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People have wide-ranging views of what it means to be “high net worth,” according to a poll by digital wealth manager Personal Capital.
Yet most people – 74% – never see themselves falling into that category.
When 2,209 adults were asked what they would consider high net worth, the average average across all responses was $ 400,000.
Meanwhile, 32% of respondents agree with the widely accepted definition of high individual equity as having $ 1 million or more in investable assets.
Only 23% of respondents believe they will ever reach high net worth status.
Only 35% of people are sure they know what equity means, even though 91% say they have heard of it.
Knowing your equity is the first step to putting a good financial plan in place that will help you achieve your financial goals, said Michelle Brownstein, certified financial planner and vice president of the Private Client Group at Personal Capital in San Francisco.
“Having a good bird’s eye view of your financial situation is such an important exercise,” Brownstein said.
“There is no time like the present to sit down and say, ‘Where am I?’” He added.
To determine your personal equity, start by adding all your assets: checking and savings accounts, 401 (k) and other retirement savings, other investments, and the value of your home.
Then, subtract all of your debt, including credit card balances, student loans, and mortgages.
The result is your personal equity.
If your equity is negative, it means you have more debt than assets. If so, you should prioritize paying high-interest balances first, Brownstein said.
If your net worth is positive but lower than you would like it to be, you can identify goals that can help you improve it, such as building an emergency fund or saving for retirement or buying a house.
Even small changes, like reducing daily expenses by eating inside instead of dining out, can lead to big savings over time, Brownstein said.
Plus, by prioritizing your goals, you may be able to get on your way to achieving them faster, such as retiring earlier than expected, he said.
Retirement accounts account for 55% of the wealth of people with high net worth, according to personal capital data.
The survey was conducted in March by Morning Consult on behalf of Personal Capital.