Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Americans have a net worth problem, and it’s not positive
Just tossing this Credit Karma survey out there for those interested.
° More than half of Americans don’t know how to calculate their net worth (51%) ° Nearly one-third of Americans have a net worth of $0 or less (31%) ° 30% of Gen Z care more about celebrities’ net worth than their own
Thanks, Mark. For too many years I've pushed many I know to put a 'little' money, at the very least, into available 401k/403b's or a Roth. Don't try to be fancy, but learn along the way. Throw some money at a balanced fund. The vast majority missed their best investing friend of compounding with time. Pretty sad all around. I'm writing about boomers who can not 'catch up' to the lost time. The other generations still have a 'chance'.
Lewis, we all know that the CEO-to-worker compensation ratio is absurd. That doesn't make Mark's information any less factual. Perhaps if more Americans knew their net worth and compared it to that of CEOs and "celebrities" there might be more concern about the CEO-to-worker compensation ratio.
I know. But it seems irrelevant to say Americans aren't saving enough when so many have nothing left over to save after paying their bills. I often think the constant complaints posed in the media over "financial illiteracy" are really just a coded repeat of the "personal responsibility" mantra, blaming the victims of massive income inequality for their own suffering when that inequality is systemic and, largely, by design, and not primarily due to individual moral or ethical failings. Yes, people should save more and put more in their retirement plans. But there are often really good reasons they can't, and in certain cases lousy reasons. There tends to be a fixation on the lousy reasons.
Got cable? Skim through the hundreds of available offerings nearly any time of day or night to get a read on where America’s deteriorating brains are.
Both sides here are correct in some manner. However if you gave a bushel basket of money to some they wouldn’t know what to do with it and it’d be depleted inside of a year. Oh, hell, goes to education I suppose. But how do you teach / learn when you’re busy running “live-fire” drills even at the elementary level?
I know college educated people who have no grasp of money management. In one door and out the other.
I know. But it seems irrelevant to say Americans aren't saving enough when so many have nothing left over to save after paying their bills. I often think the constant complaints posed in the media over "financial illiteracy" are really just a coded repeat of the "personal responsibility" mantra, blaming the victims of massive income inequality for their own suffering when that inequality is systemic and, largely, by design, and not primarily due to individual moral or ethical failings. Yes, people should save more and put more in their retirement plans. But there are often really good reasons they can't, and in certain cases lousy reasons. There tends to be a fixation on the lousy reasons.
I think it's a combination of structural inequity AND lack of personal responsibility.
If money's tight, do we really need to go into hock for that summer vacation just because it's summer vacation and everyone is 'supposed' to take a trip? I would argue no; find something local that's more cost effective and go when you're not going to spend the next 10 years paying interest on the credit card debt used to finance the week away.
But at the same time, one can argue that the structure of the capitalist system also runs against people, too. For example, think how many things are now subscription-based versus years ago. Or why is there a 'PBM' dictating what medicine you can get when they're NOT your doctor? Etc, etc.
And don't get me started on the insane nature of our retirement system, account limitations on contributions, etc. I long since quit playing the annual contribute-and-convert-to-Roth game because for only 5-7K/year it wasn't worth it. If you want to create responsible savers, let them save what they want WHEN THEY WANT TO. Had a windfall year and can sock away 50K? Great! Had a bad year and couldn't contribute more than 5K? Okay, that's fine, too. But things like the Roth phase-out and the huge delta between 40X contribution levels and IRA contribution levels remains a sore spot for me. Nobody these days can expect a comfy retirement in 2050+ on tucking away 5-7K a year in an IRA no matter how much it might grow or how lucky the investments are.
And there's the whole single-person-penalty when compared to married couples on taxation and more. Hell, our tax code in general is slanted against most people anyway. Grargh....
Living within your means and staying debt free is what enables true freedom, but that thinking just ain't profitable.
(sorry, I'm on a roll this week - I'm hosting 2 different sessions for our uni's financial literacy week)
@rforno Ever hear about The Stanford Marshmallow Test? Worth reading. https://globalcitizen.org/en/content/marshmallow-test-rich-children/ People who've suffered deprivation much of their lives may not want to put off that vacation or put off eating that marshmallow. Deep down they believ they won't get another chance, and in some cases they're right. Poor people have shorter life expectancies than rich, and less access to life's pleasures.
@rforno Ever hear about The Stanford Marshmallow Test? Worth reading. https://globalcitizen.org/en/content/marshmallow-test-rich-children/ People who've suffered deprivation much of their lives may not want to put off that vacation or put off eating that marshmallow. Deep down they believ they won't get another chance, and in some cases they're right. Poor people have shorter life expectancies than rich, and less access to life's pleasures.
Oh yeah, I know about that. And I also concede that, as in many things, there often is no single right reason/answer/solution to this situation, either.
Is this new to this young generation as this survey suggests? No. I don't believe it is generational at all. As Lewis suggests, it's where you stand on the economic ladder.
And it's not new. A look at the number of todays seniors where social security is their sole income is not much different than this "survey's" critique genX or genZ or any other subset generation they want to pick. It's social status, not generational.
Social Security is the sole source of income for about one in five (20 percent) people aged 65 and older. Certain subgroups are particularly reliant on Social Security. Of those age 65 and older, Social Security is the sole source of income for 40 percent of Hispanics, 33 percent of African Americans, 26 percent of Asian and Pacific Islanders, 18 percent of whites, and 20 percent of unmarried women.
The other scandal is granting huge numbers of options to upper management ( whose compensation is based on the stock price) who then borrow large amounts of money to buy back shares so earnings are not diluted.
As for personal finances, my wife and I scrimped and went camping for vacations, driving cars till they fell apart etc. We bought a small house and paid off the mortgage early.
Consequently both our kids could graduate from the Ivy League debt free, and work at lower paying jobs that they love and find rewarding and fulfilling. We retired at 67 and 64
We know folks who are both lawyers. The wife spends $200 every couple of weeks to get her hair done. They eat out 3 or 4 times a week They had to accept a private mortgage for their house because I guess they couldn't qualify at a bank.
Their kids have large student loans and they have to work at high paying jobs that they really don't like, rather than work they like, to pay off loans, but one kid's goal is still to eat at all the Michelin rated restaurants in NYC as soon as possible, rather than paying off loans ASAP.
@sma3 I know this may sound surprising, but I don't think either lifestyle is necessarily wrong as life is short and we never know what tomorrow will bring. Eating at a Michelin rated restaurant if you truly love food could be a treasured memory or a highpoint in one's life, as can a beautiful but expensive vacation. Meanwhile, someone who never enjoys life and scrimps and saves everything could be struck down too soon by illness or an accident. Life is more unpredictable than financial planning models would have us believe. Ideally, some balance between prudence and pleasure should be a goal.
I agree but if you owe thousands of dollars in student debt that requires you to work in a job you don't like just to pay the monthly payments you shouldn't be eating at Michelin restaurants.
It is easier to change your perceptions of what is a good life than to pay off student loan debt when you are 60
I can appreciate both sides of your arguments, but it seems to me that both of you are describing options available to people who should be well acquainted with the concept of individual net worth, and are making decisions within that framework.
Mark's original post is more concerned with the presumed fact that half of Americans have no concept of what net worth even is, and about one-third have no net worth to even think about.
@Old_Joe You're right. I think many Americans are too busy trying to get by than to think about things like net worth, but it would help those who have the means to save to learn. It's an interesting question what the percentage of people who have the means is.
"You can lead a horse to water, but you can't make him drink". Some people just don't care about finance and savings. It's all carpe diem. Cash in, cash out, no matter what the income. Even if you sent some of the free spenders to a Budgeting class, the desire has to be there. Certain personality types will not allow for structured saving and planning. It's just not in their DNA.
I'd venture that most posters on these discussion boards are fairly good savers/budgeters (or at least, were at some point). That's simply not the case for the typical American. In general, we are good at one thing - spending.
On the flip side, some of the supposed Financial Planning experts push the limits of what you really need to retire. Not everybody requires over $2M or $3M in savings to retire comfortably.
"...I'd venture that most posters on these discussion boards are fairly good savers/budgeters (or at least, were at some point). That's simply not the case for the typical American. In general, we are good at one thing - spending.
On the flip side, some of the supposed Financial Planning experts push the limits of what you really need to retire. Not everybody requires over $2M or $3M in savings to retire comfortably." ******************* Bingo. 66% --- isn't it--- of the USA economy depends upon CONSUMPTION??? And really, if the proper arrangements are made, no one needs anything near a million dollars. If you work for a nonprofit, you're not going to earn a lotta money. But there are choices to be made and saving and investing to be done, which will stand you in good stead when retirement age comes around.I never owned a home. STILL renting, in retirement. Works for me. Affordable SENIOR housing isn't very costly compared to the standard apartment rents. And I'm not in a senior-living arrangement. There might be a wait. But it's worse, quite a long wait, for under-employed single moms around here. I know one, personally. She applied, and the system simply never came through for her on that score. At least she's been smart enough to put $$$ into her 401k.
Hank mentioned criticalthinking skills. There certainly is quite a dearth of that stuff, I note, these days. I talk to ordinary people all around and am shocked. Missing the forest for the trees. Or missing the forest AND the trees. Or not CARING where that forest might be. Or not knowing what a forest IS. OMG. And these people VOTE, I presume.
@Crash Regarding consumption, there is something almost pathological in how our entire economy is dependent on the U.S. consumer consuming more, yet financial experts whose portfolios of company stocks benefit from that consumption are constantly tsking tsking them for consuming too much. It is similary weird and hypocritical to criticize Americans for being obese and eating too much while constantly bombarding them with ads for junk foods and actually subsidizing the corn industry with tax dollar paid farm subsidies--the same corn that makes corn syrup in all of the junk food making Americans obese. Similary, we say Americans are wasteful with plastic harming the environment and they need to recycle while we don't have the recycling facilities to recycle their waste and most of it ends up not being recycled or shipped to China, which doesn't want our waste anymore. Meanwhile, the companies producing the plastic and industries consuming it are largely unregulated and actually the main cause of plastic waste. Everything problematic in the U.S. tends to be put back on the individual as some sort of moral or ethical problem with that individual--that personal responsibility mantra--instead of acknowledging sometimes deeper systemic or structural problems that can only be fixed with regulatory and legal changes. So, with the financial literacy business--and it is a business now--the assumption is if you're poor in the U.S., it has to be your own fault. You're just not saving enough. That's even if your low wages can barely cover your bills or you're just one illness away from being bankrupted by a hospital bill and/or lost employment as a result.
I imagine raising the federal minimum wage and extending Medicare to all citizens regardless of age would do a lot more to solve Americans' net worth problem than financial literacy classes.
Regarding the perception that Americans are just lazy wasteful ignorant people who don't know how to save, one distinction that starkly highlights how that perception is somewhat mythological is the differences in vacation time in the U.S. versus other nations: https://benefitnews.com/news/should-the-u-s-have-the-same-pto-as-the-u-k-and-the-eu
On average, employees in the U.S. take 14 days off per year, while workers in European countries like Spain, France, Germany and even the U.K. take 24 days, according to workforce tech solutions company Skynova. The disparity isn’t a surprise, since the U.S. does not federally mandate paid vacation or holidays, leaving it up to the discretion of employers. The EU, on the other hand, requires at least 20 days of vacation for all employees while the U.K. requires 28 days.
I think Americans are for the most part a hard working people and deserve better treatment from their employers and the government regulating or not regulating currently those employers.
Right on but you left out the totally dysfunctional education system that is failing students who need to learn how to do more than flip burgers.
All could change if people voted their economic interests not their prejudices, or their belief that Ragan's "most terrifying words " are true.
When I see MDs believing that Ivermectin works or Fox News is truthful, there is little hope the less educated will vote to force the government to change
@LewisBraham. well stated. I have nothing to add. As long as we do not completely wash our hands of the IDEA that personal responsibility ought to matter. Given a better set of circumstances, personal choices would make a bigger difference. I certainly do hear you when it comes to our very different work-world, as compared to the EU, even the UK, too.
@sma3. Truth. Life's deeper questions should not be the sole property of gifted students. When I see MDs believing that Ivermectin works or Fox News is truthful, there is little hope the less educated will vote to force the government to change.
spot-on. Not to mention LAWYERS who think the same way. I have some regular cotact with a guy who is a lawyer. Retired. Presumably very smart. But..... he's drunk the kool-aid, and there's no going back.
Same thing with one of my best friends, a Ivy League trained Cardiologist. Only watches Fox News and believes the "Woke Libs" are taking over the world. My cousin's husband, a brilliant business man had two safes in his office full of AKA 47's to defend his factory from Antifa who he was convinced were soon going to storm the place.
It seems the American Empire remains happy to salsa drunkedly along the knife's edge. At what point does a society become so ensnared in embracing or fighting such BS that it's unable to pull out of the death spiral it ends up bringing upon itself? Does it take hitting the iceberg. hearing the screams, and seeing the water lapping up the poop deck before folks realize that's the trajectory of their lives and the world around them?*
* because obviously, the lifeboats pulling away are just full of fake news hoax Antice agitators, right?
Lovely thought for a Monday morning, *grumble*grumble*growl*
Comments
The vast majority missed their best investing friend of compounding with time.
Pretty sad all around. I'm writing about boomers who can not 'catch up' to the lost time.
The other generations still have a 'chance'.
If only America's young stopped eating all that avacado toast and listening to the rock n' roll music, they'd be alright.
Both sides here are correct in some manner. However if you gave a bushel basket of money to some they wouldn’t know what to do with it and it’d be depleted inside of a year. Oh, hell, goes to education I suppose. But how do you teach / learn when you’re busy running “live-fire” drills even at the elementary level?
I know college educated people who have no grasp of money management. In one door and out the other.
Some other problems Americans have:
- immediate gratification problem
- savings problem
- living within your means problem
- critical thinking skills problem
If money's tight, do we really need to go into hock for that summer vacation just because it's summer vacation and everyone is 'supposed' to take a trip? I would argue no; find something local that's more cost effective and go when you're not going to spend the next 10 years paying interest on the credit card debt used to finance the week away.
But at the same time, one can argue that the structure of the capitalist system also runs against people, too. For example, think how many things are now subscription-based versus years ago. Or why is there a 'PBM' dictating what medicine you can get when they're NOT your doctor? Etc, etc.
And don't get me started on the insane nature of our retirement system, account limitations on contributions, etc. I long since quit playing the annual contribute-and-convert-to-Roth game because for only 5-7K/year it wasn't worth it. If you want to create responsible savers, let them save what they want WHEN THEY WANT TO. Had a windfall year and can sock away 50K? Great! Had a bad year and couldn't contribute more than 5K? Okay, that's fine, too. But things like the Roth phase-out and the huge delta between 40X contribution levels and IRA contribution levels remains a sore spot for me. Nobody these days can expect a comfy retirement in 2050+ on tucking away 5-7K a year in an IRA no matter how much it might grow or how lucky the investments are.
And there's the whole single-person-penalty when compared to married couples on taxation and more. Hell, our tax code in general is slanted against most people anyway. Grargh....
Living within your means and staying debt free is what enables true freedom, but that thinking just ain't profitable.
(sorry, I'm on a roll this week - I'm hosting 2 different sessions for our uni's financial literacy week)
People who've suffered deprivation much of their lives may not want to put off that vacation or put off eating that marshmallow. Deep down they believ they won't get another chance, and in some cases they're right. Poor people have shorter life expectancies than rich, and less access to life's pleasures.
And it's not new. A look at the number of todays seniors where social security is their sole income is not much different than this "survey's" critique genX or genZ or any other subset generation they want to pick. It's social status, not generational. per https://www.nasi.org/learn/social-security/the-role-of-benefits-in-income-and-poverty-2/#:~:text=Social%20Security%20is%20the%20sole,people%20aged%2065%20and%20older.
The other scandal is granting huge numbers of options to upper management ( whose compensation is based on the stock price) who then borrow large amounts of money to buy back shares so earnings are not diluted.
As for personal finances, my wife and I scrimped and went camping for vacations, driving cars till they fell apart etc. We bought a small house and paid off the mortgage early.
Consequently both our kids could graduate from the Ivy League debt free, and work at lower paying jobs that they love and find rewarding and fulfilling. We retired at 67 and 64
We know folks who are both lawyers. The wife spends $200 every couple of weeks to get her hair done. They eat out 3 or 4 times a week They had to accept a private mortgage for their house because I guess they couldn't qualify at a bank.
Their kids have large student loans and they have to work at high paying jobs that they really don't like, rather than work they like, to pay off loans, but one kid's goal is still to eat at all the Michelin rated restaurants in NYC as soon as possible, rather than paying off loans ASAP.
Some people just don't get it.
I agree but if you owe thousands of dollars in student debt that requires you to work in a job you don't like just to pay the monthly payments you shouldn't be eating at Michelin restaurants.
It is easier to change your perceptions of what is a good life than to pay off student loan debt when you are 60
Mark's original post is more concerned with the presumed fact that half of Americans have no concept of what net worth even is, and about one-third have no net worth to even think about.
I'd venture that most posters on these discussion boards are fairly good savers/budgeters (or at least, were at some point). That's simply not the case for the typical American. In general, we are good at one thing - spending.
On the flip side, some of the supposed Financial Planning experts push the limits of what you really need to retire. Not everybody requires over $2M or $3M in savings to retire comfortably.
On the flip side, some of the supposed Financial Planning experts push the limits of what you really need to retire. Not everybody requires over $2M or $3M in savings to retire comfortably."
*******************
Bingo. 66% --- isn't it--- of the USA economy depends upon CONSUMPTION???
And really, if the proper arrangements are made, no one needs anything near a million dollars. If you work for a nonprofit, you're not going to earn a lotta money. But there are choices to be made and saving and investing to be done, which will stand you in good stead when retirement age comes around.I never owned a home. STILL renting, in retirement. Works for me. Affordable SENIOR housing isn't very costly compared to the standard apartment rents. And I'm not in a senior-living arrangement. There might be a wait. But it's worse, quite a long wait, for under-employed single moms around here. I know one, personally. She applied, and the system simply never came through for her on that score. At least she's been smart enough to put $$$ into her 401k.
Hank mentioned critical thinking skills. There certainly is quite a dearth of that stuff, I note, these days. I talk to ordinary people all around and am shocked. Missing the forest for the trees. Or missing the forest AND the trees. Or not CARING where that forest might be. Or not knowing what a forest IS. OMG. And these people VOTE, I presume.
I imagine raising the federal minimum wage and extending Medicare to all citizens regardless of age would do a lot more to solve Americans' net worth problem than financial literacy classes.
Regarding the perception that Americans are just lazy wasteful ignorant people who don't know how to save, one distinction that starkly highlights how that perception is somewhat mythological is the differences in vacation time in the U.S. versus other nations: https://benefitnews.com/news/should-the-u-s-have-the-same-pto-as-the-u-k-and-the-eu I think Americans are for the most part a hard working people and deserve better treatment from their employers and the government regulating or not regulating currently those employers.
Right on but you left out the totally dysfunctional education system that is failing students who need to learn how to do more than flip burgers.
All could change if people voted their economic interests not their prejudices, or their belief that Ragan's "most terrifying words " are true.
When I see MDs believing that Ivermectin works or Fox News is truthful, there is little hope the less educated will vote to force the government to change
@sma3. Truth. Life's deeper questions should not be the sole property of gifted students.
When I see MDs believing that Ivermectin works or Fox News is truthful, there is little hope the less educated will vote to force the government to change.
spot-on. Not to mention LAWYERS who think the same way. I have some regular cotact with a guy who is a lawyer. Retired. Presumably very smart. But..... he's drunk the kool-aid, and there's no going back.
Same thing with one of my best friends, a Ivy League trained Cardiologist. Only watches Fox News and believes the "Woke Libs" are taking over the world. My cousin's husband, a brilliant business man had two safes in his office full of AKA 47's to defend his factory from Antifa who he was convinced were soon going to storm the place.
use that old plastic, swipe deeper in debt
Its easy, easy you see
If tomorrow never comes....everything is free.
* because obviously, the lifeboats pulling away are just full of fake news hoax Antice agitators, right?
Lovely thought for a Monday morning, *grumble*grumble*growl*
... back to investing thoughts, I guess.