The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

September 19, 2009

US Net Worth grows in 2Q. What can we learn

Filed under: Net Worth, News Review, Personal Finance — thebalancedspreadsheet @ 11:23 am

I ran across this article from the A/P titled “US Net worth grew in 2Q for first time since ‘07”. It is based on data from the Federal Reserve and I noticed some interesting facts and figures:

Americans’ wealth rose this spring for the first time in nearly two years, with stocks and home values gaining as the recession faded.

 

The Federal Reserve said net worth grew by $2 trillion to $53.1 trillion in the April-to-June quarter. Net worth, or the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards, rose nearly 4 percent from the first quarter, the Fed said.

 

The increase in the second quarter was led by stock portfolios, according to the Fed report. The value of Americans’ stock holdings rose 21.6 percent from the first quarter, the first increase in two years.

Net worth also was boosted slightly by higher home prices. The value of real-estate holdings rose 1.8 percent, according to the Fed report. That was the first gain since the final quarter of 2006.

The report showed that total household debt — including mortgages, credit cards, autos and other consumer loans — stood at $13.7 trillion in the second quarter. That’s down slightly from $13.8 trillion in the first three months of this year. It suggests that households are trimming debt, but doing so slowly.

This shows how volatile net worth really can be. The total net worth increased by $2 trillion while debt only decreased by $.1 trillion, meaning most of the increase was due to assets increasing value such as stocks and homes, which are two things you can not really “control”.

It is good to see stocks re-gain some of their value after their depressing drop last fall and winter. Seem to me that those who did not panic and sell their stocks at the bottom and instead rode out the downturn and actually bought more share are reaping their rewards.

The moral of the story to me is that even when you do things right financially, in the short term it might not always turn out well. But in the long term it will lead to financial growth and prosperity.

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