How much money do you need to become rich?

Big budgeting is a trend these days, but for the most part, people keep their finances private. Some discuss salary and broader financial goals. Not many people share details about their bank and retirement accounts.

So it’s understandable to wonder what it takes to become rich. You might want to know if you belong to that group, and if not, how much money it takes to get there. There is no perfect definition of wealth, but there is enough current data to give you a reasonable idea.

Average wealth level in the United States

The median net worth of Americans in 2022 was $192,700, according to net worth data compiled by The Motley Fool. To be clear, net worth is the value of all assets minus liabilities. If you are above that number, you are above average in terms of wealth.

However, most people see their net worth increase as they age. Young adults have the lowest average net worth because they are starting their careers and have not yet had time to build wealth. If you’re in your 30s, comparing your net worth to that of people in their 40s and 50s probably doesn’t make much sense.

The average net worth broken down by age group is as follows:

• Under 35: $39,040
• 35-44: $135,300
• 45-54: $246,700
• 55-64: $364,270
• 65-74: $410,000
• Ages 75 and older: $334,700

Net worth isn’t everything. Having an above-average net worth doesn’t necessarily mean you feel wealthy. And don’t feel bad if your net worth is lower than average. This is a financial indicator and can change significantly if a significant portion of your wealth is in stocks or homes.

What You Can Do to Build Wealth

You don’t have to obsess over your net worth, but building wealth is important. This is a way to help you achieve your financial goals and save enough money to retire when you want.

It all starts with spending less than you earn. If you can save money every month, you can build wealth. Make sure your monthly expenses don’t take up too much of your income. Ideally, your regular bills should not exceed about 60% of your income. Then you’ll have plenty of money left over to save, invest, and spend on yourself.

After adjusting your spending, here are some additional steps you can take to build wealth faster.

• Invest in stocks. The stock market has been one of the biggest wealth creators over the long term, averaging about 10% annual returns. If you want to set up a portfolio yourself or an index fund that invests in the stock market, you can buy individual stocks.
• Contribute to your retirement account. Although you can invest through a regular brokerage account, we recommend starting with a retirement account because of the tax benefits. An Individual Retirement Account (IRA) is an option available to everyone, and you can also contribute to a 401(k) if your employer offers it.
• Make your savings and investments automatic. Decide how much you want to add to your savings and investment accounts each month and automate it. You’ll save time and there’s no risk of forgetting to do something.
• Avoid high-interest debt. Some types of debt, such as taking out a mortgage to buy a home, can be a good decision. But credit card debt and other high-interest debt will hold you back as long as you pay it off.

Improving your finances isn’t a particularly complicated process, but it does take time. Follow these steps, make it a habit, and you will be amazed at the results.

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