How your net worth compares – and what matters most

Home value, job title, car model, savings account balance. These things only indicate how rich you or your neighbors are. The bare financial truth comes down to one number: net worth.

Net worth is the total of what you clean less what you duty. It’s a mathematical calculation of accumulated assets (including cars, homes, Roth IRAs, and that dish of small change on the dresser) and accumulated debt (such as mortgages, car loans, student loans, and debts. credit card IOUs).

And the average net worth is …

A household in the United States has an average net worth of $ 692,100, according to the most recent data from the Federal Reserve’s Survey of Consumer Finances.

Shocked by this figure? This is because the average (aka the “average”) is skewed by the super rich in the nation. The median net worth of the average American household is $ 97,300. The median is the midpoint where half of households have more and half have less.

This means that the median number can be a better indicator of where you stand in relation to your friends and neighbors. But the overall numbers are only an indicator. There are many other ways to slice the net worth numbers released in the 2016 survey. Let’s start with age:

Median and mean net worth by age

  • 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).

The Fed conducts the survey every three years. Looking at how families fared from early 2013 to early 2016 based on the education level of the head of household, Americans without a college degree experienced the largest gains in median net worth (by 24% at 29%). Over the same period, the median net worth of families headed by someone with a college degree rose only 2%.

Median and average net worth by level of education

  • No high school diploma: Median net worth: $ 22,800 (average net worth: $ 157,200).

  • Baccalaureate: $ 67,100 ($ 249,600).

  • Some colleges: $ 66,100 ($ 340,600).

  • University diploma: $ 292,100 ($ 1,511,100).

Other notable changes in net worth from 2013 to 2016:

  • Median homeowners’ net worth ($ 231,400) increased 15%.

  • Renters and other non-owners saw their median net worth drop 5% to $ 5,200.

  • The net worth of non-urban households increased to a median of $ 87,900 from $ 70,100 in 2013, while city dwellers increased their median net worth by 13% (up from about $ 12,000 to 99,000 $).

It was a fun exercise, right? But …

Does Net Worth Really Matter?

Yes, but only as an overview of your overall financial situation.

A bunch of other data points, some of which determine your net worth, give you more revealing and actionable information. Here are some key figures to know:

Your credit rating tells lenders (and others, like homeowners and insurers) how well you are managing borrowed money. It changes depending on whether you make payments on time and stay within your credit limits, in addition to several other factors. (One way to check your credit score is with the free NerdWallet tool.)

Your debt-to-income ratio (DTI) indicates how financially strained you are. This is a measure of how much of your monthly income goes to cover debt and other outstanding expenses, such as your rent or mortgage, credit card, student loan, child support, and more. payment obligations. Divide the total of these by your gross monthly income (or use this debt ratio calculator).

This number is important when applying for a loan. Most lenders set their own debt to income ratio requirement. In general, a DTI of 20% or less is considered low. Mortgage lenders like the number to be less than 36%, but can go higher in some cases, depending on other factors, such as your credit score. A DTI of 50% or more indicates financial stress.

Your retirement savings score reveals the lifestyle you can live in the future based on your current age, salary, and retirement savings (how much money you have in your work plan and in all individual retirement accounts, or IRA).

Get a snapshot of your location with this retirement savings calculator, which shows you how close you are, as a percentage, to a savings goal that will get you the retirement you want. You can play with the numbers – saving a few hundred dollars more per month; take early retirement; work part-time – to see how different factors affect how much money you will need to spend each month.

While it’s great to calculate your net worth, mastering these other financial metrics is what really matters when making day-to-day, important decisions.

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About Douglas Mackenzie

Douglas Mackenzie

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