Here’s how your net worth compares to other Americans your age

Monitoring your net worth is a great way to see if you are making progress in strengthening your financial situation over time.

Your net worth sums up your entire financial profile in one number. It includes all your savings, investments, and other assets, as well as any debts you might have. And it can be a lot more informative than just looking at your brokerage statement or how much you have left to pay off on your student loans.

Improving your net worth is simple but not easy. It requires the discipline to spend less than you earn, pay off high-interest debts, and invest what’s left. However, doing this consistently should lead to a high net worth.

But everyone’s finances look different. You could be just starting out in your career, sitting on a mountain of student loans, and have a negative net worth. Or you could be approaching retirement and wondering if you’ve saved enough. The best benchmark you can use is to compare yourself to where you’ve been 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 compare to your peers to understand whether your net worth goals and expectations are reasonable.

How does your net worth stack up?

Every three years, the Federal Reserve conducts a survey of American households, cataloging a variety of financial and demographic data. It covers everything that concerns household finances, including income, money in the bank, investment accounts, home ownership, real estate investments, cars, credit card debt, mortgages, car loans, and student loans. Almost everything that could affect net worth is cataloged in detail by the Federal Reserve.

This dataset of Americans’ wealth shows the wide range of net worth across the population. Here’s how it breaks down by percentile and age.

Note: For couples, the reference person is the man in mixed-sex couples and the older person in same-sex couples. Data source: Federal Reserve. Author’s calculations.

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

First, it’s not uncommon to have a negative net worth, especially when you’re young. About 20% of people ages 18 to 29 have a net worth of $0 or less. It’s not uncommon for young people to take out loans to pay for college or start a career and live as independent adults. Paying off these loans can take some people a long time.

Another thing is that older Americans tend to have higher net worth than younger Americans. People in their 50s and 60s may have had an easier time affording a college education or buying a home decades ago, but they also have had more time to pay down debt, invest, and grow their assets. In most cases, time is your friend when it comes to increasing your net worth.

Finally, it’s worth noting that millionaires aren’t exactly rare. More than 25% of households age 50 and older had a net worth of more than $1 million in 2022. That number is likely even higher after the strong market returns of the past two years.

Set yourself realistic goals

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

But your goals should also be realistic. You can use the table above to think about where you want to be in 10 years compared to where you are now. If you are 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 within the next decade. You can be more aggressive at the lower extremes and less aggressive at the higher extremes.

How to effectively increase your wealth

Increasing your net worth is as simple as spending less than you earn. But if you want to grow your net worth as effectively as possible, you need to invest that excess money where it will yield the greatest long-term returns. That won’t necessarily be investing in the stock market, although that often plays a key role in building a significant 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 around 30%, you’re effectively getting a 30% return on your “investment” by putting the extra money toward paying off those outstanding balances.

But you don’t necessarily want to get rid of all your debt. For example, paying off your 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 can help ease the cost of your mortgage through a tax deduction, and you may be able to refinance at a lower rate in the future.

On the other hand, investing in the financial markets is one of the best ways to grow your assets. And there are many incentives to do so. Your company may offer a 401(k) match that can match what you contribute up to a certain percentage of your salary. In effect, you’ve earned an immediate return of 50% or 100% of your investment. The government will also offer a tax deduction for the amount you contribute to traditional retirement savings accounts. This can be a great way to increase the amount of money you have in your pocket at the end of the day.

Saving, investing, and paying down debt are the foundations of building a high net worth. If you set a reasonable goal, create a plan to achieve it, and stick to it, your efforts will pay off.