Wednesday, June 13, 2012

Business Week: We're Poorer

Your net worth includes your assets such as houses, cars, 401Ks, and stocks/bonds/mutual funds minus your liabilities which might include mortgage, car loan, and credit card debt. Peter Coy of Business Week writes that Americans' median net worth is lower today than in 1989. Ouch.

The article shows family net worth climbed until 2007 and then slumped.in 2010. We had a property bubble that burst, and our property values declined precipitously. I believe we knew that, but Coy puts numbers to what we already knew.

Coy also notes that family net worth rose 62% from 1962 to 1983, but fell 12% from 1983 to 2010. Twelve percent isn't a big drop, but we were accustomed to it rising instead of falling.

This sort of number crunching can be misleading. Overall family net worth can fall while individual family worth increases because as people get older, they have more home equity and less owed on their mortgages. Their 401Ks and IRAs may get bigger, too.