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What Should Your Net Worth Be?

I recently received a voicemail question from an anonymous caller who says:

“Hi, Laura. I’ve really been enjoying the Money Girl podcast! I have a question about net worth and couples. I heard on a previous episode a guideline for comparing net worth to see how you’re doing as an individual. But how should I compare me and my husband together?”

This is a great question that I’ve never been asked. (And by the way, if you have a money question or comment, I’d love to hear from you. Just call our voicemail at (302) 364-0308 to leave your message.)

In this episode, you’ll find out what net worth is and if you’ve accumulated enough wealth as an individual or as a couple. Plus, I’ll give you a free tool that makes it easy to figure your net worth and track it over time.

What Is Net Worth?

You probably heard the term “net worth” as it relates to super-rich celebrities or famous CEOs. Like Beyonce has a net worth of $500 million or Jeff Bezos is worth $133 billion. But what you may not realize is that even for the rest of us non-famous folks, it’s important to calculate and monitor your net worth.

Here’s an excerpt from my new book and audiobook, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, that explains net worth and how to determine yours:

The first step on any journey is to assess the situation. You have to be clear about where you are right now and where you want to go. So, we’re going to really assess where your finances are right now.

Being clear about your current financial situation can be difficult and even a little scary, especially if you’re struggling with debt and don’t want to face it. However, embracing reality makes you better able to make positive changes.

The first priority in assessing your financial situation is getting organized so you understand your level of financial fitness. I’ll explain how to easily create an important tool to track the state of your finances throughout your life.

I call it your Personal Financial Statement, or PFS. It’s critical for gauging your financial health because each time you update it, you calculate your net worth. What exactly is net worth? 

The definition of net worth is summed up in a very simple formula: Net worth equals assets minus liabilities.

The definition of net worth is summed up in a very simple formula: Net worth equals assets minus liabilities.

Let me define what that means.


Your assets are things you own that have real value. Your liabilities, on the other hand, are the opposite of your assets.  Liabilities are your financial obligations to others. When you subtract your total liabilities from your total assets, you’ve figured your net worth. It’s really that simple.

Here’s an example: If you own $200,000 in assets, but have $175,000 in debts, your net worth is $25,000. If you have $200,000 in assets and $200,000 in liabilities, your net worth is zero. And if you owe more than you own, such as $200,000 in assets and $250,000 in liabilities, your net worth is negative $50,000.

Since everyone’s financial situation is unique, there’s not a magic net worth number that you should have, but obviously the higher the better.

Net worth is an important number because it reveals your bona fide financial resources at a given point in time. Tracking your net worth keeps you focused on increasing your assets and shrinking your liabilities, which is the key to building wealth. Click here for the free Personal Financial Statement. Use this workbook to keep tabs on your net worth and make better financial decisions.

I recommend updating it on a regular basis, perhaps annually or quarterly. It’s the best way to get a complete view of your current situation and should be your financial “reality check”—something like stepping on the scale if you’re watching your weight.

As you update your PFS in the future, you’ll be able to track whether your net worth is increasing, flat, or decreasing. The goal is to slowly raise your net worth by reducing and eventually eliminating your non-essential debts. When you see your net worth increase slowly over time, pat yourself on the back and know that you’re making the right financial decisions.

How Much Net Worth Should You Have?

Once you calculate your net worth, you’ll probably wonder what it should be. We typically compare wealth across age groups. Older folks generally have more economic advantages, such as more job experience, higher pay rates, or a spouse or partner who contributes to household wealth.

But the Federal Reserve regularly publishes net worth statistics by many factors including, age, education, homeownership, and race. So, you can analyze net worth through a variety of lenses.

While age can be a useful way to think about a net worth goal, don’t get upset if you’re behind the U.S. average for your age. You can’t change your past financial life. Your job is to stay focused on what you accomplish with your money going forward.

On average, a household in the U.S. has a net worth of $692,100. That’s a pretty high number because it’s skewed by the super-rich with sky-high net worth.

A better measure is the median net worth. That’s the number found in the middle, where half the households have higher net worth and half have less. The U.S. median net worth is $97,300. Let’s break it down by several age groups.

What Should Your Net Worth Be in Your 30s?

Your thirties are an important time in your financial life. You might be getting married or starting a family and seeing expenses rise. If you can rein in costs while your income goes up, you can build significant net worth. Likewise, if you go deep into debt and live beyond your means, your net worth will stay flat or go down.

According to the Federal Reserve for 2016, the average net worth for U.S. households under the age of 35 is $76,200. And the median net worth is $11,000.

For those in the age range of 35 to 44, your average net worth is $288,700 and the median is $59,800. Again, remember that the average is skewed by a small number of very wealthy households. If you’re like most, you have student loans or a home with little equity that’s dragging down your net worth.

While you may not be able to eliminate much debt in your thirties, you can make a savings goal to build wealth. A good target is to accumulate the equivalent of your annual salary by age 30 or 35.

For example, if you earn $50,000 a year, try to have at least that much in your bank savings and retirement accounts before your 30s come to an end. Make it a habit to save money on a regular basis, even if you can only save small amounts. It will really add up and lay a rewarding foundation for your future.


What Should Your Net Worth Be in Your 40s?

As your career progresses and you build experience, you typically have the opportunity to earn more in your forties. Plus, you may own real estate that you’re paying down and that also appreciates in value. That can turbocharge your wealth accumulation.

However, this is also a decade when you may launch kids out on their own or to college. Be sure that you protect your wealth and don’t overcommit to education loans and expenses. Your children have the opportunity to apply for scholarships, take student loans, and work while they’re in school.

The Federal Reserve reported that the average net worth of households between the age of 45 and 54 is $727,500 and the median is $124,200. A good savings goal during your 40s is two times your annual income.  

See also: IRA or 529 Plan–Which Is Better for College Savings?

What Should Your Net Worth Be in Your 50s?

By the time you’re in your 50s, you’ve had three decades to make contributions to your retirement accounts and savings. Starting at age 50 you qualify to make additional “catch up” contributions to most types of retirement accounts, such as a 401(k), 403(b) and IRA.

This decade is also when many people enjoy their peak earning years. You may also have mortgages and other debt finally paid off. Therefore, this is the time to really step up your savings to four times your annual income.

The Federal Reserve shows that the average net worth for households in the age range of 55 to 64 is $1,167,400 and the median is $187,300.

What Should Your Net Worth Be in Your 60s?

Most people in their 60s are seriously considering when and how to retire or semi-retire with a second career. You may not have dependents counting on you for financial support or much debt to speak of at this point.

Your 60s is a good time to downsize your lifestyle to reduce your overall cost of living as you glide into retirement. If you qualify for Social Security retirement benefits, you must decide whether to take them early at age 62 or to wait for a higher benefit at your full retirement age of 66, 67 or beyond.

The amount you can save in your 60s depends on whether you’re still working and whether you’ve accumulated a nest egg that’s large enough to last the rest of your life. A wise savings goal is to have accumulated at least 8-10 times your salary during this decade.

The Federal Reserve data shows that the average net worth for Americans between the ages of 65 and 74 is $1,066,000 and the median is $224,100. By this time, your net worth is an indicator of the type of lifestyle you can enjoy in retirement. In fact, the average and median are nearly the same for those over age 74.


How Much Do You Need to Save for Retirement?

Now that you understand what net worth is and how it relates to your financial future, let’s get back to the anonymous caller’s question. She wants to know a good way to measure her net worth and her husband’s together.

The Federal Reserve statistics that I’ve reviewed are by household. Couples who plan to share their financial lives and eventually retire together should plan together. Start by completing the Personal Financial Statement for everything you both own and owe and compare your combined net worth to the median data for your age.

It’s no surprise that wealth is correlated with family structure, such as being married, single, or having children. Having more earners or lower living expenses allows a household to attain higher levels of net worth.

If you and your spouse or partner have a household income of $150,000, you might aim for a combined nest egg of $1.5 million.

Most couples need to accumulate about 10 times their household income to generate enough retirement income. So, if you’re married and have one breadwinner who earns $100,000, having $1 million is a wise goal to maintain your lifestyle in retirement. If you and your spouse or partner have a household income of $150,000, you might aim for a combined nest egg of $1.5 million.

However, if you plan to significantly increase your spending in retirement by traveling or owning a second home, you may need more. Likewise, if your dream is to simplify your life and downsize your lifestyle, you may need a smaller nest egg to be comfortable.

It’s reasonable to assume that you could get a 5% return on your wealth in retirement. That comes to investment earnings of $50,000 a year from $1 million or $75,000 from $1.5 million.

Remember that once you or your spouse collect Social Security benefits, you’ll have that additional income to count on. But the longer you delay taking it, the bigger your monthly retirement check from the government will be.

There are many unknowns in retirement planning but using these savings goals and basic income calculations give you a target to shoot for. You can also use a good retirement calculator to figure out if you and your spouse or partner are saving enough each month to hit your savings goal.

You’ll find a link to my favorite online retirement planning calculator in the free Personal Financial Statement. If you’re not on pace to have what you’ll need, you may need to delay your retirement age, radically decrease your cost of living, or step up your savings rate.

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