Americans Have an Average Net Worth of Over $1 Million. Why Don't More of Us Feel Rich?

It's interesting to have a look at Americans' net worth, as opposed to just the amount of money they have in their savings accounts, because it paints a bigger picture. Net worth is a measure of all of your assets minus all of your liabilities.

So let's say you own a home worth $400,000 and you have $40,000 in savings and $160,000 in a retirement account. That's a total of $600,000 in assets. But let's say you also owe $300,000 on your mortgage. That brings your net worth down to $300,000.

Recent Federal Reserve data found that the average American has a net worth of $1,063,700. But if that's the case, why do so many people feel as if they're barely making ends meet?

Average net worth doesn't tell the whole story

While the average net worth among Americans may be $1,063,700, median net worth is only

$192,900. And when you have a median that's well below the average, it tells you that more people are closer to the median than the average.

To put it another way, what's likely happening with this data is that a small percentage of very wealthy Americans is resulting in an average net worth of over $1 million. But that's not representative of the typical American.

Many of us can't tap our assets in full

Net worth is a measure of your total assets. But not every asset translates to liquid, spendable cash.

Let's say you have a net worth of $200,000, which is roughly what the median net worth looks like today. You might have that net worth because you have no money in savings, a home that's worth $300,000, and a $100,000 mortgage balance.

Do you feel wealthy? Probably not. You may be sitting on $200,000 worth of equity in your home. But you need your home to live in, so you can't exactly convert that asset to spendable cash unless you sell it.

One thing you can potentially do is borrow against your home equity via a loan or line of credit. But that means taking on more debt and having to pay interest on it. So while it is a way to get access to liquid cash, it may not be an optimal one.

Now let's say you have a net worth of $1 million, which is closer to the average. It may be that you're sitting on a $1 million IRA balance by your late 40s because you started funding that account in your early 20s and invested your money well over the years.

In this situation, you may be doing quite well financially. But that doesn't mean you have $1 million to spend. If you tap your IRA ahead of retirement, you won't have that money for retirement. And if you're not yet 59 1/2, you'll be penalized for taking early withdrawals anyway. In fact, it's more than possible for someone to have $1 million in a retirement plan but still have to pinch pennies day to day to cover their expenses.

Take this data with a grain of salt

All told, Americans' average net worth is high. But that doesn't mean the typical American feels rich. If you were to survey your friends and neighbors today, chances are, they'd tell a very different story.

To be clear, it's good to have a high net worth, even if most of your assets aren't ones you can touch easily. If you have a house you have $300,000 worth of equity in, you can tap that equity in an emergency or downsize to a smaller home and pocket some profit if you need money.

But if you want to feel as if you're in a good position to be spending money without worry:

• Build emergency savings
• Keep your essential expenses low
• Steer clear of high-interest debt, like that of the credit card variety
• Save money in the bank for the things that bring joy to your life, like vacations and social events

It's good to have a high net worth. But it's also important to set yourself up to enjoy your success and feel as if you're in a position to be able to spend money comfortably.