22% Of People Think 'Net Worth' Only Applies To The Rich – Here's The Average Net Worth And How To Calculate Yours

It's easy to hear "net worth" and picture yachts, private jets and the Forbes list of billionaires. According to a Tearsheet report, 22% of Americans think net worth only applies to the rich. That's a big misconception. The truth is, net worth applies to everyone. It's not about how much money you flaunt; it's about knowing where you stand financially.

And here's another surprising stat: Credit Karma reports that 51% of Americans don't know how to calculate their net worth. That number jumps to 61% for women compared to 41% for men. Financial literacy gaps like this can make it harder to plan for the future, but don't worry – it's easier to understand than it sounds.

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So, what exactly is net worth? And how do you figure it out? Let's break it down, look at the numbers and clear up some common myths about what "average" really means.

How to Calculate Your Net Worth

Your net worth is simply the difference between what you own (assets) and what you owe (liabilities).

Here's a quick example:

• Assets: This includes everything from your house, car and retirement accounts to smaller items like savings or investments. Let's say you have $800,000 in total assets.
• Liabilities: These are your debts – things like student loans, mortgages, credit card balances or car loans. If your debts total $200,000, you'd subtract that from your assets.

Net worth = $800,000 (assets) – $200,000 (liabilities) = $600,000

That's it. No need for fancy math or high-end accounting software. A simple calculator will do.

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The Difference Between Average and Median Net Worth

Now, when it comes to financial stats, there's always confusion between "average" and "median." They sound similar but paint very different pictures:

Average Net Worth: This is the total net worth of a group divided by the number of people in that group. It tends to be skewed by a handful of ultra-wealthy individuals.

Median Net Worth: This represents the middle point – half of people have more and half have less. It's often a more realistic snapshot of how most people are doing.

Here's why it matters: The average net worth of U.S. households in 2022 was $1,059,470, but the median was just $192,700. That's a huge gap, highlighting how a few ultrarich people pull the average way up while most people sit closer to the median.

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Average Net Worth by Age

If you're wondering how your net worth stacks up, it helps to look at the averages and medians by age group. Here's what the Federal Reserve found in its latest Survey of Consumer Finances:

In Your 20s:

• Average Net Worth: $120,896
• Median Net Worth: $10,800

In Your 30s:

• Average Net Worth: $379,681
• Median Net Worth: $115,500

In Your 40s:

• Average Net Worth: $686,320
• Median Net Worth: $173,650

In Your 50s:

• Average Net Worth: $1,287,303
• Median Net Worth: $296,750

In Your 60s and Beyond:

• Average Net Worth: $1,714,085
• Median Net Worth: $394,300

Notice the jump in net worth as people get older? That's mostly due to years of saving and paying off debt. It's also a reminder that comparing your net worth to someone decades older can be unfair.

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How Do You Measure Up? And Why Percentiles Matter

If you want an even clearer picture of where you stand, it helps to look at net worth percentiles. These show how your net worth compares to others in the same age group.

For example, if your net worth is in the 75th percentile, you're wealthier than 75% of people in your age group. Here's a breakdown of the 75th percentile by age:

• Under 35: $153,000

• 35-44: $415,000

• 45-54: $800,000

• 55-64: $1.122 million

• 65-74: $1.176 million

• 75 and up: $975,000

And for those overachievers aiming for the top 10%, here's what it takes to hit the 90th percentile:

• Under 35: $350,000

• 35-44: $850,000

• 45-54: $1.6 million

• 55-64: $2.5 million

• 65-74: $2.8 million

• 75 and up: $2 million

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Why Knowing Your Net Worth Matters

Tracking your net worth isn't just for bragging rights – it's a practical tool for managing your finances. It helps you:

1. Set realistic financial goals, like saving for retirement or paying off debt.
2. Spot trends over time to see if you are building wealth or losing it?
3. Make smarter decisions about spending, saving and investing.

And no, you don't need to be rich to do this. In fact, the earlier you start tracking, the better equipped you'll be to grow your wealth over time.

The Takeaway

Net worth isn't just a number – it's a snapshot of your financial health. And while the stats on averages, medians and percentiles might seem intimidating, they're tools to help you measure progress.

So, forget the myth that net worth is only for the ultrarich. It's for anyone who wants to take control of their financial future. Start with what you own, subtract what you owe and go from there. You might be surprised by what you discover.

If you're serious about staying on track to meet your financial goals, consulting a financial advisor could be one of the smartest moves you make. A good advisor can help you examine your net worth, identify growth opportunities and create a personalized plan to reach your short- and long-term goals.

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