The Sad Decline in Personal Net Worth

June 11, 2012 by  
Filed under Fools of Finance

The Federal Reserve does at least one thing well: Finding economic bad news and sharing it with us. This week’s bad news is about personal net worth. As you probably guessed, it’s down – way down.

According to the Fed’s data, a hypothetical family with median wealth had a net worth of $77,300 in 2010. In 2007, the median net worth was $126,400 in 2007. The bursting of the housing bubble caused 75% of this decline. There is lots of blame to go around for this. Congress and its “home ownership for all” mentality. Freddie and Fannie’s lack of reasonable underwriting standards. The big banks. And homeowners who became speculators and gamblers via the act of purchasing something that they could not afford if economic conditions changed.

There is more bad news: The percentage of families who save anything fell from 56.4% in 2007 to 52 percent in 2010. This is somewhat strange because total family savings actually increased. This can only mean that a minority of families (the smart and/or lucky few) are saving more while the “unsaving” majority is growing.

Another debt shift is a decrease in credit card debt which – sadly- has been more than offset by an increase in total student loan debt. Indeed, people now collectively owe more in education loans than for car loans. That’s a first. Can you say that many colleges and universities are run by greedy bastards? Even if you can’t, I can. GREEDY BASTARDS!

This net worth data will be meaningless to many Americans because they don’t know what their net worth is. They are probably afraid to calculate it because they are not comfortable working with negative numbers.

My advice to them is: (a) face your predicament with mindfulness; (b) save more; (c) spend less.


Let’s get specific. Skip Starbucks. (Check – I go there only for free WiFi with an occasional small iced tea.) Cancel your cell phone data plan. (Check – I’m on Straight Talk at $30/month.) Wear the same outfits to work. (Check – My assistant can probably recite my complete wardrobe from memory.) Eat less. (Check – still Working on that.) Walk more. (Check – Lots of this.) Use cash. (Check minus – using debit card for most purchases to earn 3% checking interest.) Fire your “friends” who tempt you to live beyond your means. (Check – I’m now immune to this.)

Or not. Then you can remain one of the sad majority.

Here is a link to the Fed story.

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4 Responses to “The Sad Decline in Personal Net Worth”
  1. Brian says:

    I think the savings rate dropped in correlation to the increase in people receiving help from the Govt. In CA you can not have in excess of $2000 in liquid assets to be eligible for food stamps.

  2. GW in TN says:

    “Indeed, people now collectively owe more in education loans than for car loans. That’s a first. Can you say that many colleges and universities are run by greedy bastards? Even if you can’t, I can. GREEDY BASTARDS!”

    Yesterday I heard on the radio (Glen Beck) that the endowment for Harvard is large enough (32 Billion in 2011) to offer free tuition to every student for decades yet the greedy bastards still take our tax dollars!

  3. Terry Pratt says:

    I live on a poverty level income, have student loan debt, and am not saving. I have no car and a prepaid cell phone. Not much room for spending less.

  4. Jessica N says:

    At the rate economy is going I’m glad I have been always someone who saves for an emergency. Spending frivolously isn’t really something I do. My advice to everyone is, have at least $2,000 or more tucked away for an emergency. Even if you are flat broke, try to find something on the side where you can make a little extra money. Even saving $25 every 2 weeks is enough to have SOME cash put aside. You really never know what will happen.

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