Knowing how your finances match up with those around you can help determine whether you are staying on track. Net worth is important, but it may cause you to be more comfortable than you should be.
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George Kamel, personal finance expert and co-host of “The Ramsey Show,” had a few things to say about net worth. In a recent video on his YouTube channel, Kamel broke down the typical American’s net worth by age. He also explained one thing that’s more important than net worth.
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What Is Net Worth?
Your net worth is the total of everything you have. To determine your net worth, you’ll first need to figure out the value of all your assets, including savings accounts, investments and housing. Then, you must calculate how much you owe, such as outstanding student loans, credit card debt and mortgages. When you have these two numbers, you can subtract your debts from your assets to calculate your net worth.
Knowing your net worth can be useful because it indicates where you are financially. It’ll show you how close you are to achieving your financial goals, and provide insights into what adjustments you need to make.
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Net Worth and Age
In general, your net worth will grow as you age. Age brings more work experience, income opportunities and time for gains to compound on your investments. However, Kamel pointed out that significant life milestones — like purchasing a house or having children — can momentarily lower your net worth, as well.
While there isn’t a correct amount of money to have at any given point in your life, it can be helpful to know what others have. Kamel prefers to look at the median instead of the average regarding net worth, because he believes the largest and smallest numbers in the average skew the data. On the other hand, the median considers the middle of the data, which can more accurately reflect the real number.
According to Federal Reserve data, the median net worth for each age group was as follows in 2022:
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Under 35: $39,000
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35 to 44: $136,000
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45 to 54: $247,000
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55 to 64: $365,000
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65 to 74: $410,000
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Over 75: $336,000
What’s More Important Than Your Net Worth?
Kamel said you shouldn’t obsess over whether you’re above or below the median net worth for your age bracket. Instead of worrying about hitting a certain number, it’s better to stick to a financial plan and work on growing your net worth over time.