When you hear someone say, “what’s your net worth”? Do you know what the definition of that question really is? AS to not assume, let us break it down to some basics… To calculate your net worth, add up all your “assets” first… If you own a house, what is the estimated current value, how much do you have in savings, as well as in retirement accounts, the value of your car… Let’s stick with the big-ticket items vs things like a diamond ring… Again, we are keeping it simple. The total dollar amount you get is what we call our “assets” for this conversation.
Now the fun part… You need to add up all your debts and subtract that from the asset total dollar amount you got.
If you own a home and it’s valued at $500,000 BUT you still owe $200,000 on the mortgage… in the asset column under your home, the asset is valued at $300,000, because the bank “owns” $200,000 worth of that home.
If you have student loans, subtract that total amount, same with credit cards and any other debt/loans. If you paid $20,000 for your car and you still owe $10,00 just use the $10,000 vs the blue book value of the car, remember simple. Once you take your total assets subtract your total debt amount and this equals your “net worth.” Sometimes this number is a negative number… Don’t be scared… Its fixable.
This article from Motley Fools gives a nice snapshot of the “average” Net Worth in the US by age, so you can see where you stand compared to others. Check out the whole article, it’s a good read!
Here’s the Average American’s Net Worth by Age in 2024 | The Motley Fool
For most things in life, average is OK, right? But there are some things in life where “average” is just that “average”. That does not mean it’s a good thing. Unfortunately, Americans do not seem to be good at saving, sad but true, just look at the numbers above. I would bet we used to be! Maybe we were not good at investing/saving because most people worked for companies with a pension.
Pensions are still out there, but they are always moving the needle. I know, because two family members have pensions. Still a great deal! But not like the old days… Maybe those number above scare me because I live in the northeast and its very pricey to live here. How do we encourage the younger generation that just saving a little extra in their retirement accounts in their 20’s makes a HUGE difference 30 years down the road, vs waiting till they are well into their 30’s. if you start in your 20’s the amount each month can be much lower than if you wait ten years.
They say the average car payment these days is over $700 per month for a new car and over $500 for a used car. The average credit card debt in the US is over $6500. Most people want a NEW house, or at least one that looks like the ones on HG TV! I do! Which is why I do not watch those shows… to depressing… ☹ We as Americans want instant gratification and want everyone to see how “successful” we are. Based on the numbers above I think it’s all a smoke and mirror show.
We all need to just squeeze a little more into the long-term investments so that we can take care of ourselves later in life. I am not saying we can’t have nice things but paying ourselves first with money into long term retirement accounts, and not OVER buying on the house and car will go a long way. Unless you plan on living in that nice new car in your older years??? 😊 Small changes make a big difference ten-twenty years down the road. Slow and steady and be aware of big purchases and make good decisions that are well thought out. We have all hade the car issues, the house issues…
What’s the goal here? Be above “average” on the Net Worth chart by just making small changes and nailing new good habits with automation and good decisions on the big stuff.
You got this! 😊
two chicks talking money. 