Determining the net worth is like having a financial report card for one’s performance. One can get a clear view of their finances by counting their liabilities and assets up. If a person has their financial report card, they can figure out what changes do have to make and what are the things that they should stick by. People usually compare their average net worth by age, to get an idea of how they are comparing when compared to people from the same age group. The average American net worth can be determined by considering factors such as homeownership status, race, location, educational level, or age.
What Is Average Net Worth?
In America, the measuring of one’s net worth or wealth is known as average net worth. In other terms, net worth is the total net asset of a person. Net worth can be calculated by finding a difference between the total asset of a household and total debt. Home equity which is the difference between the resale value of a house and the selling and mortgage cost is included in the net asset. Net assets include reselling value of jewelry, automobile; electronics, art; cash and savings, and retirement account. Whereas a debt includes any type of outstanding amounts or loans like auto loans, mortgage loans, credit card loans, medical debts, student loans, etc.
What Is The Average American Net Worth?
According to “Federal Reserve’s 2019 Survey of Consumer Finances”, the net worth on average of an American household is USD 7,48,800. There was an increase of 2% in the average American net worth in a span of three years, i.e between 2016 to 2019. There is a lot of difference between the median and the average net worth. While the average net worth is above 7,00,000 USD, the median is USD 1,21,700. Below is the list to better understand the average American net worth by different factors including educational level, location, age, homeownership status, and race.
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Net Worth by Age
The relation of one’s net worth to age cannot be neglected. Assets cannot be build up in one day but it eventually grows. For example, it is through compound interest the money invested for retirement grows. According to data by the Federal Reserve in 2019, the Americans wealth by age is:
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Net Worth by Level of Education
With an increase in the education level per person in a household, the net worth also increases. According to past research people who graduated from college have a net worth of 4 times than someone who dropped out in between and 9 times than someone who doesn’t even have a high school diploma. There is no much difference to the above when considering the median net value.
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Net Worth by the area one is living in
The place where one is residing matters a lot. The salary, as well as the expenses of people living in rural areas and urban areas of America, are very different. People in an urban area might earn more and have higher expenses but still, the net worth is more when compared to the rural area.
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Net Worth by Race
There is a huge wealth gap when considering and comparing people from different races in America. According to data in 2019, even today, the net income of white people and black have a huge difference.
The Importance Of Networth
Average Net Worth should be calculated by people all over the world. As it tells where a person stands financially and what are the weakness and strengths that are associated with it. But, it is not always necessary that a person whose net income is high lives a luxurious life on the other hand one might have a luxurious ancestor house they are living in but still unable to make payments to the house helps. One can get motivated on seeing a higher average net income of a person, others can still be demotivated. So, depending on certain scenarios, and person to person, one can say if net worth calculation is important or not.
How Can One Increase Their Net Worth?
Many things need to be considered when one wants to increase their net worth. To make changes, the first step is to calculate the net worth and see what are the areas that need to be given a thought on. Below is a summary of what can be done to increase a net worth:
- Create a plan that lets to clear debts and get rids of liabilities with higher interest first
- Invest money where the interest rates are higher. This will enable the growth of the money that is not being put to use.
- These days, youngsters tend to get hyper and impatient if they do not have a higher net worth in the early stage of their career. It is mandatory to understand that great things take time. So, net worth cannot be increased in a day or two, it is something that needs continuous hard work and will increase eventually.
