Is American Household Wealth Growing? Ep #234

Is American Household Wealth Growing?

American wealth is growing—but you would never know it. Every three years, the Federal Reserve releases a report that summarizes the changes to family finances in the United States. The most recent report was released in early October 2023. What did it say? One of my business partners, Brian Cayon CFA®, CPA, covers it in his article titled “4.9%.” We will cover the news in this episode of Best in Wealth.

Is American Household Wealth Growing? I’ll go over what the Fed is saying in this episode of Best in Wealth! #wealth #investing #PersonalFinance #FinancialPlanning #WealthManagement Click To Tweet

Outline of This Episode

  • [1:19] Positivity or negativity: which will you choose?
  • [3:42] Changes in U.S. Family Finances from 2019 to 2022
  • [7:55] Where was the largest increase in wealth?
  • [9:03] Theory #1: The media loves bad news
  • [12:29] Theory #2: The pandemic played head games with us

Changes in U.S. Family Finances from 2019 to 2022

The Fed’s report, “Changes in U.S. Family Finances from 2019 to 2022” showed that net worth for US households grew a stunning 37% from 2019 to 2022. That is a massive increase in wealth, especially because 2022 was one of the worst years for a diversified portfolio.

Before you say “It’s all because of rising home prices,” renters experienced a bigger increase in net worth than homeowners! Home prices played a role but they were not the primary driver. The numbers are also adjusted for inflation.

This is the biggest increase ever. So what do the numbers tell us?

  • From 1989–1992, household net worth grew by -5%
  • From 1992–1995 it grew by 9%
  • From 1995–1998, it grew by 17%
  • From 1998–2001 it grew by 11%
  • From 2001–2004, it grew by 1%
  • From 2004–2007, it grew by 18%
  • From 2007–2010, during the great recession, it shrunk by –39%
  • From 2010–2013, it shrunk by -1%
  • From 2013–2016, it grew by 16%
  • From 2016–2019, it grew by 18%
  • From 2019-2022, it grew 37%

What else is surprising? Where the largest increase in wealth was realized. The largest increase in wealth came from the under-35 cohort, who saw a 143% increase in net worth. The 55–64 bracket saw a 48% increase in net worth. Young people as a whole are in a much better place than a few years ago.

What changes happened with U.S. Family Finances from 2019 to 2022? The answers might shock you. Check out this episode of Best in Wealth! #wealth #investing #PersonalFinance #FinancialPlanning #WealthManagement Click To Tweet

Why does it feel like the world is falling apart?

When we turn on the news it feels like the world is caving in. It feels like the world is miserable. While there is a war, labor strikes, inflation, etc., the economy is doing well. So why are predictions so dire? Brian has two theories.

Firstly, the media has always loved bad news. It has spent the last two years bashing us with recession predictions in the second half of 2023 or early 2024. When was the last time you saw an article about inflation falling? Or you saw that companies going on hiring sprees?

The more frightened we are, the more likely we are to read a story or buy a magazine. The media wants their clicks so they can make more money. The media will not allow us to enjoy good news.

Rapidly rising prices and interest rates are shocking

The pandemic played head games with us. There was tons of cash on hand because people were not spending. Prices lowered while incomes rose. Now, in a short period, we are seeing rapidly rising prices and interest rates. It is a shock to our equilibrium that will take a while for investors to absorb (while recalibrating expectations for the economy and financial markets). This is why we are seeing market volatility.

Just this morning, the Commerce Department reported that US GDP grew at a 4.9% annual pace in the 3rd quarter. That is great news. The growth—fueled by a strong consumer—marked the biggest gain in the US economy since the 4th quarter of 2021. This came despite high-interest rates, ongoing inflation pressures, and domestic and global headwinds.

Does that sound like a recession to you? Things are not perfect. A recession is a possibility. High inflation is making things different for households. But we have made progress.

Rapidly rising prices and interest rates are shocking—but do they reflect American household wealth? Find out in this episode of Best in Wealth! #wealth #investing #PersonalFinance #FinancialPlanning #WealthManagement Click To Tweet

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Podcast Disclaimer:

The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.

About the author, Scott Wellens

Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.

Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.

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