Net Worth Figures of US Households by Age

 

Last week, the Federal Reserve released their 2022 Survey of Consumer Finances. It provided household net worth data by age in terms of average and median net worth. What is net worth? Simply assets minus liabilities. In other words, the value of a household's home, cars, bank accounts, stocks and bonds, 401k’s or 403b’s, any real estate holdings minus mortgages, auto loans, student loans, and credit card debt.

The big surprise in the data provided below is that the young adults (under 35) were doing better than I anticipated. Yes, they carry the bulk of the trillion dollars in student loan debt but not every young adult has student debt.

You will note that there are two columns—one for average net worth and the other for median net worth. The gulf between the average and median appears, as best as I can tell, to be at an all time high. This is because wealth inequality is high now and always roars during a bull market in equities. Remember, these data are from February, 2022.

Why the huge gap between average and median numbers? Let me tell the modest joke that statistic professors have been using for years. There is a bar in a small town with 29 people in it. Bill Gates (worth $120 billion) enters. Now there are 30 people in the bar and the average net worth of folks in the bar in $4 billion ($120 billion divided by 30). The median net worth is about $75,000 as the median represents the 50th percentile in a group with half above and approximately half below that. It always annoys me that some people use average and median interchangeably. They are vastly different. So the wealthy, in each age group, pull the average up substantially. The median figure is a lot more realistic as a snapshot of American wealth.

If you roll up all the age groups, the Fed says that average net worth is $1,059,470 while the median is $192,700. Remember, half of American households are BELOW the $192,700 figure.

Age Range Average Net Worth        Median Net Worth

20-24          $120,896                        $10,800

25-29          $120,185                        $30,160

30-34         $258,073                                $89,801

35-39         $501,289                              $141,200

40-44         $590,718                              $134,730

45-49         $781,923                              $212,800

50-54       $1,132,532                      $272,800

55-59       $1,442,075                      $320,700

60-64      $1,675,214                              $394,010

65-69      $1,836,884.                        $394,300

70-74     $1,714,085                              $433,100

75-80     $1,630,969                              $316,000

Source: Federal Reserve Board, data from February, 2022

If we have a recession next year and a bear market in equities (stocks), the average net worth figure should drop far faster than the median net worth estimate as the wealthier tend to have a higher proportion of their wealth in stocks.

These numbers are fun to look at and do not get too discouraged if you are below either the average or the median for your age group. Living costs vary widely across our country as do real estate values. Your family may be doing just fine. 

I also do not wish to drown you in numbers but I did take a look at the 25th percentile by age (25% of America is below that number and 75% above).

This shaped up as follows:

Under 35 head of household—$4,000

35-55–19k

45-54–51k

55-64–82k

67-74–87k

75+—94k

So, clearly most of Americans are far from being millionaires although a million is definitely not a definition of wealth anymore.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Lessons From Jeff Bezos

 I have long been fascinated by Jeff Bezos and the growth of Amazon. There is no question that his firm has changed the way we shop and set a standard for service for retailers. Here are a few things that I have digested by tracking his actions over the past few decades:

1) Bezos’ mantra is: “We have a whole process that starts with the consumer and works backwards.” As a result, many business analysts would say that Amazon is the most consumer-centric company in the world. Many have imitated their approach.

When I mentioned this to people in various industries, I have often received the reply that “just about everybody does that.” Not in my experience. Not even close. I worked with people who promised outstanding service when pitching business, yet when it came in their primary focus was on earning a 20%+ profit margin on the new acquisition. I was frequently accused of over-servicing an account. The customer was paid lip service but the firm’s bottom line mattered far more than the long term health of the people ultimately paying us.

A similar scam goes on in financial services where a “customized plan” is put together for new clients. The reality is that it is almost always a pre-packaged mix of assets that is driven solely by the age of the client(s) and their existing net worth. The exception was the late Jack Bogle of Vanguard who popularized the index fund. His tactic, fully above board, was to buy the entire market and charge a very, very low service fee. Overtime, the natural growth of markets would make your holdings rise and you were not eaten up by high fees from investment "professionals.” Bogle was truly customer-centric.

2) Bezos is a great communicator. Study his work and it is cloning Winston Churchill. Years ago, I told a colleague that he should read Warren Buffett’s annual letters to shareholders of Berkshire Hathaway (I still highly recommend them). My friend said you should read the Amazon letter to shareholders that Jeff Bezos puts out each year. The guy writes like Churchill, he said.

I am a huge Churchill fan and was always impressed since my teenage years with the clarity of both his writing and speeches. The great man once said regarding writing or speechmaking: “Short words are best, and old words when short are best of all.” Read Bezos or watch some of his presentations on You Tube. The man is a great communicator. Many words have one syllable, sentences are short and memorable. To me, it is a 21st century American version of Sir Winston. Executives in all industries should imitate this approach.

3) “Missionaries love their product and love their customers.”—Jeff Bezos

Do you REALLY love your customers? If not, maybe you are in the wrong game.

4) “Humans aren’t good at understanding exponential growth.”—Jeff Bezos

When Jeff launched Amazon, a deciding factor was that the internet was growing at 2,400% per year. Mind boggling but most of us missed it. I never bought Amazon shares as, a quasi-securities analyst, they had no consistent earnings for years. Yes, sales kept exploding but I was wedded to a low P/E (price to earnings ratio) strategy and the company’s shares left the station without me. This comment still hits home and smarts a bit.

5) Avoid big departments. Bezos once said that if your team cannot be fed with two pizzas, it is too big. So, he divides teams into smaller groups and fresh ideas seem to pop up.

6) He banned power-points at meetings. At Amazon, memos are used and very tightly written. For some meetings, no one reads the recommendation memo until decision-makers are all in the room. The memo is passed out and everyone reads it at the same time. Also, for each staff meeting, there is an empty chair at the table. The point is that the chair represents the consumer and you always need to be aware of them and their needs and wants.

7) One last gem from Bezos—“You don’t choose your passions. You passions choose you.” 

Many people have tried to copy some of this. Some Amazon alumni are developing consumer-centric companies. I wish them well. One very successful player is Bom Kim who has created a company called Coupang (ticker symbol CPNG) which is referred to as the Amazon of South Korea. I am not touting the company and do not own any at present but I do follow their journey closely.

There are many books out about Amazon. My two favorites are: The Bezos Blueprint by Carmine Gallo and bezanomics by Brian Dumaine.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Game Over For Spot TV?

Last week, I was visiting a relative in a market that is no longer a top 50 Nielsen DMA. For a change, I watched a bit of local network affiliate TV checking some local news and a few other programs. I was more than a bit surprised by what I saw.

The issue was not at all the quality of the actual programming. It was the size and quality of the advertisers. I expected local multi-unit retailers and some car dealers. Instead, the airwaves were flooded with individual craftsmen such as plumbers, roofers, and glorified handymen hawking their business. 

All may be solid business people and pillars of their communities. The gnawing question was how can they afford to advertise on DMA wide TV? The answer clearly was that the network affiliates were taking what they can get. Actually, I applaud the sales teams who do not look down their noses at tiny players. What hit me was that the relentless decline in spot tv revenue was clearly coming to an end soon.

Also, how could the commercials pay out? A rule of thumb for decades is that you needed a certain number of points of distribution if you were advertising across an entire DMA for advertising to work for a retail advertiser. These one shot players must have been paying almost nothing for the time or would only be on one brief flight and swear off over the air TV as it failed to move the sales needle profitably for them. Local cable, however, could certainly work in some cases for single unit advertisers.

Linear, or over the air TV, was the greatest mass medium ever. Both network and their affiliate stations were able to reach an overwhelming majority of the country or their individual market respectively almost weekly. Profit margins for strong affiliates were a virtual cash machine. Not so any longer!

In media, as in life, it has always been true that the only constant is change. Still, I felt a bit of sadness getting hit so directly with visible evidence of the medium’s decline.

It also brought back another issue that I have mentioned several times over the years in Media Realism (MR). How does one launch a new product aimed at a mass audience? Fragmentation continues to get worse. My answer is that a few upstarts will break through as their message and products go viral. Most success will likely come from the existing giants in many categories who can do line extensions and are a proven quantity to most prospects.

You may reach Don Cole at doncolemedia@gmail.com or leave a message on the blog.