Jun 13

It started with a CNN article catching my eye – Family net worth plummets nearly 40%.  That article let me a to paper by the Board of Governors of the Federal Reserve System. This paper is titled Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances. A report the Fed issues every three years. What I found interesting about the report and how CNN presented the information was that the report offered both Median (the family right in the middle) and Average (add up all families and divide by the total.) Indeed, the median fell 39% during this period, yet the mean fell less than 15%.

It’s not a simple matter to parse out the reasons for this sharp difference. One likely cause I’d look at is the drop in real estate values over this period. The report shows 2/3 of residential homes carrying a mortgage. As the median value of these homes dropped 18.9% and the mean fell 17.6%, the effect on the homeowner’s equity is magnified. The Fed report offers “If primary residences and the associated mortgage debt are excluded, the median of families’ net worth is reduced from $126,400 to $42,300 in 2007 and from $77,300 to $29,800 in 2010. Although the adjusted wealth measure declined proportionately by only a somewhat smaller amount than the unadjusted measure—29.7 percent— the amount of the change is, obviously, much smaller; median adjusted wealth declined $12,600, while the unadjusted measure fell $49,100.” This confirms my suspicion that real estate was a major factor.  Another cause is the demographic shift, new graduates coming into the job market at lower wages than they might have before the current economic troubles began.

An interesting report from the Federal Reserve, and not light reading, if you retrieve the article from the link above you’ll find an 80 page PDF dense with data that will take some time and patience to sift through. Next time, we’ll look at the changes in income over the same three year period.

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Aug 30

Mike at Gather Little by Little posted 7 Quick Numbers To Fix Your Personal Financial Situation a list of 7 rules of thumb regarding your finances. They included my favorite, the Rule of 72, as well as some I might disagree with, such as the 100 minus your age should be your stock percentage in your portfolio.

MSN money blog’s article Frugal or dishonest? You decide referenced stories from my fellow PF bloggers, Penelope Pince, FMF, and Smithee. A combination of MSN struggling a bit to come up with new material, and the blogging world’s quality really improving. A good selection of frugality gone too far.

John Chevreau discussed Jim Otar’s book Unveiling the Retirement Myth. In his soon to published book, Jim warns that most baby boomers have not saved enough for retirement and fall into the “red zone.” He feels that the concepts we take for granted, asset allocation, frequent rebalancing, asset dedication, diversification and the notion of stocks for the long run are all myths and need rethinking. A video interview with the author appears on the site as well.

Wise Bread offers Save Money: Take the Boring Challenge, a brief list of frugal ways to save that may get a bit, well, boring. I don’t find the list there boring enough. The suggestion to drop the Starbucks habit and make your own coffee? I’ve been doing that for years. Take a look, and see what ideas you can use to start saving.

Thomas J. Stanley, author of The Millionaire Next Door, a classic, has his own blog, and posts some very interesting articles. His recent Average Rich or Median Poor? offers us two data points, an average net household worth of $434,782, and a median net worth of $91,304. Median is the halfway point, half of families have more, half less. This disparity points toward a growing concentration of wealth. On average we may be a rich country, but the average person isn’t wealthy. An article that gets you thinking about how the numbers are offered to us and what happens when you a bit more closely.

Thank you, fellow bloggers for some good reading this week.
Joe

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Jun 20

There’s an attraction to the interactive sites suggesting you plug in your age, sex, etc, and see details related to your category peers. From CNN/Money I found;

Yes, I am 45-54. The site also offers median net worth based on your income. Click on the image to be taken to the site to see where you stand. Keep in mind, net worth figures generally include the value of one’s home and median is not the same as average. Median means half the population considered is higher, half lower.
Joe

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