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2012 Net Worth Statistics You Need to Know

Average Net Worth of Americans

A recent report on net worth statistics from the Federal Reserve shows that the average net worth of Americans has declined over 40% in the last three years. Although that sounds like a huge decline it’s important to look carefully at the numbers to see what that decline means to you and me.

You can see the data yourself on the report from the Federal Reserve so you can understand where that 40% decline has come from. Here are some of the things that I noticed:

  • The value of the assets of American households was $80 billion in 2007 vs. $76.2B now
  • The value of real estate, as expected, is much lower now than in 2007 although it’s higher than in 2011 signifying some kind of recovery
  • Financial assets that are not real estate are back at pretty much the same level they were in 2007
  • Unfortunately liabilities have stayed at pretty much the same level through the last 5 years which explains the decrease in net worth since net worth=assets – liabilities
  • Average net worth of Americans (median) was at $77,300 as of 2010 compared to $126,400 in 2007. This is the same as 1992 net worth levels. Source.
  • Incomes also dropped and most significantly amongst middle class families who saw a 12.1% decrease in income

So you can easily deduct that a big culprit for the decrease in the average net worth of Americans is the decrease in home values. This also means that for Americans a BIG chunk of their net worth is tied to real estate and in general don’t have a lot of money in the bank and/or liquid investments.

However it’s important to point out that the comparison with 2007 can be an artificial one…

The values of real estate in 2007 could have been created and pushed up by high appraisals and easy to qualify for loans. This made it easy for more houses to sell at higher prices therefore increasing the overall value of real estate.

So when you see headlines like this one that claim we are trillions poorer than before you really have to read into the data because although technically true the reality is that 2007 was an inflated net worth based on unrealistic real estate values and where people were putting all their net worth eggs in a fictitious real estate basket.

What do these net worth statistics mean to you?

First off, it allows you to understand the current economic conditions that the country is going through and the things that you can’t control. So for example if your stock investments went down in value then it’s not necessarily because you did something wrong but the market in general has gone down.

However, you need to take these net worth statistics with a grain of salt…

Just because the average net worth of Americans fell does not mean your has or should. This is why I recommend you calculate and track your net worth. If you track your net worth then you would know where you are compared with the rest of the USA.

If you are doing better then try and figure out why…

Did you invest better?
Did you save more?
Did you spend less?

Figuring out what you have done right or wrong can help you make better decisions in the future. And being aware of the impact the national economy has on your net worth is important. But you also have to be smart enough to understand the meaning of the net worth statistics and how they apply to you.

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