http://www.businessinsider.com/heres-the-average-net-worth-of-americans-at-every-age-2017-6 Net worth with and without home equity I added this after the initial publishing but here's something very eye-opening: How can the net worth of the people in this country be so low? Without home equity, the medium net worth is practically nothing for every age group. Even if you add in the home equity, it is hardly that much at all, how can the saving rate be so low? Do people not save with their 401k IRA etc? If you just put 5-10% of you income, hell even 2-3% of your income, there is no way it should be this low right? Median value of assets for households by age
Serious, I don't know how it is happening, I had coworkers who could not afford to fix their cars and had to take out bank loans, they are not your minimum wage earners but above medium household income earners. I am just a typical mid western middle class stiff, but I have saved 10%+ every year in 401k/ira combination, I should have a pretty good nest egg unless we go into recession 1920 style. I would not call myself very thrift either.
I think: monthly total bills have really grown. Phone, internet, maybe various service subscriptions, gym: a lot of it auto paid. People eat out without thinking much about it. Travel, just to see family even, is pretty expensive too. Big student loan debt is a huge factor too. Remember it has eclipsed credit card debt now. But in any case, it is definitely scary. The culture is largely paycheck to paycheck.
There's a depressing article by Reveal about modern day redlining still existing. No home ownership usually means no wealth for the avg Joe or Juan.
Prioritize your stuff. I like to eat. I like to cook. I like to travel. I like to entertain the occasional ladlyfriend. I have a flipfone (Samsung indestructible Rugby for the win!) and no tv at 2 of the houses because I don't really care about fancy froufrou crap. My bills are tiny small. It's possible to live, not off the grid, but off-ish.
Not sure why anybody would be suprised. You don't have to read Thomas Piketty to know the problem. Healthcare, education, housing costs have skyrocketed for the last decade, real wages for most Americans have remained stagnant, labor gets pushed into the garbage bin. All of the magical productivity gains of the last 30 years have been consolidated at the very top in winner-take-all markets, and the benefits are not parceled out. This means lots of people don't have money to save - anybody selling you personal finance books is just another scammer trying to obscure the real problem.
There is definitely truth to this on a macro level, but there are also serious cultural issues with regards to spending habits. I know a company of 25-35 year old employees (about 50) that offers a 401(k) with a dollar for dollar match up to 4%. Of their 50 employees they have 6 people participating in the 401(k). Everyone else says they "can't afford it." They all eat out, have new iphones, etc. I agree with you about serious issues with regards to the economic model that is in place right now, but it's exacerbated by really poor financial judgment in our population.
Yup, I don't even have a phone plan, I still use pay per minute prepay on Tmobile for about 10 bucks a month. Many people i know living from pay check to pay check are dressed much better than me, drives better cars as well (I am driving a 06 Camry and plan on keeping it for five to 8 more years).
I think most of it is due to the huge student debt. A college degree is a minimum requirement at a lot of career jobs. And people are entering the workforce with nearly $40,000 in debt. It's hard to build equity when you're starting off in the hole. Diverting that $500 in student debt payments into savings would go a long way into building equity when you're that young. I don't think spending habits are really that different when you compare the generations.
There is no evidence to suggest that if you removed $500 in student loan debt they would divert that money to savings. That doesn't mean we shouldn't tackle the issues that lead to student debt, but my experience with thousands of employees tells me that younger people will always find something new to spend the money on. Unfortunately when they get older the rising costs of healthcare start to drain their finances, but they weren't saving before that either. Technology makes it easier and easier to spend money without feeling it.
It's hard to build up your net worth when you're drowning in credit card debt and financing new cars every 5 years. Hell, even people with equity in their homes are borrowing against it, which totally defeats the purpose of building it in the first place. Cut your lifestyle, pay off your consumer debt, save up a 6-month emergency fund, pay cash for everything (including cars) and watch your net worth go up every month. Healthcare costs are out of control, but an emergency fund should at least help with that. It's a lot easier to save money when you don't have student loan/credit card/car payments every month.
Actually, spending habits are Way different now then from my parents generation. The same people that worry about a $40,000 student loan debt will think absolutely NOTHING about taking on a $35,000 (average) car loan - hey let's buy 2 cars. The average home size now is over 1,000 square feet MORE than my mom's generation. Previous generations of men owned 2 pairs of shoes, a dress pair, and a school pair. They owned about 3 pairs of jeans, 1 pair of slacks. They only had 1 television and did NOT pay for programming of any type. They might have bought a new phone every 5-6 years, but it only costs a few bucks because it plugged in to the wall. Most saved up quite a bit before they purchased big items like a house or a car - and if they bought a new car, they ran it until it died. They rarely ate out..maybe a couple of times a month if lucky. They really didn't spend a lot of money. Think about the amount of toys/electronics/crap your kids have vs. what your parents or grandparents had as kids. We really do spend a LOT of money on crap we don't need. Very few people today actually know where they spend their money. Most people are shocked when they begin tracking their money.
True. But having that obligated debt makes it harder to save and invest. Individuals are starting their careers a few years later with more debt than previous generations.
This is great personal finance idea to give you a few extra long run crumbs. Here's a better idea. Be politically active. Understand inequality as probably the single greatest driving force for a lot of what ails society. Vote for leaders that will impose taxes on the wealthy and regulate monopolists.
When someone offers you free money...TAKE IT! The 401k match is the biggest one of those. If your company offers matching, and you don't contribute up to the match limit, you are turning down free money. It is also then tax free, so you're turning down MORE free money. The reality is, for 99% of the people, that you won't even miss the 6 or so % they match up to, especially since it is tax free, and hence really only 3-4%. The people saying they can't afford this are probably also the ones getting Starbucks once or twice a day. I DO think spending habits are different. We have a lot more to spend $$ on. Starbucks, for example, didn't exist then...nor did anything similar. No one paid $200+/mo for TV/Internet. Lots of examples like this.
And who is behind the culture of having a new phone - the youngs with their millennial ways, or the algorithimcally driven dopamine exploiting world that we now exist in, and whose benefits flow ever upward to our technocapitalist overlords. But anyway that's beside the point - even in the youngs are more predisposed to consume and it's entirely their fautl, that consumption is a drop in the bucket compared to a $10,000 ER bill or a $100,000 tuitiion bill.
We fit in the 45-54 age bracket and I've figured out Net Worth (quickly) including escrow to be a little over 200K. I did not include the 12K that currently resides in our daughters 529's. We have a take-home of about 88K a year between me and my wife (after putting about $600 a month in our 403B's) I graduated college with 24K in college loans, and my wife had about 40K in college loans. I paid mine off early, and my car loan, but we didn't really start to save until later in life Here's what we did..that most people in the U.S. refuse to do. We made an actual written budget and keep to it every month. This allowed us to pay off student loans and car loans early. We have not had a car loan in 15 years. Thats an average of about $1000 a month we aren't losing to a bank. (average U.S. Car loan is almost $500 a month) Instead, we saved cash over the course of several months until we had about 6K, sold my paid off Saturn, and bought a used minivan with 67K miles on it. Still no car payment. We cook a lot of meals at home - family of four our grocery budget is about $120 a week. We take cash to the store and I add it up as I shop so I know how much I'm spending and can stay under budget Our home is about 1500 sq. feet - most people I know making around the same amount buy much larger homes - we refied to a 15yr loan about 8yrs ago and have more in equity than we owe. I currently put 10% into my 403B so that I get the full match from my company. I'm looking forward to opening Roth IRA soon so I can get up to the recommended 15%. My wife's contributions are significantly lower, but she's been contributing for a much longer time. We'll be upping her % soon. I didn't own an HD TV until about 3 months ago because our old TubeTV was still working. Why replace something that's not broken? When I did replace it, I saved up cash and waited for it to go on sale. The same thing with the TV stand that's below it. Vacations - we've only taken a couple of extravagant vacations - Disneyworld & Playa Del Carmen. And we saved up and paid cash for the both. We don't use credit cards. Last year we went to Florida but stayed with my dad in Pensacola. We also paid cash for everything we did there. Basically, we don't spend money we don't have, and we budget everything. If people tracked their spending, most would be very surprised.
I agree with you on the Dr's bill - We've had to deal with a LOT of those, but that's more likely to affect the older people, not the younger ones. As far as the tuition - nobody is forcing people to go to overpriced colleges. My niece has decided to go to Stanford at $48K a year because of the way the idiots in the North East look at college eduction. UMASS just isn't good enough for the snobby elite. Never mind that her mom works at UMASS (which is 1/4 the price of Stanford) and she can also get a massive discount off tuition at UMASS. But this is how the youth think about things - they DONT take money in to consideration. We're constantly telling our kids that UNT and SHSU are both fine schools - you don't have to go to an expensive college. The unfortunate part is that other kids will be telling them different by the time they are Seniors in HS.
The full cost of public colleges has roughly doubled over the last 20 years. Real wages have been flat You can't save your way out of that trap over time.
