Are you only a millionaire if that’s what you make? Not at all. In fact plenty of people that make that kind of money aren’t even worth a million while your neighbor could easily be a millionaire because of net worth.
What is net worth? Do only celebrities and entrepreneurial tech moguls have a net worth? No, we all have one.
Why do you want this information? It’s a good indicator of where you stand financially. It can be used as a goal setter for retirement and throughout your financial journey as achievements and milestones. Think of it as a financial GPS.
“Ok, how do I get this number”?
Your net worth is everything you own minus everything you owe.
So add up the worth of your assets like your house, your car, all your savings, retirement and investing. Then add up all your debts, credit cards, mortgage, car loan, student loans, medical bills etc. Subtract the debts from the assets. That number is your net worth.
What do you do with this information? Take note of where you are and plan. (more on planning soon).
Here is where you stand in the US:
- Under 35: Median net worth: $11,100 (average net worth: $76,200).
- 35-44: $59,800 ($288,700).
- 45-54: $124,200 ($727,500).
- 55-64: $187,300 ($1,167,400).
- 65-74: $224,100 ($1,066,000).
- 75+: $264,800 ($1,067,000).
Median is the number at which half of the population is above and below this number. (Average or mean is including billionaires like Bezos and their huge values increase the number) the median is a better idea of where you stand with your peers. Note that these numbers aren’t where you should be, just where Americans are at.
“Ok so I know where I stand against the Jones’ what now”? Really how you compare isn’t that important. I mean think about it…if everyone you know is broke and in hoc up to their eyeballs having a few bucks doesn’t mean you are set for life. It’s just a yard stick for you to measure progress. Besides you aren’t living their life, you are living yours, so it truly doesn’t matter what someone else has.
There are some generic milestones to try to hit along the way to help guide you to retirement.
- By 30 net worth of half your income
- By 40 net worth of 2x your income
- By 50 net worth of 4x your income
- By 60 net worth of 6x your income.
These are general targets but your life style and standard of living has more of an affect on what these numbers should be especially as you near retirement. For most people financial advisors recommend a million or more at retirement.
Net worth is just one of many financial key indicators of how you are progressing toward financial freedom. It is not the be all end all. Don’t get depressed or bogged down if you’re not where you want to be. Just use it to motivate yourself and have a goal in mind. Maybe even to become an everyday millionaire.
NOTICE: Mrs Locstar / Heather(“I”) provide general educational information on various topics on this website as a public service, which should not be construed as professional, financial, business, tax or legal advice. These are my personal opinions only. Please make note of our disclaimer
