The concept of “net worth” can be a relative term, based on your personal values, financial goals and where you’re at in life. Your 30sare often a time for thinking about the future and establishing more wealth to ensure that you can continue to grow your finances. If you’ve wondered about the possibility of achieving a high net worth as you enter your 30s, there are a few important steps to take for long-term success and stability. But first, let’s learn how to calculate net worth.
What is net worth?
Each person in every economic class has a net worth. To find your net worth, complete this simple calculation: Your assets (such as savings, investments and property) minus your liabilities and debts (such as loans and credit card balances). In many cases, you can use an online net worth calculator to help you reach this figure.
Additionally, your net worth is essentially an insight into your financial health. And a sign of good financial health is if the assets are growing faster than the debts, or “positive net worth.”
Why net worth matters
Tracking your net worth can help you understand your financial progress over time and identify areas for improvement. It also helps you stay focused on long-term financial goals.
As your career grows in your 30s, this is an ideal time to start building wealth and planning for the future.
Average net worth by age
It’s important to begin growing your USA net worth in your 30s to secure your financial future, hopefully bolstered with a career that is now established. According to the Federal Reserve, the median net worth for adults younger than 35 years old is $39,000. That’s compared to the median net worth of adults age 65-74, which is $410,000.
How does net worth affect me?
Many people are unaware that their net worth has an influence on their investments and can allow their wealth to increase with time. With a high net worth, you will have more money to put toward various investment accounts. Plus, with the potential for compounding interest, you can earn interest on the original amount you’ve saved, and then you continue to earn interest on the interest, all helping to grow your investments over the years. If you have a negative net worth, it can be impossible to set aside money to invest and grow your wealth.
Ways to increase your net worth
Hire a financial expert.
A financial professional can provide guidance tailored to your situation. They will help keep you aware of market performance without becoming emotionally invested and is someone who can be more critical of the investments that you own. They’ll expose your portfolio to different types of investments that you may not be familiar with, while offering a second opinion based on their training and experience. The financial adviser will also assist you with setting specific long-term goals with your finances and help you establish fiscal discipline by building accountability and awareness.
Invest consistently over time.
Investing allows your money to potentially grow through market returns and compounding. Many people start small and increase contributions over time and set automatic deposits into an investment account to help stay consistent. They also diversify investments to help manage risk.
Pay off debt.
Debt can slow your progress towards building wealth. From student loans to credit card debt, it can be easy to have your finances suffer by merely making minimum payments each month and losing money on the interest tacked on to loans and credit card balances year after year. Focusing on reducing high-interest debt can free up money for saving and investing. If your net worth is negative, prioritizing debt reduction may be an important first step.
Build an emergency fund.
Unexpected expenses can arise at any time. From car repairs to visits to the emergency room, you may not plan to pay extra for a bill that isn’t factored into your budget. Setting aside money in an emergency fund can help you avoid relying on credit cards, protect your long-term savings and stay on track with your financial goals. Start with a manageable goal and build over time.
Reduce spending and increase savings
When you want to learn how to build net worth, you’ll need to reduce your spending and increase your savings. Consider cutting back on non-essential expenses, reviewing subscriptions and recurring costs and setting a monthly savings goal. Even small adjustments can add up over time.
Building financial momentum in your 30s
Increasing your net worth doesn’t happen overnight. It’s the result of consistent habits like saving regularly, managing debt, investing over time and making intentional financial decisions. Start with a few changes, like tracking your net worth annually, setting a savings or debt-reduction goal and reviewing your financial plan regularly. With steady progress, you can build a stronger financial foundation for the years ahead.