The Average American Net Worth Is Huge!
The Wall Street Journal came out with another boring article talking about how the average US net worth per person was down some 1.3% this quarter. Whoopdeedoo. What I found surprising was not so much the decline in net worth, but the actual average net worth per person in America is $182,000! Regulars here know that I’ve been pretty positive about the economy for a while, and this stat just makes me even more so.
Originally, I had my doubts about the $182,000 figure, since the median 2007 net worth of all US households is $109,000 based on a Federal Reserve survey. However, could it be that everybody in America can all buy new Porsche 911 Turbos with plenty of money left over if they wanted to? After some thought, I tweeted out the story to see what the community would say, and the responses astounded me!
NOBODY BELIEVES IN REALITY
No sooner did I send the link out did people start discrediting the figure. They used straw hat arguments such as “Bill Gates skews the average” and using average, instead of median, or mean is misleading. Average is average, and we can have 10 Bill Gates in America, and the average net worth still wouldn’t be abnormally skewed among a denominator of hundreds of million! Don’t believe me? Do the math yourself and see how much change an average $150,000 per person net worth figure out of 200 million is once you include 10 people worth $50 billion each.
What’s more interesting is that the naysayers who are so determined to discredit the Wall Street Journal all have net worth’s greater than $182,000. It’s the darndest thing I tell ya. It would be one thing if they were all 35 years old with only net worths of under $50,000 or something. But they aren’t.
I’ll admit I’m over this figure, and so are all my colleagues who are over 30 years old as well. Given this is the case, I now easily can see why the average net worth per person is around $182,000. Heck, it might even be higher! The average age in America is around 35, and based on a sample set of around 20, there’s no reason not to believe in this figure.
THE REASON WHY THERE ARE DISBELIEVERS
There are two main ways to get ahead: 1) outperform others or 2) hope others underperform you. I always prefer to rely on myself to try and outperform because I have no control over what others do. The only person I can control is myself! Furthermore, the better the average does, the less you feel great about yourself.
As a result of this phenomena, it is no wonder why everybody on Twitter tried to discredit the Wall Street Journal’s $182,000 average net worth per person figure. The figure is an attack on their own success and makes them not feel as good about their own wealth accumulation.
It’s important to realize there’s no escaping the bell curve. At every level of competition, there will always be underperformers, folks in the middle, and outperformers. We consistently tend to OVERESTIMATE our own success and abilities and think we’re better than everyone else. You know by definition that this is statistically impossible.
Instead of trying to keep people down to make yourself feel better, I encourage everyone to celebrate the success of others. Use their success as motivation for your own sake. The more you encourage others to succeed, you will rid yourself of that negativity that plagues your mind and flourish.
If you want to know what the average net worth is for the above average person here is a table I created for your review. Remember, this table is for above average people.
|THE AVERAGE NET WORTH OF THE ABOVE AVERAGE PERSON|
|Age||Yrs Worked||Avg Pre-Tax Savings||Avg Post-Tax Savings||Avg Property Equity||Avg Total Net Worth|
|22||0||$ -||$ -||$ -||$ -|
|23||1||$ 12,500||$ 7,500||$ -||$ 20,000|
|24||2||$ 30,000||$ 15,000||$ -||$ 45,000|
|25||3||$ 45,000||$ 25,000||$ -||$ 70,000|
|30||8||$ 154,500||$ 67,500||$ 17,500||$ 239,500|
|35||13||$ 273,000||$ 115,000||$ 30,000||$ 418,000|
|40||18||$ 410,500||$ 162,500||$ 70,000||$ 643,000|
|45||23||$ 573,500||$ 200,000||$ 117,500||$ 891,000|
|50||28||$ 771,500||$ 237,500||$ 162,500||$ 1,171,500|
|55||33||$ 1,011,500||$ 275,000||$ 225,000||$ 1,511,500|
|60||38||$ 1,306,000||$ 312,500||$ 290,000||$ 1,908,500|
|65||43||$ 1,670,500||$ 375,000||$ 375,000||$ 2,420,500|
|Source: FinancialSamurai.com 2013|
To Improve Your Net Worth I Recommend:
1) Manage Your Finances In One Place: The best thing you can do to grow your net worth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going. Their 401K Fee Analyzer tool is saving me over $1,000 a year in fees I had no idea I was paying. There is no better free platform out there that is helping me manage my money. The entire sign-up process takes less than a minute.
2) Refinancing Your Mortgage: If you are a landlord or homeowner and have not refinanced in the past year, I strongly suggest you check online to see what the latest rates are. I always check with Quicken Loans because they are fast, quick, and provide a no obligation real quote based on the input you provide. I recently refinanced to a 5/1 Jumbo ARM for 2.625% in the Spring of 2012 after just refinancing in the fall of 2011 for 3.125% from 3.625%. As a result, I am saving an additional $4,000 a year in interest! Take advantage of current rates at 30 year lows in part due to the Federal Reserve’s easing policy.
3) Checking Your Credit Score: Take a moment to check your free credit score through GoFreeCredit.com, especially if you have not done so in the past year. You need to protect yourself against identity theft and errors in your credit history which will damage your financials and prevent you from getting the lowest interest rate for loans. I had a 100 point hit on my score for two years due to an $8 late payment by my tenants! The score delayed my mortgage refinance and almost derailed the entire process.
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”