Your net worth is essentially a measure of your wealth. It’s calculated by totaling the sum of all of your assets and then subtracting any debt or other obligations from it. We’ll get into more of how to go about calculating your net worth later on in this post.
If there’s one silver lining that’s come out of the pandemic, it’s that it forced a lot of Americans to re-prioritize the things in their life that are really important. Noting this, you might not be surprised to learn that the personal savings rate is the highest it’s been in decades. In fact, today many Americans have more money in savings than they do in credit card debt — and that’s a good thing for anyone but credit card companies. And money in savings all contributes to an individual’s net worth.
So, back to the question we posed in the title of this post: What net worth do Americans truly need to feel financially comfortable? According to a survey from Charles Schwab that polled 1,000 adult Americans, the answer is $624,000. What’s interesting is that this number is significantly down from the $934,000 that this same survey revealed a year ago. For what it’s worth, the survey found that Americans need a net worth of $1.1 million to feel financial happiness and a net worth of nearly $2 million to feel wealthy.
How to Calculate Your Net Worth
Like we said in the beginning, net worth is essentially the sum of all of your assets minus any debt our obligations. So how do you calculate it?
- First, add up all of your assets. These are things like the value of your home and any other owned properties, your investment portfolio, retirement savings, savings accounts, high-value collectibles, etc.
- Next, add up the sum of your debts. These are things like your mortgage, auto loans, home equity loans, medical debt, credit card debt, student loans, etc.
- Calculate your net worth by subtracting the sum of your debts from the sum of your assets.
What’s nice about net worth is that the older you get and the more you pay down the likes of some of your larger debts, like mortgages, the more secure financially you’re likely to be.
How to Grow Your Net Worth
Like we said in the above section, one way to grow your net worth is simply to stay on track with your larger loan payments. As those go down, your assets will start to outweigh your debts. But another way to grow your worth is to put into place some of the lessons you likely learned from the pandemic. We’re talking about setting a budget, determining what’s really important to spend money on, setting financial goals and then holding yourself accountable. With the economy rebounding and hiring picking up yet again, now’s the time to really put some good habits into place so that you can feel financially comfortable.