This article is a written adaptation of the video you can find on my YouTube channel, LIFE180.

I just came across an article discussing the average and median net worth by age for individuals in America. The numbers were truly astounding, even sickening, to be frank. This inspired me to write an article explaining the difference between average net worth and median net worth, what these figures signify, how they vary across different age groups, and, most importantly, what steps you can take to improve your financial situation moving forward.

Essentially, it's an article from Yahoo that delves into certain statistics, which I'd like to share here. While these figures are informative, what truly matters, in my opinion, is not just the numerical data itself, but also comprehending its significance.

As you will see shortly, I've endeavored to simplify and present educational content that breaks down these statistics, aiming to make them as easily understandable as possible.

So, my objective here is to carefully guide you through this topic, providing explanations, education, and discussion. Let's begin with the basics: understanding the concept of average net worth and distinguishing it from median net worth.

Average vs Median Net Worth (How to calculate)

When we talk about average net worth, we're essentially adding up all the individual net worth figures, let's say $100,000, $200,000, $300,000, $400,000, and $1 million. So, if we total those figures, we get $2 million. Then, to find the average, we divide that total by the number of people, which in this case is five. So, $2 million divided by five equals $400,000. Therefore, the average net worth among these individuals would be $400,000.

Now, let's consider the same set of numbers: $100,000, $200,000, $300,000, $400,000, and $1 million. When we add them up, we still get a total of $2 million. However, in this scenario, what's important is finding the median, not the average.

The median represents the middle value, so we need to identify the third net worth amount. To do this, we discard the lowest and highest values, then the second lowest and second highest values, leaving us with the middle value, which is $300,000. Therefore, the median net worth in this case is $300,000.

Understanding the significance of the median is crucial because it represents the 50th percentile, or the midpoint. So, if we were considering a population of 300 million people, and the median net worth stood at $300,000 in this example, it signifies that half of the population, approximately 150 million individuals, would have a net worth below $300,000, while the other half would possess a net worth exceeding $300,000.

AVG Is Skewed By The Top 5%

This underscores the significance of the median income. In many cases, it's just as, if not more, important than the average income. This is because the average income can be distorted by the disproportionate wealth held by the top 5% of the population. Therefore, the median income provides a more accurate representation of the income distribution among the population.

AVG and Median Net Worth By Age

This phenomenon occurs because the average income by age is significantly influenced by billionaires. A considerable number of billionaires fall within the age brackets of 45 to 54 years old and 55 to 64 years old.

Consequently, when we calculate the average net worth by simply summing up all net worth figures and dividing by the total number of individuals, these figures are heavily skewed upwards due to the immense wealth of the most successful individuals in the country.

The reality is that such calculations don't provide an accurate representation of the nation's overall financial status. Let's examine this by looking at the average net worth across different age groups: individuals under 35 years old have an average net worth of $76,000, those aged 35 to 44 have $436,000, those aged 45 to 54 have $833,000, individuals aged 55 to 64 have $1,175,900 million, those aged 65 to 74 have $1,217,000 million, and anyone over 75 years old has an average net worth of $977,600.

When you scrutinize those figures, they may not seem so dire at first glance. However, when we turn our attention to the median income, particularly in a country like the United States, which is purportedly the most prosperous nation in history, it's a different story.

The median net worth represents the midpoint, indicating that 50% of the population possesses more than this amount. This essentially epitomizes middle America. So, if we're seeking to understand the state of the middle class and gauge the average person's financial standing, there's arguably no better metric to consider than the median income.

When you juxtapose the median income against the median net worth in this country, the disparity is staggering. Consider these figures: for individuals under 35 years old, the median net worth is $13,900; for those aged 35 to 44, it's $91,300; for the 45 to 54 age group, it's $168,600; for individuals aged 55 to 64, it's $212,500; for those between 65 to 74 years old, it's $266,400; and for those over 75 years old, it's $254,800.

How To Calculate Your Net Worth

Understanding how to calculate your net worth is fundamental. Essentially, it involves subtracting your Total Liabilities from your Total Assets, which gives you your Net Worth.

Let's use the example of a primary home to illustrate this concept. Your mortgage balance represents your liability, so if you owe $300,000 on your mortgage, that's your liability. On the other hand, the value of your home, let's say it's $550,000, constitutes your asset. Therefore, to calculate the net worth derived from your home, you subtract the mortgage balance from the home's value: $550,000 - $300,000, which equals $250,000 of net worth.

During the COVID-19 pandemic, we witnessed a surge in housing prices. As a result, both the median and average net worth figures have seen significant increases. This spike can be attributed to the recent bull run in stock markets and the soaring asset prices of homes.

Much of this increase in net worth stems from the equity individuals hold in their homes, rather than being tied up in retirement accounts. It's noteworthy how much of this wealth accumulation is driven by home valuations, which is quite remarkable, isn't it?

Indeed, it's crucial to consider the impact of excluding home equity from net worth calculations. While many individuals benefit from the substantial equity in their homes, it's important to acknowledge that not everyone falls into this category.

For instance, the figure of $13,900 for individuals under 35 years old reflects a significant portion of the population who are primarily renters. Without homeownership and the accompanying home equity, these individuals may experience suppressed net worth results in their financial assessments.

How To Increase Your Net Worth

1. Eliminate Debts + Free Up Cash Flow

2. Save 20% Of Earned Income

3. Invest In Cash Flow Producing Assets

4. Increase Lifestyle

The crucial question is what do you do? and what I say to do is, first and foremost, we need to eliminate debt. When we look at number one at the beginning of this section, elimination of debt is one of the most important things that we can do because at the end of the day, life is all about cash flow.

Currently, if you have credit card payments, chances are your interest rates are increasing, given that they're often variable. This situation not only drains future potential value but also entails significant opportunity costs. The impact of making credit card payments can be utterly catastrophic to your future financial growth.

While many persons prioritize investing or pursuing various financial endeavors, the truth is, the most efficient step you can take is to address your high-interest credit card debt. By paying off credit cards with interest rates of 18% or higher, you effectively enhance your financial efficiency. Doing so not only frees up cash flow but also optimizes your overall financial situation.

Unless you can find investments that offer guaranteed returns higher than 18%, it's wise to prioritize freeing up cash flow by eliminating high-interest credit card debt. By doing so, you not only eliminate a liability but also position yourself more securely, especially in anticipation of economic downturns. Considering the current economic climate and the concerning financial statistics, I anticipate these figures to deteriorate further. Why?

Indeed, we're likely approaching a phase where both the stock market and home equity will experience declines. It's the natural cycle of things; we're nearing the end of a bullish period. If we were to encounter a scenario akin to 2008, or even a milder version of it, where we witness a 10 to 20% downturn, all the figures in the tables mentioned earlier would inevitably decrease correspondingly. As a result, the financial outlook would deteriorate further, particularly for the middle class.

While wealthy individuals may also experience the effects of economic downturns, it's undeniable that such downturns disproportionately impact the middle class. Unlike the wealthy, the middle class lacks the substantial financial buffer and insulation in their strategies.

They often face challenges due to the baseline living expenses necessary for maintaining a decent standard of living. Therefore, economic downturns tend to hit the middle class the hardest, exacerbating their financial vulnerabilities.

People in the top 5-10% income bracket can absorb financial hits without experiencing significant lifestyle changes. However, for those in the middle class and below, even a modest 5-10% contraction in their financial situation can have devastating effects on their lifestyle. It's crucial to recognize this disparity. Therefore, it's imperative to prioritize freeing up cash flow for those who are more vulnerable to economic fluctuations.

Once we've freed up that cash flow, the second step is to prioritize saving 20% of our income.

One of the major challenges facing our country is the lack of sufficient savings. This deficit compels individuals to take excessive risks, leading to a situation where we're not a nation of investors but rather speculators. This stems from a failure to prioritize building solid financial foundations through adequate savings.

I conduct a discussion called the LIFE180 Pyramid Talk, where I emphasize the importance of building a solid financial foundation. This entails focusing on safe money investments initially, followed by medium-term, medium-risk assets, and gradually incorporating more speculative investments as one's financial position strengthens.

For instance, while assets like Bitcoin may offer promising long-term prospects, they're also high-risk investments. Placing all your funds into such volatile assets without having a safety net of savings is dangerous. If you encounter a downturn and need to access your funds during a Bitcoin slump without any safe money reserves, your financial stability could collapse, leading to significant setbacks.

In this country, many people tend to be speculators rather than investors. To truly become an investor, one must construct their financial foundation from the ground up. This involves establishing a base of safe money. We focus on identifying the optimal methods for saving money, maximizing the utility of each dollar by addressing multiple needs simultaneously.

When seeking investment opportunities, it's essential to aim for returns that outpace inflation, while also prioritizing guarantees and liquidity of funds. However, finding options that fulfill all these criteria can be challenging. That's where our coaching comes in. Ultimately, our primary emphasis is on encouraging individuals to save 20% of their income. This should be the target for achieving financial stability.

It's important to acknowledge that not everyone is in a position to save 20% of their income immediately, as many struggle with poor cash flow. For those persons, the priority should be to eliminate debt before focusing on savings.

However, the objective shouldn't be to clear debt only to indulge in lifestyle upgrades like buying a fancier car or house. Instead, the aim should be to free up resources by eliminating debt, enabling one to save and gradually invest in assets that generate cash flow.

As cash flow increases over time, lifestyle enhancements can be considered. If everybody would just follow this plan, the world would be a different place.

How To Reach Financial Freedom Faster

One of our primary focuses is empowering individuals to navigate this process and take control of their own success. This approach addresses a significant issue prevalent in our country today. I often discuss what I refer to as the five F's of life: faith, family, fitness, finance, and freedom.

While many people aspire to retire around age 65, what they truly desire is financial freedom. This means having enough savings to retire comfortably and generate a guaranteed cash flow for the rest of their lives, eliminating the need to continue working. The conventional wisdom suggests a 40-year timeline to achieve this goal by age 65. However, it's important to recognize that there are alternative paths to financial freedom that don't necessarily require such a lengthy timeframe.

Focusing on investing in cash flow-producing assets can expedite the journey towards financial freedom significantly. However, I always emphasize the importance of faith, regardless of one's beliefs. Whatever your faith may be, it's essential to have a strong foundation in something, as true freedom stems from being comfortable with your beliefs. Ultimately, you cannot delegate your success or your belief system to others; it requires personal effort and commitment.

In terms of family, I can't rely on outsourcing my success as a husband or a father. It's something I have to fully commit to myself. Similarly, with fitness, I have to prioritize my health and well-being. This means putting in the effort to exercise regularly, eat healthily, and take care of myself physically.

True freedom encompasses more than just financial independence. It also involves being healthy physically, maintaining positive relationships, and feeling spiritually fulfilled. Even if I achieve financial freedom, it won't truly feel like freedom if I'm burdened by health issues, strained relationships, or a lack of spiritual well-being. Therefore, I understand that achieving holistic freedom requires attention to all aspects of my life.

Just as we recognize that success in areas like health, relationships, and spirituality can't be outsourced, the same applies to our relationship with money. Achieving true freedom also entails having the right mindset and structure in place with regards to finances. This is precisely what we aim to teach persons how to cultivate a healthy and effective relationship with their money.

The challenge lies in the narrative perpetuated by the government, the financial system, and Wall Street, which often portrays individuals as incapable and suggests that managing finances is too complex for them to handle.

Consequently, people are encouraged to relinquish control of one of the most critical aspects of their lives and trust others to manage it on their behalf. This often involves adopting a passive "buy and hold" long-term strategy, rather than empowering individuals to invest in cash-flowing assets.

The truth is, achieving financial success requires a proactive approach and a willingness to learn the necessary skills. It's about recognizing the need to take control of one's financial destiny and actively working towards it, rather than relying on chance or outside entities.

The belief that a financial advisor has a greater vested interest in your success than you do is, in my opinion, a completely delusional mindset that many have been misled into believing. This mindset is a major reason why 95% of people reach retirement age and struggle to maintain their standard of living.

If you closely examine the median and average numbers, particularly for individuals aged 65 to 74 with $1,217,700 million in assets, it becomes evident that this sum is woefully insufficient. Applying the 4% rule, which dictates a safe withdrawal rate, would barely yield $45,000 per year in income for the rest of one's life. However, those who have diligently saved to amass $1.2 million in assets likely require a much higher annual income to sustain their lifestyle in retirement.

Take Control Of Your Personal Finances

The current financial situation facing Americans is dire. An alarming 95% of people are unable to maintain their standard of living upon reaching retirement age. This is a troubling reality for the citizens of the wealthiest nation in history.

I firmly believe that this predicament is a result of pervasive misinformation and a system that is not designed for individual success. However, I am convinced that by following four key steps, individuals can reclaim control of their financial destinies.

Admittedly, the journey ahead won't be easy, but the goal is to position yourself for thriving success. It's about establishing a solid framework that allows you to progress confidently. If you require assistance in eliminating debt, I encourage you to reach out for support. Take the first step by setting up a call with us.

Clarity Call

Our team includes debt elimination consultants who excel in their field, along with cutting-edge software designed to guide you through every step of the process. Whether you're seeking assistance in eliminating debt or embarking on the journey to save 20% of your income, we're here to support you every step of the way.

In essence, it all boils down to having a well-defined framework in place. It's about establishing a clear plan of action and determining the timeframe for navigating this process. What are the key milestones and goals? How do you decide when to save and what to prioritize when paying off debt? It's crucial to assess whether you have available capital that can be utilized to pay down debt or if it's more prudent to retain those assets and use cash flow to pay off debt.

The answers to these questions vary for each individual, which is where our coaches come in to provide personalized assistance. When it comes to producing cash flow, there are various avenues to explore. This could involve investing in real estate, starting a business, or participating in private equity funds.

For instance, my wife and I recently launched the Cashflow Hacking Fund, a private equity fund aimed at generating consistent cash flow. It's crucial to ensure that any investment aligns with your values, beliefs, and financial goals. While real estate, businesses, and private equity funds are some options, it's essential to explore opportunities that best suit your objectives.

I know people who are venturing into side hustles and starting businesses that generate significant cash flow. They're achieving better results than what the stock market could offer, and they're doing so with minimal risk.

Anyway, that wraps it up. I hope everything I've discussed makes sense to you. If you have any questions or need further clarification, feel free to leave a comment in the section below. I'm committed to engaging with each and every one of you. If you're interested in gaining clarity about your financial situation and exploring potential solutions, I encourage you to schedule a clarity call. These consultations are designed to provide you with the information you need to make informed decisions about your financial future.

Regardless of whether you choose to collaborate with us, another entity, or take no action at all, the important thing is that you'll have gained new insights and information. It's crucial not to ignore your financial situation any longer. As we approach the new year, regaining control of your money may be a significant priority for many. Don't hesitate to take the necessary steps towards achieving financial empowerment.

I believe this article is highly relevant at this time of the year and can benefit many individuals by guiding them towards the next steps needed to elevate their financial situation. So, that's all for now. Until the next article, wishing you a blessed and inspirational day.