If you want to know how you’re doing financially and whether you’re wealthy (or on the path to wealth), tracking your net worth is the best way to do it.
Your net worth is determined by adding up the value of all of your assets, like your home and investments, then subtracting all your liabilities or debts like your mortgage or credit cards. It gives you an accurate picture of your finances because it shows you how much wealth actually belongs to you.
When you know your net worth, though, it can be hard to determine exactly what that number means. A higher net worth is better than a lower one. However, most people’s net worth changes over time, and it’s normal to have less wealth at some points in your life — it doesn’t mean you’re doing badly.
To get an idea of what’s a good net worth, it’s helpful to compare your own wealth to that of your peers. If you have far less than other people in a similar life stage, it could be a sign of a problem. If you have far more, it could be a sign you’re on track for a secure future.
How to determine if your net worth is good for your age
To get an idea of whether your net worth is good for your age or not, take a look at the mean and median net worth of people in different age groups.
| Age | Median Net Worth | Mean Net Worth |
|---|---|---|
| Under 35 | $39,000 | $183,500 |
| 35 to 44 | $135,600 | $549,600 |
| 45 to 54 | $247,200 | $975,800 |
| 55 to 64 | $364,500 | $1,566,900 |
| 65 to 74 | $409,900 | $1,794,600 |
| 75 or older | $335,600 | $1,624,100 |
Data source: Federal Reserve Board, table by author.
It’s most helpful to look at the median, as the mean is elevated by very-high-net-worth individuals skewing the results.
If your net worth is below other people your age, you may have to work harder to catch up financially. If it’s equal to those in your peer group, then you’re likely on track to be at least as financially stable as the typical American. And if your net worth is higher than average, it’s a good net worth for someone your age and you’re probably on the path to financial success if you stay the course.
How to improve your net worth
No matter where you stand, it’s a good idea to try to increase your net worth. The more assets you have, and the fewer liabilities, the closer you are to financial freedom. Ideally, the eventual goal should be to have enough assets to support yourself without an income in retirement.
You can improve your net worth in a few different ways:
- Increase your income: The more money you make, the more money you have to devote toward buying assets that grow your wealth.
- Invest in assets that provide a good return: If you spend your money on things that go down in value, you won’t grow your net worth. Instead, use a brokerage firm to invest in stocks that have the potential to see their value increase.
- Pay down debt: Reduce the liabilities you have by making extra payments on credit cards and avoiding any debt not used to increase your overall wealth.
It can take time to grow your net worth. Don’t be discouraged if yours isn’t high yet — even relative to people in your age group. They may have had advantages you didn’t. The key is to start from where you are and begin working today on growing your wealth, so in the future, you can have the high net worth you need for a secure future.