Monday, March 2, 2009

Your Wealth Is Not Your Standard of Living

By Scott Burns

Your Wealth is Not Your Standard of LivingHere's a challenging thought: Things aren't as bad as they seem.

Since there is plenty of bad news out there, how can I say this?

We see things dark and hopeless because we are looking at the world through a wealth window, not an income window. Wealth changes faster than income. It also changes more than income. But when push comes to shove, the standard of living that most Americans enjoy is determined by flows of income and benefits, not wealth.

The wealth destruction figures, which are reported ad nauseam, are scary.

  • Home prices are down enough that one homeowner in six is "upside down"--- they owe more than their house is worth.
  • According to the Case-Shiller indexes, home prices have declined about 25 percent in the 20 largest urban areas since the July 2006 market peak.
  • The Federal Reserve consumer balance sheet figures showed that Americans lost $7 trillion between the third quarter of 2007 and the third quarter of 2008, a decline of 11 percent. When the figures for the first quarter of 2009 are released in June, we will probably learn that we've collectively lost over $10 trillion.
  • The recently released figures from the 2007 Survey of Consumer Finances estimate that since the survey was done, we've all lost enough wealth that our collective net worth is below what we had when the 2004 survey was done.

It's all very scary. But let's ask a rude question: Has your standard of living dropped by 20 percent? Has it fallen by 25 percent? Unless you've lost your job or lost your house, the answer is no. You may be worried. You may feel poorer. You may be poorer. But your standard of living hasn't dropped much. More important, it probably won't.

http://assetbuilder.com/blogs/scott_burns/archive/2009/02/27/your-wealth-is-not-your-standard-of-living.aspx

Sphere: Related Content

No comments:

Blog Archive

Subscribe via email

Enter your email address:

Delivered by FeedBurner

Search This Blog

Subscribe Now: standard

Add to Technorati Favorites