The most recent consumer finance data from the Federal Reserve reports that the median net worth of Americans between the ages of 35 and 44 is $135,300. These figures are driven primarily by home equity and investments, while mortgages, student loans, and car payments serve as significant setbacks.
For households within this age group, approximately half have less than $135,300 in net worth after deducting debts, while half have more. This net worth figure takes into account all households, while median asset and debt totals only consider those with possessions in each segment.
Understanding your financial standing compared to others in your age group can aid in identifying financial gaps and setting meaningful goals. There are variations in net worth between individuals due to inheritances, homeownership, and income levels. Factors like inherited wealth, and to a lesser extent, choices made around money management, also contribute to these disparities.
Increasing net worth hinges on several key factors. Maximizing earning power, responsible spending, and practiced usage of debt can boost net worth. However, factors such as renting rather than owning, low or stagnant income, excessive spending, and neglect of long-term investments can impede financial growth.
Experts advise individuals to amplify income and manage spending effectively to service high-interest debts and reduce monthly outflows. Moreover, it is advisable to set aside ample funds for emergencies and insurance and invest spare money in low-cost, stock market–tracking ETFs via tax-advantaged accounts.
Authorities in financial planning, like Peter Lazaroff, also assert that the surest way to increase net worth is to contribute to employer-sponsored retirement accounts. This not only doubles your investment but also builds for the future.
The debate on homeownership versus renting continues, with some experts suggesting the former as a way to build equity and others advocating for investing potential homeownership costs into the stock market for higher returns.
Regularly reviewing your net worth can help track shifts in your financial health, simplify progress measurement, and maintain motivation over time.