Why net worth matters more than income
Income is what you earn; net worth is what you've kept. A doctor earning $400,000/year with $50,000 in savings and a $1M mortgage has a lower net worth than a teacher earning $70,000/year who's saved diligently for 30 years. Net worth is the true scoreboard of financial health.
What's a "good" net worth by age?
According to the Federal Reserve's 2022 Survey of Consumer Finances (most recent), median US net worth by age of household head:
- Under 35: $39,000
- 35–44: $135,600
- 45–54: $247,200
- 55–64: $364,500
- 65–74: $409,900
- 75+: $335,600
These are medians — half of households have less. The averages are much higher (skewed by wealthy households) but less useful as a benchmark.
Tracking net worth over time
Calculate your net worth once a quarter — not daily or weekly, which leads to obsession with market movements. The trend over years matters far more than any single snapshot. Most personal finance apps (Mint, YNAB, Personal Capital) will track this automatically if you link your accounts.
Net worth can be negative in your 20s and 30s due to student loans and early mortgages — that's normal. The goal is consistent positive growth: every year, your net worth should be higher than the year before, even if income fluctuates.
Frequently asked questions
What is a good net worth by age?
Per the Federal Reserve's 2022 Survey of Consumer Finances, median US net worth by age: under 35 ($39K), 35-44 ($135K), 45-54 ($247K), 55-64 ($364K), 65-74 ($409K), 75+ ($335K). These are MEDIANS — half of households have less.
Should I include my primary residence in net worth?
Yes, include home equity (market value minus mortgage). However, recognize that home equity is illiquid — you can't easily spend it without selling or borrowing. Some financial planners calculate 'investable net worth' (excluding primary residence) for retirement planning.
What is the difference between assets and liabilities?
Assets: things you own that have value (cash, investments, real estate, vehicles, business interests). Liabilities: things you owe (mortgage, student loans, credit cards, auto loans). Net worth = assets − liabilities.
Should I include my car in net worth?
Yes, at current market value (Kelley Blue Book). Cars depreciate — update the value annually. Some planners exclude vehicles since they're depreciating consumables, not investments. Either approach is fine — be consistent.
What is the average American's net worth?
Median US household net worth (2022 Federal Reserve data): ~$192,000. Average (mean): ~$1.06 million — but this is skewed by very wealthy households. Median is the more useful benchmark for comparison.
How often should I track my net worth?
Quarterly is ideal — frequent enough to see trends, infrequent enough to avoid obsessing over market fluctuations. Some apps (Personal Capital, Mint, Empower) track automatically. Avoid daily tracking — short-term volatility is noise.
Can my net worth be negative?
Yes, especially in your 20s and 30s due to student loans and early mortgages. Negative net worth is normal early in life — the goal is steady positive growth. Many medical and law school graduates have negative net worth into their 30s.
Glossary of key terms
- Assets
- Things you own that have monetary value: cash, investments, real estate, vehicles, business interests.
- Liabilities
- Things you owe: mortgages, student loans, credit cards, auto loans, personal loans.
- Net Worth
- Assets minus liabilities. The true scoreboard of financial health — more meaningful than income.
- Investable Net Worth
- Net worth excluding primary residence. Used for retirement and investment planning.
- Liquidity
- How quickly an asset can be converted to cash without significant loss. Cash is liquid; real estate is not.
Common mistakes to avoid
- Including primary residence at purchase price instead of current market value
- Forgetting to subtract the full mortgage balance (not just monthly payments)
- Not counting retirement accounts (401(k), IRA, pension) — these are assets
- Counting future income as an asset — only count what you own today
- Tracking daily — short-term market movements are noise, not signal
Pro tips
- Track net worth quarterly — frequent enough to see trends, infrequent enough to avoid obsession.
- Use apps like Empower (formerly Personal Capital) to track automatically across all accounts.
- Calculate 'investable net worth' (excluding primary residence) for retirement planning.
- Update home value annually using Zillow or Redfin — or get a broker's price opinion every 3-5 years.
- Focus on the trend, not any single snapshot — every year should be higher than the last, even if income fluctuates.
Results are estimates for educational purposes only and not financial advice. Consult a licensed professional for advice specific to your situation.