Sirak Buys X Eggs At (x-8) Cents Each

[Jen Ondrey]

Whenit comes to your finances, everything is relative. To get ahead, you must outperform the average. If everybody is up 20% in their investments, have you really gotten richer? You have not. This post will discuss the average net worth for the above average person. Our goal is to outperform the average so we can live better lives.

You've got one life to live. You can have the average net worth in America, which is pretty low. Or, you can shoot to have an average net worth for the above average person. Let's all shoot to be above average with our one and only lives! This is, after all, Financial Samurai.

Not bad. Believe it or not, the average household net worth in America is now $1.06 million. But these average net worth numbers are skewed by the super rich who have generated an enormous amount of wealth since the financial crisis. The median household net worth is closer to $192,000, which is a better reflection of America.

I started Financial Samurai in 2009 and it is the top personal finance on the web today. I worked in investment banking at Goldman Sachs and Credit Suisse for 13 years, got my MBA from Berkeley, and write everything based off firsthand experience. In 2012, I retired at age 34 with a $3 million net worth, and have been publishing three times a week ever since.

If you're looking to achieve financial freedom from someone who has, you've come to the right place. I firmly believe if you join 65,000+ others and subscribe to the free Financial Samurai newsletter, listen to the free Financial Samurai podcast on Apple or Spotify, and immerse yourself in personal finance by reading a great personal finance book, you will grow your net worth for above average.

5) Takes action by leveraging free tools on the internet to track their net worth, minimize investment fees, manage their budget, and stay on top of their finances in general. Once you know where all your money is, it becomes much easier to optimize your wealth and make it grow.

10) Has little-to-no student loan debt due to scholarships, part-time work, or help from their parents. Our parents have saved and invested through the largest bull market in history. It's understandable that parents want to help their children out.

Check out my Wall Street Journal bestseller for sale at bookstores everywhere and on Amazon, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. It is the best personal finance book you can read today.

The tables are based on the tens of thousands of past comments by you. They are also based on the more than 2,500 posts I've written since 2009 to highlight the average net worth of the above average person.

In fact, any country that has any sort of tax-deferred retirement plan and social safety net program for retirement that has a GDP/capita of $30,000 or more can use the below chart as an aspirational guide.

The average net worth for the above average person takes full advantage of his or her 401(k). The 401(k) is a tax-advantaged account where you contribute pre-tax dollars, which lowers your taxable income and tax bill. The money then compounds without a tax drag.

Only after 59.5, when you can start withdrawing from your 401(k) penalty-free, do you need to pay taxes on the withdrawals. However, by then, your marginal income tax rate should be lower since you're retired.

The assumption here is that the above average person is able to start maxing out their tax-deferred retirement plan every year after the second full year of work. He or she will continue on without fail until 65. You can read more about the right contribution order of your investments between tax-advantaged and taxable accounts.

This chart does not take into consideration any after-tax savings post 401K contributions. However, the high end does include 401k company contributions, as this is common for those with seniority and those who work at profitable, generous companies.

The average net worth for the above average person is also bolstered by building a large taxable investment portfolio. After all, you can't withdraw from your 401(k) before 59.5 without a 10% penalty. When I say post-tax, I mean taxable investment portfolios such as your online brokerage account.

It also refers to your rental property portfolio you are building. Some of you may simply prefer real estate over stocks. That's fine. Real estate has historically been a fantastic wealth-creator long term. The combination of rising rents and rising property values is hard to beat.

My favorite private real estate investing platform is Fundrise, which focuses on residential and industrial properties in the Sunbelt region. Valuations are lower and rental yields are higher in the Sunbelt. The platform was founded in 2012 and manages over $3.5 billion in real estate.

If you want to achieve financial independence sooner rather than later, it's your accessible post-tax savings and investments that matters more than your tax-advantageous retirement accounts like your 401(k), IRA, Roth IRA, and so forth. Why? Because your post-tax savings guide is what will spit out passive income to pay for your lifestyle.

The average net worth for the above average person also owns his or her primary residence and invests in real estate for income and diversification purposes. Inflation is too powerful a force to combat. If you are a renter, you are short inflation and the real estate market, which is no good long-term.

The Federal Reserve study showed that the average net worth of a homeowner is roughly $1,034,000. This is 11X greater than the average renter's net worth of $91,000. Some studies show the average net worth for homeowners is 40X higher.

We can debate the merits of this study all day long (demographic sampling, housing price changes, etc), but the point is: above average people generally all own homes and are much wealthier than renters.

The return on rent is always negative 100%. You get a place to live and that's that. There is never a positive return on an asset after a month, or 30 years of renting. A renter cannot pass on her paid off house to her kids or grandchildren. There is no asset accumulation at all. There is a reason why some 97% of millionaires are property owners.

The value of real estate varies across all the land and the world. It is very hard to make an assumption of what should be inputted as a result. According to the US Census bureau, the median home price in America is roughly $440,000 as of 2024.

You can't get anything livable in San Francisco, New York City, Los Angeles, Washington DC and Boston for $440,000. But, you sure can in the Midwest where I'm aggressively investing money through real estate crowdfunding platforms like Fundrise. They provide a way for all investors to diversify into real estate through private funds with just $10.

Valuations are so much cheaper and the net rental yields are so much higher in non-coastal cities compared to the coastal cities. With companies like Google investing $13 billion in heartland real estate to expand operations, you know other companies and investors will follow.

As a result, there will be a multi-decade migration away from densely populated and more expensive cities to cheaper cities with more space. CrowdStreet specifically focuses on real estate opportunities in 18-hour cities like Charleston, South Carolina vs. 24-hour cities like Los Angeles, California. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities also have higher growth potential due to job growth and demographic trends.

I personally sold a San Francisco rental property for 30X annual gross rent and a 2.5% cap rate in 2017. Then, I reinvested $550,000 of the proceeds in real estate crowdfunding with a target 10% cap rate. It feels good to diversify into no-coastal city real estate and earn income passively.

Let's now construct an equity value chart of something based on a range of $250,000-$500,000. Let's assume that upon retirement, you have your house paid off and can attribute this amount into your net worth.

By the time a 27 year old pays off his or her mortgage in 30 years, s/he will be 57 years old with a place to live rent from for the rest of his/her life. That is the true value of the property, the rent saved for the remainder of the owner's life.

The chart includes the average 401(k) amounts, average taxable investment amounts, and average real estate equity amounts. The table should give you a rough net worth amount to shoot for if you want to be considered above average.

Somewhere in their mid-40s, the above average person becomes a millionaire. In comparison, the average American only becomes a millionaire between 55-64. This is 10-15 years later according to the Federal Reserve.

The best way to build wealth is to get a handle on your finances by signing up with Empower. They are a free online platform which aggregates all your financial accounts on their Dashboard. This way you can see where you can optimize your finances.

If you want to have an above average net worth, you should also consider investing in real estate. Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties.

Fundrise has been around since 2012 and manages over $3.5 billion in assets under management and has over 500,000 investors. It's investments predominantly focus on residential real estate in the Sunbelt, where valuations are lower and yields are higher.

I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. There is a strong demographic shift towards lower cost areas of the country. Technology and the rising trend of working from home will make this trend permanent.

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