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  • Writer's pictureNate Baim, MBA, CFP®

Is Your Net Worth Keeping Up?


Are you feeling wealthy? Today I'll discuss the latest economic data which shows that household net worth in the U.S. is at an all-time high.

This has occurred despite many economic and market challenges over the past several years. This is a reminder to all investors to maintain a long-term perspective and not focus too much on day-to-day events.

Over the next few minutes, I'll share with you some charts that highlight these important lessons.

First, the latest Z.1 report was released by the Federal Reserve. This is a report that compiles information on the financial accounts across the country.

One of the closely watched figures is the total net worth of households which rose to $154 trillion in the second quarter. This is important because it represents a new all-time high and a full recovery from previous declines.

More importantly, it's easy to see that household net worth has increased dramatically since the 2008 financial crisis. This is because factors such as a strong bull market and continued economic growth helped to bolster asset prices. Long-term investors who had the fortitude to stay invested over this long period benefited from these trends.

Second, consumer spending has remained strong despite high inflation and interest rates over the past year. In fact, the health of consumer finances has been one of the bright spots in the overall economy.

Consumer spending matters because it constitutes 68% of all expenditures across the economy. The latest retail sales numbers from the U.S. Census Bureau show that spending accelerated in September more than economists expected. Other data on consumer spending, including those in the GDP report, show the same thing.

This is one reason there hasn't been a recession this year. The fact that the labor market has remained strong has helped. Unemployment is still near historic lows and wages continue to rise, supporting household finances.

That said, consumers can't continue to spend at these levels forever. Households saved a significant portion of their paychecks during the pandemic, as shown on this chart. This was in addition to government stimulus checks which were also spent on goods and services.

This chart shows that savings rates have already plummeted, although the average over the past few years is still elevated. Eventually, consumers will need to re-adjust to a more normal level of spending and savings.

The lesson here is that household net worth has benefited from these market and economic trends, especially for investors who have stuck to their financial plans. As always, those who can do so should continue to look out over longer time horizons and not overreact to short-term news.

From a financial planning perspective, there is possibly nothing more important than saving and investing enough to meet future goals. This is because, unlike daily market swings, how much you save and how you invest those savings are completely within your control. Thanks for joining me and I hope you found this insightful.

As always, please feel free to reach out if you would like to discuss your situation in more detail. I hope to talk to you soon.

Have something on your mind?

Nate Baim, MBA CFP(R)

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