Are You Richer or Poorer Than Other People Your Age?

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What does it mean to be rich, and how can you tell if you're richer or poorer than others your age?

Most people look at net worth when evaluating their level of wealth. That's how much your assets are worth minus the liabilities you have, like credit card and mortgage debt. Sometimes, you can also look at income. If you make a lot of money, you have the potential to be rich -- although what you do with your cash can matter more than how much of it you earn.

If you want to see how you stack up on both measures, take a look at the average income and average net worth by age to find out if you are wealthier than your peers.

Do you earn more or less money than others your age?

If you measure your wealth based on your earnings, the table below can help you see if you're richer or poorer than others who are the same age as you.

It's understandable to assume making a higher income means you're richer or poorer than others. But the reality is that income isn't a great way to actually measure wealth. If you earn a ton of money but also spend most of it on unnecessary stuff, then you may be a high earner but never become well-off in terms of having plenty of money in the bank.

In fact, if you earn a fortune but live above your means and are constantly taking out personal loans or other debt, you may actually be poor despite your higher salary. Having a higher income than your peers gives you a better chance to get rich, though, since your big paychecks can help you to buy assets that do build your wealth.

Specifically, if you make enough money to have disposable income, you can make the following moves to improve your finances:

• Investing in the stock market: The S&P 500 has historically earned a 10% average annual return, so you can grow your money by around this amount each year by buying an ETF that tracks this fund.
• Paying down debt: If you eliminate financial obligations, you'll be able to own your possessions outright and will build more wealth.
• Saving for emergencies: Putting money into a savings account gives you a financial cushion so you're less likely to go into debt in the future. You can also take better care of the assets you own if you have the money to do so -- for instance, by paying for regular car maintenance so your vehicle lasts longer.

Do you have a higher net worth than others your age?

Net worth is a more accurate method of measuring how wealthy you are than income. Net worth is what you own, not what you make. You could earn a pretty low income and still be wealthy if you have millions of dollars in the bank and a big paid-off mansion you live in.

The table below shows the median net worth for people in different age groups.

If you have a higher net worth than others your age, that likely means you are on your way to financial independence. This could be because you paid down debt and used your income wisely. Of course, it could also be luck if you inherited a bunch of assets or got help from your family to buy property.

If your net worth is below your peers, focusing on improving it over time is a good goal. The more assets you buy that increase what you're worth, the faster you can amass enough wealth to become financially independent and enjoy the freedom that provides.

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