Posted on 12/30/2023 7:42:57 PM PST by SeekAndFind
A median is the middle number in an ordered list of numbers. The “average” is the sum of the numbers divided by how many numbers are on the list. Here is an illustration:
If 10 people each have a net worth of $100, the sum is $1000. That number divided by 10 equals 100 which is the average. Thus the average and the median are the same.
If you change one of those $100 amounts to $1 million, now the sum is $1,000,900. The median is still $100 but the average is 1,000,900÷10, which equals $10,009. That number is not representative of the group at all because it contains such an extreme outlier.
Just think what it would do to the avdrage to have one of the $100 changed to $10 billion. That is like the effect a Jeff Bezos has on statistics.
Everyone is in a different financial place.
What matters is what you own vs. what you owe.
Basic accounting balance sheet is a great help.
My net worth was tied up in a 401(k) that I couldn't touch without penalty until I was 59 1/2 years old, and a pension benefit that I wouldn't receive until I retired.
On paper the numbers were significant, but in reality I was living almost paycheck to paycheck until I retired and the money was freed up.
-PJ
RE: it does little good to own a big personal residence, lots of land, or lots of irrigation water that doesn’t earn income because one can’t immediately spend such holdings
If one owns rentals with good paying tenants in a location that is in demand, is that liquid or not?
Need to factor in pensions and Social Security into the mix.
That can bump up the number quite a bit. We have no mortgage, property taxes are just under $400/year. All-ele tric utilities are about $95-105. Water and garbage is another $80. Car insurance is $125 for two not new cars.
Homeowners is about $300/month. Cable, internet, and phone is about $280.
We end up saving $5-800/month
We also have about $400k in 401k. We each also have about
$40,000 in our separate checking/savings accounts.
my property taxes are close to $7000....
“If one owns rentals with good paying tenants in a location that is in demand, is that liquid or not?”
personally, i would classify such as income-producing assets, but not as liquid assets ...
but to me, liquid assets are those assests that can be immediately spent to buy stuff, or are very liquid security type of assets that are valued and traded in well-defined, well-regulated markets and can be liquidated in one or two business days ...
nonetheless, dependable income-producing assets are a fantastic way to accumulate wealth, AND the right ones have the benefit of capital appreciation!
The devil is in the details - while "average" and "median" seem like they ought to mean about the same thing, in this case it demonstrates that there are a few very wealthy people in a sea of average Joes. The data set was probably something like this:
If the survey has 101 people, and ...
10 people had $100,000 net worth
40 people had $400,000 net worth
1 person had $433,100 net worth - the median: 50 people richer and 50 people poorer than this person
40 people had $500,000 net worth
10 people had $13,568,948 net worth
(10 x 100,000) + (40 x 400,000) + (1 x 433,100 + (40 x 500,000) (10 x $13,568,948), or
1,000,000 + 16,000,000 + 433,100 + 20,000,000 + 135,690,000 = 173,122,585
That's between 101 people, so the average is 173,122,585 / 101 = $1,714,085 average
but the guy with as many people richer than him as are poorer has $433,100 net worth. He's the "median" example. The 10 very rich people skew the average way away from the median. 90% of the people had net worth less than $500,001.
I was doing very well until congress spent 1/3rd more and wrecked the stock market and the economy. Only the past several months has the market gone up meaning my AMD stock : )
When the stock gets to $200 I can relax.... : )
Now at $147.41 with a recent high of $151.05 on friday.
In 2019, Congress spent $4.4 trillion, Sen. Ron Johnson (R-WI) said.
In 2023, the federal government is expected to spend $6.3 trillion.
I would guess that many of those in the median, with only $400K net worth, can't yet afford to retire. They are working into their 70's, thus their net worth continues to grow. For many in the median, their salary is so low that it allows them to draw SS without incurring loss of benefits.
You also need to take an account of where do you live. Where I live, $35000 a year is decent money. I bought a house when I was making 30,000 a year. You can run an apartment around here for $350 a month.
NH?
Why isnt SS an asset?
It appears our net worth is within the range listed for our age group. But who cares? Our standard of living is such where we are quite happy. We can go out an buy anything we want, which is very little since we have everything we want.
Money isn’t everything. It’s the quality of life we make for ourselves regardless of income.
I tend to agree with you. Our retirement income exceeds by far our expenses. The money we are forced to take out of our IRA each year is put right back into a different investment.
One’s retirement income is a determining factor in one’s quality of life. With a good income one can own very little and still be happy.
After reading all this, I really have no idea what my net worth is. I get S.S. & that is about the extent of the income. I own a very moderate house that is not valued very high & needs quite a bit of work. Own one car almost 20 yrs. old, so it is not worth much. I get by, pay the bills & in a good month I might save $100-$400. I live alone & owe nothing. I give $400-$500 per month to my church.
Forgot to add my age group....I am 80+ yrs. old.
Don’t worry, the financials sites cycle around doing a “what’s the average/median net worth” to “what’s the average/median retirement savings & expected retirement income” and “what’s the average/median yearly income” as filler material, so wait a day or three or scan back on the page and you’ll find one of those.
House rich, cash poor.
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