The Sad Decline in Personal Net Worth
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.