Mar 14, 2025
You probably don’t think about your net worth as often as, say, the amount in your checking account, or the balance you owe on an upcoming credit card bill — but it’s a good measure of your financial progress.
Net worth is calculated by taking the value of your assets and subtracting the value of your liabilities. Assets can include real estate, vehicles, investments and cash holdings. Liabilities can include any student loans, mortgages, car loans and credit card debt.
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Essentially, the more you own and the less you owe, the higher your net worth.
In 2022, the average net worth of U.S. households was $1,063,700, according to the most recent data from the Federal Reserve. If your net worth isn’t close to that number, don’t panic: The median net worth that year was way smaller at $192,900.
This discrepancy implies the average is distorted by a small number of extremely wealthy people — so the median is a better indicator of the typical American.
If you’re still worried that your net worth isn’t up to par, fear not. As personal finance expert and The Ramsey Show co-host Rachel Cruze says, "Whatever your numbers are, you can always choose to make different decisions with your money."
Reduce your debts
The average U.S. consumer, as of 2024, had a total debt load of $105,056, according to Experian.
Average credit card debt, per consumer, was $6,730, while the average auto loan debt was $24,297.
A high level of debt can bring down your net worth. So, if you’re able to shed a credit card balance or pay off a car more quickly by boosting your income with a side hustle or cutting back on spending by adhering to a strict budget, it could help raise your total net worth.
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Paying only the minimum on your credit card will ensure you stay in debt for years, while paying thousands of dollars in interest.
Consider the snowball method, a repayment strategy where you pay off your smallest debt first and work your way up. Or, you can flip it using the avalanche method, which focuses on paying down your debt with the highest interest rate attached to it first, regardless of how much you actually owe.
Cruze advises consumers to be especially cautious with auto loans, since cars only lose value over time rather than gain it. "If you cannot pay your car off in 18 to 24 months, I want you to get rid of [that] car," she said in a video uploaded to her YouTube channel.
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Buy a home instead of renting one
We all need a roof over our heads — but when you rent, your monthly payments don't add to your net worth.
When you own a home, every mortgage payment you make gets you closer to owning that property, free and clear of debt. Since many houses tend to gain value over time, buying one is a great way to grow your net worth.
During the second quarter of 1994, the median U.S. home sold for $132,000, according to the Federal Reserve. In the second quarter of 2024, the median U.S. home sale price was $419,200.
All told, the average U.S. home gained $287,200 in value in the last 30 years.
Invest your money wisely
Keeping the money you don’t immediately need for regular monthly expenses or debt payments in a savings account or certificate of deposit (CD) should help it grow to some degree.
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But to see your net worth really take off, you may want to consider putting your money into the stock market. The broad market’s average historical return is a little over 10%, accounting for years of great performance as well as downturns.
If you invest in a total stock market exchange-traded fund (ETFs), your portfolio’s return may be similar. And if you hand-pick a market-beating portfolio of stocks, your returns could be even higher.
But let’s play it a bit safe and assume you’ll generate a 7% annual return in your portfolio. If you invest $10,000 today, in 30 years’ time, it’ll be worth around $76,000, give or take.
At an 8% return, you’re looking at around $100,000. And at a market-beating 12%, you’re at just under $300,000.
The less money you spend paying down debts, the more you’ll have to invest. So resist the urge to go overboard on your next car purchase, and keep credit card balances low or non-existent, since they’re notorious for charging high interest.
Don’t overspend on a home, either. Even though owning property can help you grow your net worth, you don’t want to commit to such high expenses and mortgage payments that there’s no money left over to invest in your future.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
