Every three years, the Federal Reserve releases a report summarizing changes in family finances in the United States. While these statistics don't capture the full story, they offer valuable insights into the financial landscape.
The Remarkable Rise in Median Net Worth
From 2019 to 2022, the real median net worth for U.S. households soared by an astonishing 37%. This is a substantial wealth increase, especially when considering that 2022 was a challenging year for diversified investment portfolios.
"But Ben, what about inflation?" you might ask. These numbers are inflation-adjusted, making this wealth growth even more remarkable. During the same period, total household debt increased by less than 4%. That's a financial trend most of us would gladly embrace every three years.
A Historical Perspective on Wealth Growth
A historical look at net worth changes every three years going back to 1989 reveals the substantial magnitude of the most recent increase. There's simply no comparison to the 2019-2022 surge in wealth, which stands in a league of its own.
Generational Wealth Growth
Examining the relative changes in wealth by age groups highlights the tremendous increase in wealth among those under 35. Their rise in net worth is exceptional, marking a significant improvement for young people compared to just a few years ago.
Not Just About Housing
While rising housing prices certainly played a role in this wealth growth, renters experienced an even more significant increase in their real net worth compared to homeowners. Renters saw gains of 43%, while homeowners experienced a 34% increase.
Why the Gloomy Sentiment?
Despite this impressive financial progress, it appears that many people feel pessimistic about the economy. Several factors contribute to this sentiment:
Inflation and Economic Volatility: Americans are generally averse to inflation and economic turbulence. Higher interest rates may be affecting morale, especially since Americans tend to favor borrowing money.
Challenges in the Housing Market: The current state of the housing market isn't helping optimism.
Psychological Impact of the Pandemic: The pandemic had a profound effect on our psyche. It disrupted the financial status quo, resulting in increased savings due to reduced spending and government stimulus. Transitioning from this situation to a period of rapidly rising prices and rates has been disorienting.
Media Influence: The media has a tendency to focus on bad news, and it seems that society has developed an addiction to it. This media-driven negativity can influence our perceptions of the economy.
Looking at the Bigger Picture
While there are valid concerns and challenges in the economy, it's essential to acknowledge the substantial progress made in the financial well-being of American households. This improvement, although it might not feel like it, is worth celebrating, even if it isn't a permanent state.
In a world where good news can sometimes be viewed as bad news, recognizing the positive strides made by U.S. households is a reminder that progress has been achieved.
Title: "Unprecedented Wealth Growth: The Untold Story of America's Financial Landscape"
Author: Ben Carlson
Publication Date: October 22, 2023
Source: [Link to the original article on A Wealth of Common Sense](link)