The recent global pandemic has highlighted how poorly prepared many people are financially average net worth.
Most experts suggest you should have between 3-6 months’ worth of living costs in a savings account.
It allows you to survive unexpected issues, such as unemployment or a global pandemic.
Of course, this also gives you a cushion against emergency expenditure.
However, the truth is that 25% of Australians are unable to save any of their monthly income.
Others follow expert guidelines and save between 10-30% of their income per month. But, everyone’s situation is different, you can only do what is best for you.
What Is Net Worth?
Once you start earning money you have the opportunity to save it or spend it. Most people try to do both.
The money you have in the bank is considered part of your value. As time passes you should accumulate more funds in the bank and other savings vehicles, increasing your value.
However, you have to balance this against what you owe and any other assets you have.
Most Australians have some debt.
You are also likely to have invested in a house which means you’ll have a mortgage. These are things that decrease your worth. Of course, a house is worth a considerable sum and the value that belongs to you is a positive.
In short, to calculate net worth you need to look at all the positive values, that’s savings, money in the bank, the value of your house, and any other funds or assets you have, such as a car or boat.
You’ll then need to look at your negatives, that’ the value of your remaining mortgage, any loans you have on cars, boats, or simply unsecured loans.
In addition, balances on credit cards and any other debts.
Total all the positives and all the negatives. Then, remove the negative amount from the positive values.
Hopefully, the positives are worth more. The figure you’re left with is your net worth.
Your net worth, compared to others, will depend on your age. In general, net worth is higher for older age groups.
There are charts available regarding average net worth by age. They reflect the different stages of life, the average by age is:
- 20 year old – $15,000
- 40 year old – $441,000
- 70 year old – $973,000
These figures rely on people saving every month and much of this net worth is associated with the value of their homes.
Increasing Your Net Worth
If you want to increase your net worth you need to speak to a specialist in financial planning.
This is the best way to locate more funds to save and to discover the best place to save your money. While the bank may seem safe, your money won’t grow much sat in the bank.
A good financial consultant will help you increase your net worth. But, you should remember that it’s your life.
Take the time to consider what you want and how much savings/worth you need. You don’t have to have as much as the average if you feel you’ll have enough to be comfortable and happy.