Here's the average net worth of homeowners and renters

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Homeownership has long been touted as the ultimate American dream. There are lots of reasons why people may not want to own a home, but there's no denying that being a homeowner can have a big impact on your net worth, in a good way.

The Survey of Consumer Finances, released in Sept. 2020 by the Federal Reserve, found the median U.S. household net worth is $121,700. However, the difference between the net worth of homeowners versus renters is staggering.

In 2019, homeowners in the U.S. had a median net worth of $255,000, while renters had a net worth of just $6,300. That's a difference of 40x between the two groups.

There are many reasons why homeowners have a higher net worth. You could argue that owning a home is much like have a forced savings account, where each month part of your mortgage payment goes into the equity of the home. Whereas, renting is a sunk cost with no return on investment.

Homes often appreciate in value, which can help increase a homeowner's overall net worth. Plus, homeowners can take advantage of valuable tax write-offs as well that aren't available to renters.

However, just because someone is a homeowner doesn't automatically mean they will become wealthier. Nick Holeman, CFP and head of financial planning at Betterment, recommends that owning a home be a long-term investment. "Homes are expensive to buy, maintain and sell. If you don't plan to own your home for at least four years, you are not likely to break even on your purchase," he says.

Net worth refers to the total value of assets you own minus any liabilities or debts.

Net worth = assets - liabilities

The Federal Reserve lists several assets to consider when calculating net worth, such as:

• Cash within bank accounts, such as checking, savings and money market accounts
• Prepaid debit cards
• CDs and savings bonds
• Government bonds
• Health savings accounts
• Investment accounts including 529 college savings plans and individual taxable investment accounts
• Retirement accounts, including IRAs, 401(k)s and 403(b)s
• Life insurance policies with cash value
• Annuities with equity
• Vehicles including cars, RVs, motorcycles, boats and helicopters
• Real estate, including rental homes and primary/residential homes

In calculating net worth, liabilities are subtracted from the value of assets. In the Fed's survey, debts considered are:

• Mortgages
• Home equity lines of credit or home equity loans
• Credit card balances
• Installment loans, including personal loans, auto loans and student loans

Net worth is an important figure to consider when you're managing your personal finances. This number offers some insight into where you stand financially, and if you're on track for retirement.

There are several budgeting apps you can consider to help you begin tracking your net worth.

• Best overall free app: Mint
• Best app for serious budgeters: You Need a Budget (YNAB)
• Best app for over-spenders: PocketGuard
• Best app for investors: Empower
• Best app for couples: Honeydue

You can also consider building a simple spreadsheet in Google Sheets where you can write down all of your assets and liabilities, and then subtract the second from the first. While it isn't important to get it exactly down to the dollar or cents, having a general idea of where you stand is important.

Net worth will give you an overview into where you stand financially as you prepare yourself for retirement. While it can be difficult to envision retirement, which can be years or even decades away, the last thing you want to do is near retirement age only to find you haven't saved enough.

But even if you're a renter without much in the bank, there are steps you can take immediately to start growing your wealth. Kicking things off could be as simple as automating your savings, investing in your company's 401(k) or determining your short- and long-term goals and then making a plan to achieve them.

Information about PocketGuard has been collected independently by CNBC Select and has not been reviewed or provided by PocketGuard prior to publication.