We know that comparing yourself to others is almost never a good idea. But it could come in handy when you want to determine your financial status and how well you are actually doing. The wealth distribution in the USA can get a bit weird sometimes. It could be difficult to really say with a 100 % certainty where you stand on the financial ladder. Maybe you’re saving a lot on your account, or you maybe even invest. So, let’s look if you actually are richer than the average american.
Keep in mind, that average means that around half of people are actually worse off, so if don’t get worried if you find yourself standing just below the benchmark. There will always be people better of than you, but you have to remember that there’s also always someone, that has it worse than you.
1. Do you have more than $4,500 saved?
According to the research from Motley Fool, the average amount of money in an American’s savings account comes out to be somewhere around $4,500. As some other experts say, you should have around 6 months worth of your income saved on the side, in case of an emergency. If you don’t have any money saved, even the smallest thing (like a minor car accident) could have some disastrous consequences.
2. Do you have more than $30,000 in you 401(k)?
In the Vanguard’s “How America Saves 2022” report, it was revealed that most Americans between ages 34 and 54 have around $36,000-$64,000 on their 401(k)s. The more precise numbers are as follows
- Ages 34-44: $36,117
- Ages 45-54: $61,530
This means that if you’re in your early to middle 30s and have more than $36,000 saved up, you’re better set of than most other Americans. If you are nearing your 40s and have less than $30,000 saved for your retirement, you should probably sit down with a financial assistant. According tom some saving experts, you should have around 2 years worth of your income by the time you hit 35.
Of course, this is, again, just a comparison with the average. Maybe you spent most of your 20s studying in college/finding the perfect job, so you don’t have those numbers yet, but will overtake your peers in later years.
It’s also possible that you got a really great opportunity some years ago, but lost it because of some crisis (because, let’s be honest, there has been a lot of those in the last years). So don’t rest on your laurels just yet – just because you’re well set now doesn’t mean it will be the same 10 years from now. What if inflation comes and depreciates your wealth beyond recognition? In that case, don’t worry, we have an article about that.
3. Can you cover an emergency of at least $2,000?
Now this is fairly similar to the point number 1, but remember – having money on the side is not the same as saving for an emergency. Studies have shown that most Americans have a specific “crisis account”, on which they usually have around $2,000.
Now, this isn’t exactly the same for everyone, because some people might just use their regular savings account for this, so they might technically have 0 dollars saved. Or they might only put a really small amount of their money on these “crisis accounts” – the same study from before showed that a lot more people have bellow the average, usually only around a few hundred dollars.
Whatever your situation might be, you should always be prepared for a crisis in some way, be it with a dedicated bank account, or maybe by having some way to generate money passively. Because if another crisis comes (and they usually do), you really don’t want to be left empty-handed.
4. Do you have less than $6,500 in credit card debt?
Now this may sound weird to some of you. How is it possible that the average American is almost $7,000 in debt? Well, the answer is quite simple: they just don’t pay it soon enough. It’s frankly almost too easy to accumulate a lot of debt on your credit card, without having any real way of paying it back.
It may also be weird for you, if you are not from the USA. Because most other countries have the option to use a debit card, which connects directly to your own back account, so you use only your own money. But in the USA, most, if not all people use some forms of credit cards, which “borrow” your banks money whenever you use them.
If the data from the federal reserve in New York is true, the total amount of credit card debt in the entirety of USA last year was almost 1 TRILLION dollars. Since credit card aren’t technically linked with your bank account, but instead lends you the banks money, it’s basically impossible for the average person to not build any debt.
Why does credit card debt matter?
Your main goal should be to keep this debt as low as possible, because if you retire with a really high debt, your set income might not be able to even cover the interest. It also heavily ties to your credit score – if you have a lot of debt, you might not be able to buy a car/a house, simply because the bank won’t trust you enough. It just wouldn’t make sense for them to give a loan to someone who’s already waist-deep in debt.
If you ever find yourself with too much debt, don’t worry too much. If your debt exceeds $10,000, you might be able to ask the representative of the company to put all of your debt into the form of a monthly payment. During this period, you might not be able to use your credit card anymore (depends on the contract the company gives you), but you will have no additional fees on these payments.
5. Is your total net worth above $100,000?
This one is the most straight-forward. If the total value of your assets exceeds $100,000 after you subtract all the liabilities (mortgage loans, medical bills, etc.), then you are better at it than most Americans.
Now, similar to the 401(k) point, this number will gradually increase as you get older. When you’re in your 30s, your net worth is probably around the hundred thousand mark. As you get older, to around you mid 50s, this number should be somewhere around $170,000.
There are several calculators to calculate your total net worth. Most of them work on a similar principle – take your assets, subtract liabilities, and bada bing, bada boom, there’s your net worth. Of course, some may be more sophisticated, but then we’re getting into the really complicated stuff.
Of course, as was the case with many of the other points, don’t fret if you’re in you 40s and have around $50,000 to your name – your time will surely come someday.
They say that comparison is the thief of happiness, and I couldn’t agree more. If you spend all of your time comparing yourself to others, you will have to time left for yourself. This article is supposed to be more of a fun thought-provoking statement, rather than a genuine “Are you poor, or not?” questionnaire.
As was said in the beginning, the wealth distribution in the USA can get kind of weird sometimes, so don’t be sad if you aren’t exactly like most other Americans. There is an important saying, that i think applies well here: “When you’re average, you’re just as close to the bottom as you are the top.” ~ Alfred North Whitehead.