Don’t Settle For Average: Americans and our Average Finances

When I was an investment advisor (broker, planner, sales guy, whatever you want to call it), one of the most common questions I received was “How does my balance compare to the average balance you see?”

My classy response was typically along the lines of “Customer, trust me, you don’t want to compare yourself to an average balance. It’s not pretty.” Sidenote, if you want to read a mathematical article about averages… click here. Yeah, who writes about averages, this guy.

So why would you not want to compare your finances to the average American.  Let’s explore this a little further…

According the US Census Bureau, the last released data (11/13/2017) relating to the year 2013 shows the average American net worth of $80,039.  Net worth is equal to the value of your assets minus liabilities.  This is frightening.  Unlike the way I calculate my net worth, which I only use financial assets, the government survey includes home equity.

Average net worth, excluding home equity, plummets to $25,116.

Average balance in a checking account, just $1000.  Fun fact, most people could not cover an emergency expense of $1000.  Not even talking about health expense, something like a car repair can hurt someone and get them into debt.

Average Amount invested in stocks or mutual funds (not retirement accounts) sits at $32,200.

Here’s an interesting one.  Equity in motor vehicles $6988.  Why would you count equity in depreciating “assets” as part of your net worth!

Average IRA balance of $40,000

Average 401(k) balance $46,000

Average net worth peaks out at $225,390 for the age 70-74 demographic.  Not much when you think about it.

While these figures are from 2013, I doubt they would be much better today.  The reasoning.  Sure housing prices have rebounded, but this is very regional.  Living in a major city, you should have definitely seen gains in home prices.  Also, it’s a well known that the market has been on a decades long run.  Most major money in the markets is held by the elites, so the biggest area of gains in equity would be concentrated in the hands of stock investors, meaning the majority of America missed out.  Also, adding to that, when you look at the financial composition of the elites vs your average American, the elites will have the majority of their assets tied to financial markets, business investments, real estate investments, not their primary residence.  Here is the whole table for those interested:

Average home prices in the country sit at $225,000 according to CNN Money.

Any talk about net worth would not be complete without looking at liabilities (AKA debt).  Total household debt in 2017 has exceeded 2008 recession levels at nearly $13 trillion.

From Motley Fool, average US households owe $15,654 in credit card debt, outstanding mortgage balances of $173,995, auto loans of $27,669, and $46,597 in student loans.

Not only is borrowing above 2008 levels, but credit card debt is also at an all time high.  Average interest rates on credit card debt in 2014 sat at 21% and is surely higher after the tightening of monetary policy from the fed.  This is troubling to think that the average American consumer is already overstretching their wallet and GDP in this country is very much tied to consumers.

How do all of the above figures look?  Knowing what average balances look like in America, would you want to just compare yourself to the average person.  When you think about it, being average isn’t really difficult, you just have to show up.  Putting in that little extra effort can make you stand out from the crowd.

Don’t settle for average.

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Readers Comments (4)

  1. It seems like I see a lot of retirees who are doing just fine. Nice regular home plus a condo in Florida. They golf all the time and go out to eat regularly. Plus they have cadillac health insurance plans. Do you think the difference is that a lot of the people I see who have been doing well in retirement for the past 20 years have pensions?

    • It could be just putting on an image and they want people to think they have it all. Meanwhile they have all of that lifestyle financed. But some of them could be real. I have relatives like this, they look like they have it all, but all they have is debt and no care about tomorrow.

  2. Average is definitely not a great place to be. Below average is even worse, but I’m learning and sticking to the plan to head where I want to be.

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