The state of consumer finances in America is in a state of decline, further more this state of decline is accelerating at a rapid rate. Falling incomes of Americans along with inflation which devalues the limited dollars being earned by everyday average Americans coupled with the lack of asset accumulation is likely to make retirement at a normal age more difficult for most Americans. The Federal Reserve Board collects a massive amount of data every three years. This data ranges from incomes of Americans, assets, real estate, debts public and private, and data related to the banking and credit card industry. This data paints a picture of the state of American finances, and the latest “painting” is rather bleak indeed.
According to the last study dating back at 2013 the bulk of Americas wealth is held by the top 1% of Americans. While there has been some income gain for Americans since the last study, most of this income gain has been segmented to the higher income groups while the middle class and poor continue to hover in that category or decline further in income and asset allocation.
The study from 2013 showed an interesting statistic. The median income earned by all Americans except for Americans aged 65 to 75 and 75 or higher declined, while Americans aged 65 to 75 and 75 or higher earned more median income. The most hard hit financially has been Americans aged 55 to 64 as they struggle to meet the requirements for retirement coupled with falling incomes and inflating and rising health costs. Income was not the only factor to this rise and decline among the various age groups, but also the fact that the value of assets such as stocks and real estate has fallen due to the recession which started in 2007. The recession has forced families to carefully make decisions on what they would finance during such uncertain economic times and this has had a ripple effect on every industry in a domino like effect that has effected nearly every aspect of our economy. Stock ownership has declined in all age groups due to Americans distrusting the market and struggling with every day expenses.
There is some good news among the bleak outlooks of the last study. The one big improvement is that between the start of the recession and today the number of households which hold some form of an asset has increased across nearly every age group except those under age 35. Almost 100% of families headed by someone age 35 or higher held some type of asset. Those under 35 actually lost assets, in fact the percent of those under 35 holding assets fell 5% between 2007 and 2013. The sharpest decline asset wise for those under 35 was those owning a vehicle, which declined very sharply, while in every other age group those owning a vehicle rose sharply. Real estate was also hard hit during the recession with those between 35 and 64 investing less in real estate both primary or investment grade real estate, while those age 65 or higher have been investing more into real estate.
The one great piece of information gathered is that the proportion of all households with any type of debt has decreased slightly from 77 percent down to 74.5 percent. More Americans than ever before are focused on paying down and paying off debt. The decline in debt was sharpest among those 35 or under. The only loan category that has risen sharply among Americans has been loans for education as more Americans are focused on improving their skill set to earn more income.
What does this study show then? That more Americans are concerned with gathering assets, paying down debt but that the value of these assets has been declining at least for now. It shows that Americans are earning less due to inflation and spending less. Of investments made stocks are the least likely to be chosen as an investment today likely due to distrust due to the volatility of the stock market. It also shows that more Americans today are focused on obtaining higher education even at the expense of more debt.