Broker Check

Net Worth: How does yours stack up?

December 03, 2019

What is the one of the best benchmarks for one's overall financial health? For me, its Net Worth. 

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NET WORTH   =   ALL OF YOUR CASH AND ASSETS  -  YOUR DEBT 

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I'm going to break down where your Net Worth should be at various ages and what you can do to help yours grow, but before we begin, I would like mention one thing. Do not worry about keeping up with your friends here. There are many variables that come into play for each individual's situation. Instead, know the targets you'd like to hit and make a plan to get there. 

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Now we may proceed.

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        Age of Householder                                             Average Net Worth

          Under 35 years old:                                                     $76,200

          35 to 44 years old:                                                      $288,700

          45 to 54 years old:                                                      $727,500

          55 to 64 years old:                                                      $1,167,400

          65 to 74 years old:                                                      $1,066,000

          75 or more years old:                                                  $1,067,000

Source: Federal Reserve

                                                                                                                                                  

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Net Worth In Your 30's

The financial decisions you make in your 30's will influence your family's financial picture for the rest of your lives. It is imperative to create a rough budget and stick to it in order to lay a proper foundation. The average net worth of an individual at age 30 is $76,200, but with the majority of individuals in this age bracket having student loan debt either now or at some point, don't get discouraged if you aren't there yet. 

Now is the time to prioritize saving and paying down debt. Make sure you are funding your 401k at work and taking advantage of any employer match that might be available.

The goal at age 30 is to have approximately half of your salary saved. For example, if you make $100,000 you should aim to have $50,000 saved.

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Net Worth In Your 40's

We're getting closer to prime earning years in this age group with the average net worth of a 40 year old creeping up to $288,700. You may have equity from your primary home included here, and ideally you've built a foundation you deem adequate for your family. If you have any debt outside of your primary mortgage, let's pick up the pace with paying that off. These are prime accumulation years, which should not be held down by excess debt payments.

The goal at age 40 is to have approximately two times your salary saved. 

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Net Worth In Your 50's

The average net worth of someone at age 50 is $727,500, which should be bolstered by equity in your home, as well as retirement and non-retirement accounts. At this age, we are making sure to do a personal financial checkup once a year as retirement comes into sight. Does your retirement savings need a boost? Do you need to change up your asset allocation? Does a refinance make sense? Make sure all of the rooms in your financial house are in order.

The goal at age 50 is to have approximately four times your salary saved. 

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Ways To Increase Your Net Worth

Increase Income. Earning more each year should not be taken for granted as most pay raises are quite modest. If you don't believe you are being adequately compensated for the work you are doing then it's time to have a conversation with either yourself or your superior. If you don't ask, you most likely will not receive.

Decrease Expenses. Having additional income leftover each month should be saved, not spent. A proper budget will assist here so you have an idea where your money is going each month. Use the 50/30/20 rule. 50% of your income should go towards rent and utilities, 20% should go towards food and entertainment, 30% should go towards savings and paying down debt.

Invest, Invest, Invest. Compound interest is your friend. The earlier you start the faster it will grow. Don't make it complicated, and if you don't know where to start ask someone to help!

Set goals. I have a 31 year old couple who told me at our last review meeting that they want to have $250,000 saved for a home by June 2021. Guess what we did? We put a plan in place to make sure they accomplish that. You need to set realistic goals and plan for how much you'll need to save to accomplish them.

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Fun Fact: NYC's nickname "The Big Apple" came from a local newspaper's horse racing column in the 1920's. It described a big money prize won at important horse races held around the city.