How Do You Compare to Most Americans

Jacob Sturgill, CFP®

Most of us have learned how we should take care of our physical health: visit the doctor at least once per year for an annual examination, make every effort to eat healthy, and fit in some daily physical activity. The annual examination serves as a baseline measurement for all future visits, and with it, our physician can more easily determine if our health is improving or declining over time. But what about assessing our financial well-being? Here we take a look at the financial health of Americans and provide some insight into how you can determine your financial baseline for comparison.

The financial health of Americans, as a whole, has improved over the past several years. Stocks are hitting all-time highs as a result of steady growth in the U.S. economy, substantial earnings gains1, and increasing optimism surrounding tax reform in Washington, D.C. Consumer confidence also remains strong and steady as job growth, wages, and consumer spending continues to rise.2 However, does this good news about the economy and markets mean your financial situation is improving? One place to start is to measure and track your net worth over time.

We provide our clients with an online portal where they can view their updated net worth daily. However, if you do not have access to an online tool, you can calculate your net worth by doing the following

  1. List all of your assets including real estate, cars, savings accounts, retirement accounts, brokerage accounts and assign a value to each.
  2. Add up the total value of all of your assets.
  3. Now list all of your liabilities including mortgage debt, car loans, credit card debt, and any other outstanding balances due and assign a value to each.
  4. Add up the total cost of all of your liabilities.
  5. Subtract your liabilities from your assets to determine your net worth.

A financial professional can use your net worth to help you determine whether or not you are on track to reach your goals. Since financial goals are specific, so are the numbers needed to obtain them. In general, if you want to improve your net worth and ability to achieve your goals you have to take a closer look at your income, debt, and assets.

Wages for the median American family have not kept up with inflation over the past twenty years.3 If you too have not experienced any significant increases in income over the past several years, it may be time to consider changing employers, continuing your education, or finding a way to supplement your income with a side job. Increasing your income is an obvious way to improve your financial health, but is not always an available option.

Americans are not earning more, but we are managing debt better. After the Great Recession, paying off debt continues to be a top concern for most Americans. Interests rate continue to be historically low, and debt payments as a percentage of disposable income are the lowest they have been since 1980.4  When you look at your net worth, are your liabilities keeping you from being financially healthy? What can you do to increase debt payments and pay off your debt faster?

The last area that is critical to our financial health is our assets. The stock market has more than tripled since reaching its lows, and home prices have recovered across the country.5 However, since 2007, the number of adults owning stock investments and so has home ownership has declined.6 How have your assets grown over the past five years? Is fear about the markets keeping you from investing more?

If you are not satisfied with your financial situation, it may be time to make some changes. Change may come in many forms but may mean earning more, saving more, paying off debt, altering your asset allocation or investment objectives, or devising a plan for all of the above.

Since we are professionals in assessing and helping people to improve their financial health we invite you to give us a call or sign-up for our free download, How Healthy is Your Life Portfolio?, to access even more research and insight into how you compare to most Americans.

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1-6 “How Healthy is Your Life Portfolio?” LPL Research Thought Leadership, October 2017