Net worth is one of those terms that gets thrown around a lot, but few people actually know what it means. Simply put, your net worth is the value of your assets minus your liabilities. In other words, it’s what you own minus what you owe.
Calculating your net worth is a good way to get a snapshot of your financial health. It can also help you set goals and track your progress over time. If you’re not sure how to calculate your net worth, don’t worry – this blog post will show you everything you need to know.
Table of Contents
What Is Net Worth?
Net worth is the value of all assets minus all liabilities. It is an important metric to track because it provides a snapshot of an individual’s or company’s financial health. A high net worth indicates that an individual or company has a lot of assets and few liabilities, which can lead to financial stability and success. A low net worth, on the other hand, may indicate that an individual or company is in a precarious financial position and may be at risk of defaulting on their obligations.
It is important to calculate your net worth because it provides a snapshot of your financial health. This number can be used to set financial goals and track your progress over time. Additionally, knowing your net worth can help you make informed decisions about your finances, such as whether to invest in certain assets or pay down debt. Ultimately, calculating your net worth is a valuable exercise that can help you better understand and manage your finances and keep yourself on track with your financial goals.
The 4 words that delay your success
How To Calculate Your Net Worth
If you want to know how to calculate your net worth, you will need to list all of your assets and liabilities and then subtract your liabilities from your assets. This will give you your net worth.
Your assets include everything that you own and that has monetary value. This includes your checking account balance, your savings and investment accounts, your home equity, and your personal possessions. You will need to calculate the value of each of these items and then add them together to get your total assets.
Your liabilities include everything that you owe. This includes your mortgage, your credit card debt, your student loans, and any other money that you owe. You will need to calculate the value of each of these items and then add them together to get your total liabilities.
Once you have your total assets and your total liabilities, you can subtract your liabilities from your assets to get your net worth. Or you may find it easier to enter this information into our net worth calculator below.
It can be difficult to get all of this information together. One of the easiest ways to get a snapshot of your financial health is to use personal finance software such as Quicken.
Net Worth Calculator
Simply enter the details of all of your assets and liabilities into the net worth calculator below to find your own net worth. You can find average net worth for your age group at the Federal Reserve survey of consumer finances.
Net Worth Calculator
The median number in a range of data can be a closer representation when comparing net worth of individuals compared to using the average. The median number may be better when comparing net worth figures because it is not as influenced by outliers as the average is.
For example, if we have a group of 10 people and their net worths are:
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000,000
The average value would be $100,900, while the median value would be $1,000. In this case, the median is a better representation of the net worth of the group because it is not skewed by the one person with much more assets. The median is the number in the middle of the range.
Average Net Worth Age Under 35
As we can see from the data from Federal Reserve survey of consumer finances, those under 35 have on average the lowest net worth of all the age groups at $76,340. There are several reasons why individuals in the age bracket of below 35 years old are likely to have a lower net worth than all other age groups.
One reason is that they are less likely to have accumulated assets such as property or stocks and shares. They are also more likely to have student debts which can reduce their net worth. Another reason is that they are less likely to be in well-paid jobs and may not have had the opportunity to save as much money as older age groups.
Average Net Worth Age 35-44
This age bracket starts to see a significant increase in net worth but is still much lower than all older age groups. There are a few life events and lifestyle factors that will have the biggest affect on net worth for the age bracket of 35-44 years old.
The first is whether or not they own their own home. Home-ownership is a great way to build equity and wealth, and it’s something that should be encouraged. However, it’s not always possible for everyone to own their own home, and there are other ways to build wealth as well.
Another factor that will have a big impact on net worth is whether or not the individual has a retirement plan. Retirement planning is important for everyone, but it’s especially important for those in their peak earning years. It’s also important to make sure that the retirement plan is on track and funded adequately.
Another factor that can impact net worth is whether or not the individual has children. Having children can be a great joy, but it also comes with a lot of financial responsibility. Children can be expensive, and they can also require a lot of time and energy.
Finally, another factor that can impact net worth is lifestyle. Those who live a lavish lifestyle or who have a lot of expensive hobbies may find that their net worth is lower than those who live a more modest lifestyle. Learn how to avoid lifestyle inflation.
Average Net Worth Age 45-54
There are a few reasons for why those in the age bracket of 45-54 start to see a significant increase in net worth. The first reason is that this age group is typically in the middle of their career. They have usually been working for a few years and have started to climb the corporate ladder. This means that they are making more money than they were in their 20s and 30s. Additionally, this age group is usually more stable in their careers and have fewer job changes. This stability leads to increased earnings and savings.
Another reason for the increased net worth in this age group is that they have likely paid off any debt from their 20s and 30s. This includes student loans, credit card debt, and any other loans. This frees up more money to save and invest. Additionally, this age group is typically starting to think about retirement. This means that they are saving more money in order to have a comfortable retirement.
Overall, the increased net worth in the 45-54 age bracket is due to a combination of increased earnings, stability, and savings.
Average Net Worth Age 55-64
The average net worth for individuals in the age bracket of 55-64 is $1,176,520. There are a few reasons for this. Firstly, this age group is likely to have been in the workforce for longer and to have had higher incomes than younger age groups. They are also more likely to own their own homes, and to have paid off more of their mortgages. Finally, they are likely to have built up more retirement savings than younger age groups.
Average Net Worth Age 65-74
Individuals in the 65-74 age bracket tend to have the highest net worth of any age group. There are a few reasons for this. Firstly, people in this age bracket are likely to have been in the workforce for longer than those in younger age brackets, meaning they have had more time to save up. Secondly, they are likely to be closer to retirement or already retired, meaning they are less likely to have large amounts of debt. Finally, they are likely to have benefited from years of compound interest on their savings and investments.
Average Net Worth Age 75+
Whilst still among the highest net worth of any age group, those over the age of 75 do start to see a drop in their worth compared to the previous age bracket. There are a few reasons for this.
First, those in the 75 and older age bracket are more likely to be retired, and thus have more disposable income. Second, they are also more likely to have paid off their mortgages and other debts, freeing up more cash flow. Finally, they are likely to have been investing for longer, and thus have had more time to compound their returns.
However, it is important to note that while the 75 and older age bracket typically has a higher net worth, it is still lower than the 65-74 age group on average. This is likely due to the fact that the 65-74 age group is still working and thus has a higher income.
Can You Have Negative Net Worth?
Yes, you can have negative net worth. This means that your liabilities exceed your assets. A negative net worth can occur when you have a lot of debt or if your expenses are greater than your income. If you have a negative net worth, it is important to take steps to improve your financial situation.
One point to note on the flip side to this is that having a high net worth doesn’t always mean the individual has a high income or lots of cash as people can be asset rich and cash poor. People with a high net worth may not have a high income or lots of cash, but they may have a lot of assets. This means they have a lot of valuable things, like property, stocks, and bonds. They may not have a lot of money in the bank, but their assets are worth a lot of money.
How Can You Increase Net Worth?
Increasing your net worth is simply a matter of increasing your assets and decreasing your liabilities. Fortunately there are several steps you can take to help with this including; reducing debts, cutting spending and saving money, maximizing retirement contributions, finding ways to increase your income, and investing.
Reducing Debts
The first step to increasing your net worth is to reduce your debts. This can be done by paying off your debts, consolidating your debts, or renegotiating your debts.
Paying off your debts: When you pay off your debts, you are reducing your liabilities and increasing your assets. This can be done by making extra payments on your debts or by paying off your debts in full.
Consolidating your debts: When you consolidate your debts, you are combining your debts into one loan. This can be done by taking out a consolidation loan or by transferring your debts to a balance transfer credit card.
Renegotiating your debts: When you renegotiate your debts, you are negotiating with your creditors to lower your interest rates or to lower your monthly payments. This can be done by calling your creditors and asking for a lower interest rate or by asking for a lower monthly payment.
Cutting Spending and Saving Money
The second step to increasing your net worth is to cut your spending and save money. This can be done by creating a budget, tracking your spending, and finding ways to save money.
Creating a budget: When you create a budget, you are creating a plan for your spending. This can be done by using a budgeting tool, or by creating your own budget.
Tracking your spending: When you track your spending, you are tracking where your money is going. This can be done by using a spending tracker, or by tracking your spending manually.
Finding ways to save money: When you find ways to save money, you are finding ways to reduce your spending. This can be done by looking for discounts, coupons, cashback and sales, or by negotiating your bills. You could also open a savings account such as a certificate of deposit.
Maximizing Retirement Contributions
The third step to increasing your net worth is to maximize your retirement contributions. This can be done by contributing to a 401(k) or IRA, by investing in a Roth IRA, or by investing in a taxable account.
Contributing to a 401(k) or IRA: When you contribute to a 401(k) or IRA, you are investing in a retirement account. This can be done by contributing to your employer’s 401(k) plan or by opening an IRA.
Investing in a Roth IRA: When you invest in a Roth IRA, you are investing in a retirement account that is not subject to taxes. This can be done by contributing to a Roth IRA or by investing in a Roth 401(k).
Investing in a taxable account: When you invest in a taxable account, you are investing in an account that is subject to taxes. This can be done by investing in a mutual fund, a stock, or a bond.
For those that want full control over their retirement accounts and wish to invest in alternative assets, you could consider using a self directed IRA.
Get wills and estate planning from just $39.95!
Increasing Your Income
There are a few key things you can do to increase your income and thus your net worth. One is to get a higher paying job. Another is to start your own business. And finally, you can invest your money in assets that will generate income for you, such as rental properties or stocks.
Higher Salary: If you want to get a higher paying job, you can start by looking for openings in your field that offer higher salaries. You can also look for promotions or ask for a raise at your current job.
Business & Side Hustles: You can start your own business or side hustle. This can be something as simple as starting a blog or an online store. And, if you’re successful, you can make a lot more money than you would working for someone else.
Investment Income: If you want to invest your money, you can start by opening a brokerage account and buying stocks or mutual funds. Or, you can buy real estate, such as rental properties. These investments can generate income for you, which will help increase your net worth.
Investment Growth
Investing for long term growth has the potential to significantly increase your net worth for a number of reasons. Firstly, it allows you to take advantage of compounding returns – whereby the returns you earn on your investment are reinvested and generate additional returns over time. This can help you to grow your wealth much faster than if you simply saved your money into a bank account, for example.
Secondly, it enables you to benefit from market growth – over the long term, most asset classes tend to increase in value, so by investing you can participate in this growth. For example, shares have outperformed cash and inflation over the long term.
Finally, it gives you the opportunity to take more risk and potentially earn higher returns than if you were investing for the short term.
There are a number of different investment assets that are suitable for long term investors. These include shares, property, bonds and other fixed interest investments. For investment ideas, check out this list of 21 types of investment assets to grow wealth.
Conclusion
Now that we know what net worth is and how to calculate it, we can start working on increasing our own and improving our family finances.
If you’re not sure where to start, sign up to our newsletter and get more help with your personal finances on our blog.
More essential reading:
- Should i save or invest?
- Protecting yourself from financial scams
Thanks for reading!
