25 things vanishing in America, part 2: Your net worth
Filed under: Debt, Home, Real Estate, Wealth, Recession, Investing
Do you feel as if you're worth less than you were just one year ago? Speaking in a monetary sense, nearly all of us Americans are. Net worth, the result of that calculation which subtracts liabilities from assets to reveal true equity value, has taken a nose dive for most Americans. For some of us, the change has been negligible. For others of us, the change has been particularly devastating.I myself have not suffered much loss in the decline of our national net worth levels. My household debt load is very light, and our meager retirement investments have always remained in very conservative portfolios. Although our household budget has taken the same beating as most budgets, reeling from reduced purchasing power and increased prices, our actual asset to liability ratio has remained fairly constant.
My net worth situation seems to be an exception to the rule, however. Perhaps that's due mainly to the fact that when the decline started to snowball, I didn't have much to begin with. However, some people have been forced to witness extreme changes in the status of their personal net worth. An article provided in February, by CBS News, paints a grim picture of America's current net worth scenario.Not surprisingly, the greatest net worth losses have been felt by people within the higher income brackets and by those who are closest to retirement age. The reasons for this are quite easily understood. These are the two groups of people who tend to have the greatest amount of capital value invested in stocks and real estate. These two investment vehicles are the most prevalent value holding structures. They are also the two value bases which have recently suffered the greatest losses.
The question of the day is, will these net worth declines continue? Of course, I don't have the answer to that. If I had to make a guess, I'd say that I think the decline will continue. I don't believe that our stock markets have bottomed out yet, and real estate values are directly tied to the broad and healthy income levels which are currently taking a beating on a nation wide scale.
Right now, the best advice I can give you is to keep eliminating debt you have on assets which historically depreciate in value. Beyond that, I'd highly recommend that you keep income creation at the forefront of your personal economic plans.
Reader Comments (Page 1 of 1)
4-06-2009 @ 7:51PM
LIONEL said...
THIS ROTTEN FROM THE TOP DOWN GOVT. WE HAVE HAS STOLEN EVERYONE`S MONEY, BUT THE SUPER RICHE`S AND THEY`LL CONTINUE TOO , UNTIL WE GO TO ARMED REVELUTION !
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4-27-2009 @ 5:37PM
Sailor Barsoom said...
I'd never go into an armed revolution behind somebody who can't turn his caps lock off.
4-12-2009 @ 8:28PM
Jeff said...
I hear you on this one!
Our net worth decreased nearly 40% from a peak in November 2007 of $797,500 to a current low of $485,200. The main culprits are loss of value in 401k ($120,000), loss of equity in our home due to decline in the real estate market ($110,000), and loss of value in our Russell 2000 and S&P 500 index stock funds ($75,000).
All of theses are long term investments (we are 37 and 39), so there is no real impact to our lifestyle. But it is really depressing to have such a dramatic loss on paper. We are thankful to still have savings, but it is not fun to know that all the money we saved since 2005 have essentially been wiped out.
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4-14-2009 @ 7:26PM
g4dget said...
wow that is an awesome lighter
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4-14-2009 @ 7:25PM
ajones? said...
Hey Jeff,
Don't ake it so hard. My wife and I are 55+. That would be inside ten years of retiring for the previous generation.
For us it means we are NOT retiring.
You, on the other hand, have a quarter century to make it up. And you will. Count your blessings and go conservative in 15 years so it doesn't happen to you!
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4-14-2009 @ 7:25PM
Nick said...
This is one of the dangers of handing your money to fund managers and investing in the stock market where you have little (basically no) control of the movements of the companies and industries you invest in. Unfortunately, this idiot investing is going to ultimately affect the dollars I use.
However, the past two years have been the best financially in my life, because I invested for cash flow, and in real estate markets that hadn't been experiencing suicide appreciation (and then subsequent suicide depreciation). Do you know how happy I am to have dumped that IRA and happily paid the 10% tax penalty? Instead of losing value, that money is truly going to towards my future living (which isn't a "retirement"/surviving, but living).
Amazing how far a little financial education will get you.
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4-21-2009 @ 6:08PM
alimae said...
It certainly stopped our retirement...Once again, the elderly are the ones really taking it on the chin! We don't have years of incoming income to ever make up what we have lost. 40 years of playing by the rules and our retirement plans are shot to heck! I wish I had stuffed my money in my mattress like my granny used to tell me :)
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4-27-2009 @ 1:26AM
srdha said...
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4-29-2009 @ 5:47PM
galeca said...
At 55+, you are even lucky to have a job to not retire from. Most people over 50 cannot even find a decent one.
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