In today's economic landscape, it's clear that homeowners generally possess a higher net worth compared to renters. However, renters aren't without hope. There are steps they can take to enhance their financial positions. According to a recent report by the Aspen Institute, in 2022, the typical renter in the U.S. had a median net worth of $10,400, which is a record high but still significantly lower than the nearly $400,000 net worth of homeowners. Renters commonly face financial challenges such as lower income, higher debt, less savings, and lower rates of asset ownership.

Unlock the Path to Financial Success for Renters

Renters with an Annual Income Less than $25,000

As of 2022, more than one-fourth of renter households made less than $25,000 a year. These renters are more likely to be "cost burdened," spending a significant portion of their income on housing and utilities. This makes it difficult for them to cover other essential expenses and build wealth. Janneke Ratcliffe from the Urban Institute in Washington, D.C. points out that once they reach a certain level of income or savings, they may lose certain benefits. A hypothetical family in this category first needs financial stability. They need positive cash flow through higher income, lower expenses, or both. They also need more savings and personal resources and increased access to benefits that support stability. Clifford Cornell, a certified financial planner, emphasizes the importance of tackling high-rate debt. A credit card balance can eat away at savings. Shaun Williams advises renters in this income bracket to be thoughtful about where they live to manage housing expenses. They might find better job prospects and increase their income by moving to a different area or state.

Renters with an Annual Income between $50,000 and $75,000

In 2022, roughly 18% of renter households fell within this income range. A hypothetical family in this bracket has some baseline financial security. Cornell suggests monitoring cash flow to find savings opportunities each month. After covering all expenses, what's left over can be saved. Williams advises finding ways to save about 5% to 10% of income while also looking for ways to increase earnings. This is the starting point for building wealth.

Renters with an Annual Income of $100,000 or More

About 20% of renter households made more than $100,000 a year in 2022. Although they have a strong financial picture, they may choose to rent for various reasons. In some places, renting is cheaper than owning. Landlords cover maintenance and property taxes, while tenants pay renter's insurance and utilities. Cornell points out that for homeowners, the mortgage is the minimum monthly expense. While these renters aren't building home equity, they can focus on building their investments and savings. For example, if the mortgage payment is $2,500 and the rent is $2,000, they can save the $500 difference in a retirement account. This way, they can still save money and potentially see faster growth than in real estate.