Here's the Net Worth That Puts You in the Top 5% of American Households

Tracking your net worth can be a great way to stay on top of your finances and ensure you’re making good progress toward building wealth.

Your net worth is a snapshot of your current financial picture. Think of it like a personal balance sheet. To calculate your net worth, you add up all of your financial assets — cash savings, retirement accounts, other investments, your home value, and any other property — and subtract any liabilities — your mortgage balance, student loans, credit card balances, and any other debt you might owe.

If you consistently save more than you spend, you should see your net worth climb over time. After investing consistently for years, you may be surprised at how much your net worth can change in a given year. You could find your net worth increasing by tens of thousands or even hundreds of thousands of dollars in just a few months, depending on how the stock market performs.

Making steady progress in pushing your net worth higher means you’re on the right track. But if you want a goal to aim for, you may want to know how much it takes to be considered wealthy enough to put you in the top 5% of American households.

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Here’s the net worth that puts you in the top 5%

The Federal Reserve regularly surveys American households, cataloging all sorts of financial variables, including assets and liabilities. The most recent data from the Fed’s Survey of Consumer Finances took a snapshot of the American public at the end of 2022.

At that point, a net worth of $3,795,000 was enough to put you in the top 5% of all American households. If that number has your head spinning, there are some important details you should consider.

First of all, the wealthiest Americans tend to be older. That makes sense. Over the life of your career, you have more time to pay down debt, save, and invest. More importantly, you give your investments more time to grow. Warren Buffett notably accumulated 99% of his net worth after turning 50. The bulk of the top 5%’s net worth comes from investments in stocks, with the value of their primary residence being another big contributor.

Second, you may take solace in the fact that the median net worth for all Americans was $192,700. That’s a much more achievable number that will put you in the top half of American households. If you reach $1 million, you’ll be in the top 20% or so of households. Those are some big milestones that you shouldn’t ignore.

Growing your net worth is a marathon, not a sprint. If you can consistently make progress toward building your financial well-being, you’ll likely end up better off than most Americans and possibly find yourself in the top 5%.

Put yourself on the path toward elite wealth

As mentioned, your net worth includes all of your assets and liabilities. So, if you want to grow your net worth, you have to make your assets grow faster than your debts.

If you have any debt that’s racking up interest faster than your investments are growing, your first step should be to pay those balances. While debt can be a great tool to grow your wealth (with a home mortgage or by using student loans to advance your career opportunities), it’s important to recognize when it’s a drag on your wealth. Paying off credit card debt has one of the highest guaranteed returns on investment you can find.

Another high return on investment opportunity is your employer’s 401(k) match, if they offer one. You could receive an immediate return between 50% and 100% just by saving for retirement. That should make getting the most out of your company’s 401(k) plan a top priority for building your net worth. Don’t discount the tax savings you can receive by using other retirement accounts like an IRA, as well.

If you’ve paid down your high-interest debts and you consistently put money into your investment accounts, you should see your net worth climb over time. Taking steps to advance your career and increase your earning power can help you supercharge your savings, as long as you don’t let your expenses rise faster than your spending for too long. Occasionally, you may end up spending more for a period (like if you’re paying for a child’s education), but over the long run, you should aim to increase your savings rate (the percentage of your income you save and invest) up until retirement.

If you take those steps, you’ll eventually see your net worth start to climb. It might take a long period of steady progress before your net worth starts to take off. Remember, you need to set yourself up with consistent saving habits in your early years so that your investments can take care of pushing you toward the top 5% in your later years.

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