use is to compare yourself to where you were in the past. As long as your net worth is trending positively, you should be on the right track.

But you may also want to see how you stack up against your peers to understand whether your net worth goals and expectations are reasonable.

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How does your net worth compare?

Every three years, the Federal Reserve surveys American households cataloging various financial and demographic details. It includes everything about household finances, including income, money deposited at banks, investment accounts, home ownership, real estate investments, automobiles, credit card debt, home loans, auto loans, and student loans. Just about anything that would impact your net worth is cataloged in detail by the Federal Reserve.

This trove of data about Americans' wealth shows a broad range in net worth across the population. Here's how it comes out by percentile and age.

Note: For couples, the reference person is the male in mixed-gender couples and the older individual in same-sex couples. Data source: Federal Reserve. Calculations by author.

There are a few things that jump out in the table above.

First, it's not too uncommon to have a negative net worth, especially when you're young. About 20% of 18- to 29-year-olds have a net worth of $0 or less. It's not unusual for young people to take out loans to pay for school or to get started in their careers and live as an independent adult. Those loans can take a long time to pay off for some.

Another thing is that older Americans generally have a higher net worth than younger Americans. Perhaps it was easier for those in their 50s or 60s to afford higher education or a home purchase decades ago, but they've also had more time to pay off debts, invest, and grow their assets. In most cases, time is your friend when it comes to growing your net worth.

Finally, it's worth pointing out that millionaires aren't all that uncommon. Over 25% of households age 50 and older had a net worth exceeding $1 million in 2022. That number is likely even higher now following the strong market returns of the last two years.

Set realistic goals for yourself

Setting a goal is a great way to motivate yourself to build your net worth over time. It's important to take a long-term mindset because growing your wealth is a marathon, not a sprint. Building good financial habits that you can execute consistently will pay off in the long run.

But your goals should be realistic too. You might use the table above to think about where you want to be in 10 years compared to where you are now. If you're currently in the 30th percentile for your age group, you might want to aim for the 40th or 50th percentile in the next age group over the next decade. You might get more aggressive on the lower extremes and less aggressive on the higher end.

How to improve your wealth effectively

Boosting your net worth is as simple as spending less than you bring in. But if you want to grow your net worth as effectively as possible, you have to put that excess money to work where it provides the greatest long-term returns. That's not necessarily going to be investing in the stock market, although that often plays a key role in building a sizable net worth.

If you have any high-interest debt, such as credit card debt, it makes sense to put most of your savings toward paying off those balances. With credit card interest rates hovering near 30%, you're effectively receiving a 30% return on your "investment" by putting your extra money toward these outstanding balances.

Image source: Getty Images.

But you shouldn't necessarily be eager to get rid of all of your debt. For example, paying off a home mortgage might not be the best use of your money, especially if you have a low interest rate. Even if you have a higher interest rate, the government might help mitigate the cost of your mortgage with a tax deduction , and you may have an opportunity to refinance to a lower rate in the future.

On the other side of the coin, investing in the financial markets is one of the best ways to grow your assets. And there are plenty of incentives to do so. Your company might offer a 401(k) match , which could be equal to whatever you contribute up to a certain percentage of your salary. Effectively, you've earned an instant return of 50% or 100% on your investment. The government will also offer a tax deduction on the amount you contribute to traditional retirement savings accounts . That can be a great way to boost the amount you keep in your pocket at the end of the day.

Saving, investing, and paying down debt are the cornerstones of building a high net worth. If you set a reasonable goal, make a plan to get there, and execute it consistently, your efforts will pay off.

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