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How your net worth compares - and what matters more

Net worth is the total of what you own minus what you owe.

A household in the United States has an

A household in the United States has an average net worth of $692,100, according to the most recent data from the Federal Reserve's Survey of Consumer Finances. Photo Credit: AP / Jacquelyn Martin

Home value, job title, car model, savings account balance. These things merely hint at how wealthy you or your neighbors are. The naked financial truth comes down to just one number: net worth.

Net worth is the total of what you own minus what you owe. It’s a mathematical reckoning of assets accumulated (including cars, homes, Roth IRAs and that dish of loose change on the dresser) and debts accrued (such as mortgages, auto loans, student loan debt and credit card IOUs).

And the average net worth is …

A household in the United States has an average net worth of $692,100, according to the most recent data from the Federal Reserve’s Survey of Consumer Finances.

Shocked by that figure? That’s because the average (aka the “mean”) is skewed by the nation’s super wealthy. The median net worth of the average U.S. household is $97,300. Median is the middle point where half the households have more and half have less.

That means the median figure may be a better indicator of where you stand relative to your friends and neighbors. But the overall figures are just one indicator. There are many other ways to slice net worth figures published in the 2016 survey. Let’s start with age:

Median and average net worth by age

  • Under 35: Median net worth: $11,100 (average net worth: $76,200).
  • 35-44: $59,800 ($288,700).
  • 45-54: $124,200 ($727,500).
  • 55-64: $187,300 ($1,167,400).
  • 65-74: $224,100 ($1,066,000).
  • 75+: $264,800 ($1,067,000).

The Fed conducts the survey every three years. Looking at how families fared from early 2013 to early 2016 based on the educational attainment of the head of household, Americans without a college degree experienced the largest gains in median net worth (up anywhere from 24 percent to 29 percent). During that same period, the median net worth of families headed by someone with a college degree increased just 2 percent.

Median and average net worth by education

  • No high school diploma: Median net worth: $22,800 (average net worth: $157,200).
  • High school diploma: $67,100 ($249,600).
  • Some college: $66,100 ($340,600).
  • College degree: $292,100 ($1,511,100).

Other noteworthy changes in net worth from 2013 to 2016:

  • The median net worth of homeowners ($231,400) increased 15 percent.
  • Renters or other nonhomeowners saw their median net worth fall 5 percent to $5,200.
  • The net worth of nonurban households grew to a median of $87,900 from $70,100 in 2013, while city dwellers padded their median net worth by 13 percent (up about $12,000 to $99,000).

That was a fun exercise, right? But …

Does net worth really matter?

Yes, but only as a treetop view of your overall financial picture.

A bunch of other data points, some of which determine your net worth, give you more telling — and actionable — information. Some key numbers to know are:

Your credit score tells lenders (and others, like landlords and insurers) how well you handle borrowed money. It changes based on whether you make payments on time and stay within your credit limits, in addition to several other factors. (One way to check your credit score is with the free NerdWallet tool.)

Your debt-to-income ratio (DTI) tells how financially stretched you are. It’s a measurement of how much of your monthly income goes to cover debt and other must-pay expenses, such as your rent or mortgage, credit card, student loan, alimony and other payment obligations. Divide the total of those by your gross monthly income (or use this debt-to-income ratio calculator).

This number is important when you’re applying for a loan. Most lenders set their own debt-to-income ratio requirement. In general, a DTI of 20 percent or less is considered low. Mortgage lenders like the number to be less than 36 percent, but may go higher in certain cases, depending on other factors, such as your credit score. A DTI of 50 percent or more indicates financial stress.

Your retirement savings score reveals what kind of lifestyle you’ll be able to live in the future based on your current age, salary and retirement savings (how much money you’ve got in your workplace plan and any individual retirement accounts, or IRAs).

Get a snapshot of where you stand with this retirement savings calculator, which shows you how close you are, as a percentage, to a savings goal that will sustain the retirement you want. You can play with the numbers — saving a few hundred dollars more a month; retiring early; working part-time — to see how different factors affect how much money you’ll have to spend each month.

While it’s interesting to calculate your net worth, having a handle on these other financial measures is what really matters when making day-to-day and big-dollar money decisions.

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