What Is the Average American Net Worth by Age?

Knowing how much money is at your disposal in your checking and savings accounts is important for day-to-day budgeting and expenses. But those figures don’t account for other crucial aspects that contribute to your overall financial situation, including both liquidatable assets and liabilities, such as unpaid debts. That’s why knowing your net worth — and how it compares to others in the U.S. who are roughly your age — can be helpful.

What Is Net Worth?

Your net worth is the total value of all of your assets after subtracting your liabilities. Assets might include cash, properties, vehicles, antiques, fine jewelry, insurance policies, investments or anything else that could be liquidated for profit. Liabilities could include unpaid student loans, credit card bills, mortgage balances or any other payments that you owe to someone else, whether a person or a business.

Salaried income is not usually considered an asset, even though it is money coming into your pocket. That’s because you can have a high income but spend all that money on liabilities; conversely, you can have a relatively moderate take-home pay but a significant amount of your income may go directly into retirement accounts. So the more important number is what’s regularly in your various savings, retirement and checking accounts.

[READ: Are You Rich? How the Wealthy Are Defined.]

Your net worth can be positive or negative, depending on whether the present value of your assets outweighs that of your liabilities, but you always want to aim for a positive net worth. Combining the total value of both your assets and liabilities reveals whether you’re financially heading in the right direction.

For example, if you owe $99,000 on your student loans and have $1,000 in unpaid credit bills, your total liabilities would equal $100,000. But if you also have $30,000 in cash, then your net worth would be negative $70,000.

On the other hand, if you had $100,000 in property, $51,000 in cash and $1,000 in unpaid credit card bills, your net worth would be $150,000.

Why Is Knowing Your Net Worth Useful?

Your net worth isn’t the end-all, be-all of your financial picture. Theoretically, you could have a high net worth but a low credit score, which would potentially make it harder for you to take on loans to acquire more assets. Or you might have a low net worth but a high credit score and manageable debt load.

Additionally, there are times when your net worth may steadily decrease but wouldn’t necessarily be considered a red flag, like if you liquidate assets and spend the resulting cash during retirement. And a negative net worth when you’re young and just starting your career after going to college and accumulating some student loan debt might also not be a warning sign, considering the number of working decades you’ll have to pay off that liability and accumulate assets.

Nonetheless, if you know your net worth and what factors are driving that number up or down, you can evaluate how best to increase your appreciating or stable assets or otherwise eliminate depreciating assets or accumulating liabilities.

Average Net Worth of an American Family

Both median and average family net worth increased between 2016 and 2019, according to the U.S. Federal Reserve. Average net worth increased by 2% to $748,800 between 2016 and 2019, the bank reported in September 2020, the most recent year it publicized such data. Median net worth, however, rose 18% over that same time period to $121,700.

You might wonder why the average and median net worth figures are so different. That’s because when you take the average of something, you add together every value in a data set and then divide that figure by the number of individual values. When calculating a median, you simply look at the middle figure within a data set. That said, an average figure can be significantly higher or lower than a median figure if there are extreme outliers — meaning a group of people with significantly more net worth than the rest of the group can bring the average higher.

[Read: Where Do I Fall in the American Economic Class System?]

Average Net Worth by Age

The average net worth of someone younger than 35 years old is $76,300, as of 2019. From there, average net worth steadily rises within each age bracket. Between 35 to 44, the average net worth is $436,200, while between 45 to 54 that number increases to $833,200. Average net worth cracks the $1 million mark between 55 to 64, reaching $1,175,900.

Average net worth again rises for those ages 65 to 74, to $1,217,700, before falling to $977,600 for someone over age 75.

However, the median net worth within every single age bracket is lower than the average net worth.

Ways to Grow Your Net Worth

Regardless of what the average net worth is, your net worth goal should be based on your financial, personal and professional goals. If you want to retire early and lounge on a beach for your remaining decades, you’ll want to increase your net worth fast. But if you have few goals that require substantial assets to achieve, then a financial advisor may suggest aiming for a relatively lower net worth.

The question of how much your net worth should be “really points to evaluating your goals and your values,” says Martha Sullivan, president of Provenance Hill Consulting LLC. “Because the default answer is, ‘as much as possible.’ But if you think about that, (that number is) not really as much as possible.”

[READ: How to Save for Retirement.]

“Would I be happier with a net worth twice what I have? I don’t know the answer to that question,” she says. “You have to think about, ‘What do I have to do to achieve that?'”

Regardless of the number you and your advisors decide to target for your net worth goal, here some tips for increasing your net worth:

1. Eliminate your debt load, tackling high-interest debt as soon as possible. In terms of building up your net worth, high-interest debt is like an unplugged sink that washes away funds you could otherwise use to accomplish your goals. Knock such debts out as soon as possible.

2. Cut back on frivolous or luxury spending, sticking as close as you can to a set budget. Get back to basics. While you shouldn’t give up everything that makes your life interesting or enjoyable, try to find alternatives that allow you to still have fun without dropping a lot of money at once.

3. Put savings and emergency funds into liquid growth accounts, like high-interest savings accounts. Although high-interest savings accounts aren’t the fastest way to grow your money, your savings will grow at least somewhat more than if they just sat in a lower-interest account. But make sure that whatever higher-interest account you choose to deposit your emergency funds and savings, you’re able to quickly access the money.

4. Think about increasing your retirement contributions to the maximum amount, taking advantage of employer matches and tax deferment. Once you’ve nailed your near-term financial goals, think about whether maximizing your retirement contributions could help you. But even if you only divert some income to your retirement accounts, you’re still helping “future you” better afford your golden years.

5. Consider riskier investments if you’re younger and have time to make up any losses. “I believe if you’re still building your financial wealth, you could be taking more risks,” says Ba Minuzzi, the founder of a San Francisco-based financial advisory firm that focuses on high-net-worth individuals, pointing out the abundance of technologies and resources to help you make educated decisions on newer types of investments like cryptocurrencies. “You will not build financial wealth by sitting on what you have and not taking a little risk.”

6. Don’t put all your eggs in one basket: Diversify your investments and assets in case one falters. If you put all your money in one company’s stock, for example, your investment portfolio essentially becomes reliant on the performance of just that one business. Find ways to diversify your investments to protect yourself if one investment stops performing to your expectations.

7. Consider starting or acquiring a business. “I don’t believe that business ownership is for everyone, because it’s not,” says Sullivan. “But if you’re going to be a business owner, you’re investing in an asset and you deserve to have a return on investment in that asset as you would any other asset,” both while you own the company and when you exit it. A business geared toward net-worth building shouldn’t be dependent on the owner’s involvement, she notes, since that drastically alters an owner’s ability to later sell the business.

More from U.S. News

Can You Retire on $1 Million? Here’s How Far It Will Go

10 Strategies to Maximize Your 401(k) Balance

15 Steps to Achieve Financial Freedom

What Is the Average American Net Worth by Age? originally appeared on usnews.com

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