Has the Recession Affected Your Net Worth?

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Thu, Jun 11 - 4:51 pm EDT | 5 years ago by
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Today, the Federal Reserve released its quarterly report on household wealth. According to MarketWatch, the report contained this information on net worth:

Household net worth fell at a 9.9% annual rate in the first three months of the year to $50.4 trillion, the lowest in more than four years. Net worth — assets minus liabilities — peaked at $64.4 trillion in the spring of 2007, the Fed said in its quarterly flow of funds report.

uscurrency_federal_reserveThis is the 7th consecutive quarter that saw a decline in household wealth. While there are some bright spots in the report (more disposable income, lower credit card debt), the fact remains that many people are seeing their overall net worth decline. Home values are declining and investment portfolios are experiencing losses. Since many people have a great deal of their assets tied up in their homes, it is little surprise that the bursting of the real estate bubble has hit net worth. Additionally, with the losses to the stock market, the assets many had in their retirement accounts are dwindling. As I see it, there are two things you can do to reduce the psychological burdens that come with these losses:

  1. View your primary residence as a purchase: Instead of thinking of your home as an investment, think of it as a long-term purchase. Consider the intangibles that come with your home (a yard for your kids, your own space, etc.).
  2. Remember the long-term value of the stock market: Even though your retirement account may be suffering now, over time stocks gain overall. If you keep investing now, there is a good chance that in 10, 15, 0r 20 years, you will see significant gains.

This still doesn’t change the fact that your net worth may have fallen. However, if you stick with the sound personal finance fundamentals of reducing debt, building your savings, engaging in prudent investing and making your mortgage payments, your net worth will recover — and eventually thrive.

How has your net worth been affected by the recession?

image source: Wikimedia Commons

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  • carl

    My debt reduction plan has continued as normal. Our house may have lost value but we are still near 20% equity in the house and I need to call about canceling the PMI.

    We have not been able snowball debt as I really wished we could have but the monthly payments have been decreasing and balances are decreasing. Hopefully a couple more loans will be paid off in the next 6-9 months.

  • http://www.biblemoneymatters.com Bible Money Matters

    Our home’s value has dropped by almost 50,000, and my 401k has taken a huge hit as well. But we’ll weather the storm. We’ll continue living within our means, saving, giving and being responsible. Hopefully more people will do the same.

  • Jim

    No reason for anyone to boo-hoo over what is happening. For the optimist it is a once in a lifetime buying opportunity for real estate, stocks and commodities….. but not bonds, because interest rates have no where to go but up (thank you Timmy, Ben and the big O).

  • Miranda Marquit

    It sounds like you are in a good place, Carl! Good luck to you as you continue to decrease your debt and lay a foundation for a secure financial future!

  • Miranda Marquit

    I think you’ll be fine. You have everything that creates a firm foundation. We’d all be better off if we were more like you :)

  • Miranda Marquit

    You make a good point. For those who are ready, this recession presents a good opportunity.

  • Jim

    Especially if your investment time horizon is 20 or thirty years. We’ll see Dow 40,000 or 50,000 in that time frame if the historical trends for market returns remain intact (which it has for hundreds of years).