8-17-2014
http://www.usatoday.com/story/money/business/2014/08/17/why-americans-broke/14056173/
5 signs Americans are flat-out broke
Despite improvement in certain areas of the economy, the Great Recession never truly ended for millions of Americans. Households across the nation are still trying to overcome a sluggish labor market, stagnant wages, and rising living costs. Making matters worse, the struggle does not appear to be ending anytime soon.
1. Higher education
The cost of obtaining a degree and the associated benefits are making some Americans think twice about the college experience. With soaring tuition prices that regularly outpace other forms of inflation, the days of a degree virtually guaranteeing material wealth early in life are over.
2. Cars
Americans have a long history of obsessing over automobiles, but that relationship may be running on fumes.
"As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level," said Melinda Zabritski, Experian Automotive's senior director of automotive credit. "The benefit of a longer-term loan is the lower monthly payment; however, the flip side of that is consumers can find themselves paying more in interest or being upside-down on their loan if they seek to trade their vehicle in early."
The average monthly payment for a new vehicle loan also hit a record high of $474 in the first-quarter, driving more cash-strapped buyers to leases.
Of all new vehicles financed, 30.2% were leased compared to 27.5% a year earlier.
3. Real estate
Home ownership has been a critical component of the American Dream for decades. However, affordability issues and the recent housing-bubble collapse are keeping many buyers on the sidelines.
Last month, the Census Bureau reported that the nation's homeownership rate during the second quarter dipped 0.3 percentage points to 64.7%, compared to 65% a year earlier. As the chart above shows, that is the lowest level in nineteen years.
Rent prices are not rising as fast as home prices, but Trulia reports that rent prices rose 6.1% on a year-over-year basis in July a sizable increase to those already struggling with their finances.
4. Savings
Saving money continues to be a losing battle for many Americans. Twenty-six percent of Americans do not have any money placed aside for emergencies, according to a new survey from Bankrate. In fact, 67% have saved less than six months' worth of expenses, and 50% have saved less than three months' expenses. Over the past year, the number of Americans with at least three months' expenses in savings declined from 45% to 40%.
5. Wealth
A brutal combination of falling stock and home prices has decimated wealth gains over the past decade. Net worth at the 50th percentile (median) totaled $56,335 in 2013, down 36% from $87,992 in 2003, according to a recent report from the Russell Sage Foundation. In fact, the 90th and 95th percentiles were the only groups to report wealth gains between 2003 and 2013.
"It is possible that the very slow recovery from the Great Recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace."
http://www.usatoday.com/story/money/business/2014/08/17/why-americans-broke/14056173/
5 signs Americans are flat-out broke
Despite improvement in certain areas of the economy, the Great Recession never truly ended for millions of Americans. Households across the nation are still trying to overcome a sluggish labor market, stagnant wages, and rising living costs. Making matters worse, the struggle does not appear to be ending anytime soon.
1. Higher education
The cost of obtaining a degree and the associated benefits are making some Americans think twice about the college experience. With soaring tuition prices that regularly outpace other forms of inflation, the days of a degree virtually guaranteeing material wealth early in life are over.
2. Cars
Americans have a long history of obsessing over automobiles, but that relationship may be running on fumes.
"As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level," said Melinda Zabritski, Experian Automotive's senior director of automotive credit. "The benefit of a longer-term loan is the lower monthly payment; however, the flip side of that is consumers can find themselves paying more in interest or being upside-down on their loan if they seek to trade their vehicle in early."
The average monthly payment for a new vehicle loan also hit a record high of $474 in the first-quarter, driving more cash-strapped buyers to leases.
Of all new vehicles financed, 30.2% were leased compared to 27.5% a year earlier.
3. Real estate
Home ownership has been a critical component of the American Dream for decades. However, affordability issues and the recent housing-bubble collapse are keeping many buyers on the sidelines.
Last month, the Census Bureau reported that the nation's homeownership rate during the second quarter dipped 0.3 percentage points to 64.7%, compared to 65% a year earlier. As the chart above shows, that is the lowest level in nineteen years.
Rent prices are not rising as fast as home prices, but Trulia reports that rent prices rose 6.1% on a year-over-year basis in July a sizable increase to those already struggling with their finances.
4. Savings
Saving money continues to be a losing battle for many Americans. Twenty-six percent of Americans do not have any money placed aside for emergencies, according to a new survey from Bankrate. In fact, 67% have saved less than six months' worth of expenses, and 50% have saved less than three months' expenses. Over the past year, the number of Americans with at least three months' expenses in savings declined from 45% to 40%.
5. Wealth
A brutal combination of falling stock and home prices has decimated wealth gains over the past decade. Net worth at the 50th percentile (median) totaled $56,335 in 2013, down 36% from $87,992 in 2003, according to a recent report from the Russell Sage Foundation. In fact, the 90th and 95th percentiles were the only groups to report wealth gains between 2003 and 2013.
"It is possible that the very slow recovery from the Great Recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace."
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