Financial Samurai

Interesting. That does sound really high! I suppose a lot of people count their cars and other pricey toys in that calculation.

I sat down and tallied up my net worth for the first time this month. Surprised to find it at $14k! I’ve been able to save at a good rate as I’m making decent money due to the hours I work. That won’t last forever though.

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Financial Samurai Reply:
September 25th, 2010 at 6:07 am

$14K is better than negative $14K! Go, go, go!

” The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—”

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Average networth doesn’t really tell you very much at all. In order to get a proper measure you have to take into account age. earnings and earning capacity, life circumstances (kids or no kids). A young married couple with two young kids would be expected to have a lower networth than $182k, while someone nearing retirement has (hopefully) a much higher networth.

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Even if you believe the numbers, $182k net worth isn’t exactly huge.

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Financial Samurai Reply:
September 25th, 2010 at 6:08 am

I think it’s huge, $182,000 given how large the denominator is. Compare $182,000 to many countries in the world, and I say Americans are doing OK!

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“average, instead of median, or mean is misleading”

the average you are talking about IS mean.

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Sorry for double post, but I just caught something else…

“It’s important to realize there’s no escaping the bell curve”

Yes, there is. The bell curve cannot be applied to all statistics. Wealth is one of those measures that cannot as it is not normally distributed. For one, the downside is limited while the upside is unlimited. Secondly, it is highly skewed. Thirdly, assuming a normal distribution, the standard deviation of wealth 50 years ago would likely present today’s top 100 as statistically impossible.

don’t try and fit the model to the data. if the model doesn’t fit, scrap it

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Money Reasons Reply:
September 24th, 2010 at 5:22 pm

Hi Sloan,

I questioned the usage of a “Bell Curve” too until I remember that debt can bring a person’s net worth deep into the negative numbers. So I totally believe that “Net Worth” can be represented by as a normal distribution.

Average in math lingo, can be either median or mean. But outside of mathmatics, it’s most commonly used in place of mean.

I’m not trying to be nit picky, but I just wanted to throw that out there… :)

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Financial Samurai Reply:
September 25th, 2010 at 6:09 am

There is no escaping the bell curve. You can be in the top 1% of your HS class, but once you enter Harvard, all your peers are smart and there will be another bell curve.

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Sloan Reply:
September 25th, 2010 at 7:32 am

I don’t think you understand my point. the data is not normally distributed for wealth, hence the bell curve is inappropriate. class rank also doesn’t fit a bell curve as it is linear with equal distribution, rather than grouping around the mean.

i’m wondering if you really understand the assumptions behind the bell curve

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Financial Samurai Reply:
September 25th, 2010 at 9:34 am

I understand that if you want to call a cat a dog, you will try and do as much as possible to do so.

Bell curve is a bell curve.

Mars Reply:
December 8th, 2010 at 5:18 am

No, he’s talking definitions. There’s always a curve for finite data, but that if the distribution isn’t normal its by definition not a bell curve because its not symmetric [50% of area to one side 50 to other side].

The curve would graph number of households vs average worth. The peak of the curve is at the median, not the average net worth. When the average = median you have a bell curve. Otherwise you have a skewed curve. America as a whole is worth a lot so its no surprise that the average worth is high, I’m actually surprised that its that low right now! It makes me wonder if there’s disagreement on how to calculate net worth.Maybe that number takes into account share of the debt too?

However the graph is heavily skew right. In 2007 net worth median = 85k (so half of america had that net worth or lower), and average at 536k (those are numbers taking into account home worth. The big disparity is because twenty percent hold about 60% of the total wealth.

cited:
http://www.levyinstitute.org/pubs/wp_589.pdf

http://psidonline.isr.umich.edu/Publications/Papers/tsp/2007-07_Trends_in_Household_Wealth.pdf

ian Reply:
January 31st, 2011 at 8:58 am

I could argue the downside is also unlimited… you can borrow a lot of money, the housing market crashes, and your assets depreciate, and you’re in for a lot of debt.

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I am not saying I don’t believe the number, I am just surprised. We are above the number, but I know many that are not.

I wonder how they figured the average though. For instance, if you didn’t have net worth, did they figure it as 0, or did they include your net debt? Probably doesn’t matter much I guess, but I can see where multi millionaires could skew the number.

I wonder what the number was 10 years ago.

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Financial Samurai Reply:
September 24th, 2010 at 7:57 am

But isn’t that strange? You’re over the 182k networth figure, and so are like 20 other people on Twitter who responded yet why r u surprised? This is where the discussion gets interesting!

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Everyday Tips Reply:
September 24th, 2010 at 8:04 am

Well, I grew up in a neighborhood that was more about drinking than saving. So, a lot of people from where I grew up are probably no where near that number. And, I know there are a lot of people just like them in the world. Plus, I live in one of the most depressed areas in the country.

In addition, I know a ton of people who are recently divorced, and their finances have been destroyed. Not to mention the number of people foreclosing on their homes, etc. When you are surrounded by bad news, it is sometimes hard to absorb a somewhat optimistic number.

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Financial Samurai Reply:
September 24th, 2010 at 8:53 am

True. Now you know that people r doing much better than you think! Hooray! :)

Is this figure factoring in property? I’m just curious because I know I’m well below this amount for retirement savings and personal savings. I’d be curious to know if property raises the number to that amount.

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Financial Samurai Reply:
September 25th, 2010 at 6:09 am

From the WSJ article: The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—

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Sam,

Here is by far a more sobering number:

Given the government’s (read: ours) debt as of today and the entitlement burden the average share of this debt per person is about $250k. So in spite of a net worth of $182K we are, on average, still negative.

-Mike

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Financial Samurai Reply:
September 24th, 2010 at 7:54 am

Net worth is after accounting for debt no?

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Mike Hunt Reply:
September 24th, 2010 at 3:07 pm

Not at all, Sam. Our share of the national debt just hangs out there like a smelly ugly turd.

-Mike

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Financial Samurai Reply:
September 24th, 2010 at 3:13 pm

Is it possible you are confusing personal worth comparing it with national debt? Do you owe 250k for example bc I sure don’t!

Mike Hunt Reply:
September 25th, 2010 at 3:01 am

I’m saying our average net worth is still less than our share of debt we owe as a nation.

That’s a really bad thing!

Financial Samurai Reply:
September 25th, 2010 at 4:39 am

But it doesn’t matter. Someone else will pay for it, and foreigners are still funding our debt!

Mike Hunt Reply:
September 25th, 2010 at 10:18 pm

It doesn’t matter until it does.

Look at Greece, Ireland and Iceland.

After Japan gets whacked the USA is up next.

Remember this comment in the future, Sam…

$182k isn’t enough to buy the average house. $182k will generate $7280/yr = $607/mo income (using the 4% safe withdrawl rate), which is well below the poverty rate.

So the average American is POOR.

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Financial Samurai Reply:
September 25th, 2010 at 6:10 am

First person to say $182,000 per person is poor! I like it! What do you think would be the level so that we start to consider ourselves AVERAGE?

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As Little House mentioned, it really depends on how net worth is defined.

1: How much you’re worth if you had to liquidate all investments including retirement plans. Home equity either would or wouldn’t be included so that might be 1a and 1b.

2: How much you’re worth counting all investments as they stand, i.e. unliquidated, but don’t include home equity.

3: The highest (which is what I think this number refers) would include all investments and all home ownership.

If you include home equity in net worth, then I can easily believe this number. In fact, it seems rather low if all retirement accounts and home equity are included.

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Financial Samurai Reply:
September 25th, 2010 at 6:11 am

Sounds good. This is what the WSJ article said, “The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—”

So yes, home equity is in the figure.

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Americans are indeed amongst the wealthiest on the planet, but income inequality has been growing due to all sorts of pork-barrel legislation that tends to favor the politically-connected and the powerful at the expense of others.

Sam, you work in IT and live in San Fran? While it’s good for you, you’re living in an outlier.

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Financial Samurai Reply:
September 25th, 2010 at 6:11 am

Am I an outlier, really? I don’t believe I am anybody special. Millions of people live out here in the SF Bay Area, and millions more around the country who are doing fine.

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Kevin@InvestItWisely Reply:
September 25th, 2010 at 6:21 am

Wouldn’t SF be one of the richest countries in the world, if it was a country? You are in an area that is doing relatively quite well, but it doesn’t mean that the whole country is doing as good.

You sure you don’t have confirmation bias? ;)

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Financial Samurai Reply:
September 25th, 2010 at 6:27 am

No, because Renters, who are the majority in SF aren’t willing to pay a Renter Tax directly to the government to help fund infrastructure!

I am an optimist at heart. That is my nature. Yet, I’m a realist. When I see everybody and their mama with Apple products and $700 iPads, I do not believe in a recession.

I believe my eyes, not my ears, which is why I am so bullish!

Kevin@InvestItWisely Reply:
September 25th, 2010 at 6:39 am

What’s with you and this renter’s tax :P

Sam, what would the renter’s tax honestly accomplish? Unless you are proposing a double payment of property tax, what’s the difference? You’re simply calling part of the rent payment by a different name.

Hello again, Sam.

I dug into the WSJ article. One has to be *very* cautious when reading a capitalist tool rag like the WSJ. They belong to Rupert Murdoch of “Faux News/Fox Noise/…”

Take a look at table 1 in http://www.levy.org/pubs/wp_502.pdf

An average isn’t a great number for ‘net worth’ when you think about it, as it’ll be skewed by a few data points, like the net worth of the ultra-rich. A median is better (the number right in the middle).

And, Levy’s use of ‘non-home net worth’ is interesting, since a home isn’t anything you can spend (ATM mortgages and the excesses spurred on by the REALTOR industry and their bankster budwans notwithstanding.)

Median ‘net worth’ was about $77k in the data Levy has, from the same sources as the WSJ article, as of 2004. Median non-home net worth, about $18k.

And, if you troll the blogosphere and sift through the noise, I don’t think with all the increases in people living in poverty, high unemployment rates and so on, that these numbers will have substantially gone up since 2004. I imagine they’d drop.

Oh – another interesting blog with lots of great data links: http://theeconomiccollapseblog.com/

And, as always, remember that the biggest threat to our (dwindling) prosperity is overpopulation. It’s not surprising that a generation after imposing draconian limits on family size that China is becoming the world’s leading economy. As the economic collapse blog poitns out or links to, Chinese manipulation of the price of the yuan vs. the USD is a direct threat to our economy, but as long as we keep breeding and buying crap from wal-mart we don’t need, they’ll succeed.

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Financial Samurai Reply:
September 25th, 2010 at 6:12 am

I agree with overpopulation issues, but our replacement rate in America is below 1.

So what is the conclusion of your comment? $182,000 is high, medium, or too low?

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ian Reply:
January 31st, 2011 at 9:15 am

“And, as always, remember that the biggest threat to our (dwindling) prosperity is overpopulation. ”

funny you should say that line, then use China as an example… are you serious? There are more chinese than there is water in the ocean.

Guess you would have to define overpopulation…. I would argue that overpopulation is only a problem if you can not make your nation productive, or if you do not have the means and support to feed/house or take care of your populace.

China is doing so well, because of international laws sending jobs to China. They basically are taking the wealth from the rich nations, and making themselves richer while at the same time develping their country and infrastructre… lining themselves up to be the next word super power.

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igotadose Reply:
January 31st, 2011 at 4:37 pm

China’s growth rate is approximately half that of the US. Yes, there’s like 1.5 billion of them.
However, 30+ years of ’1 child per family’ has led to:
1. Dramatic reduction in the people living in ‘abject poverty’ – less than $2 day. Something like dropping from 60% of the population to under 15% today. Impressive.
2. A much stronger economy as you point out.

Think of it this way: imagine if they had not imposed their population control a generation ago. There’d be twice as many today. Scary.

Population growth rates: http://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate

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Well I know one thing – I’m psyched that the markets crossed 10800! Even though I sold a bunch of stock I hope the market keeps climbing. That is a hilarious picture by the way. If the avg net worth is really 182000 that’s great! It’s better news than having it be a figure 1/3 the size b/c it means more people are getting paid well. Whether or not the average person knows how to keep a budget and manage debt is a whole ‘nother story though.

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Financial Samurai Reply:
September 25th, 2010 at 6:12 am

I’m psyched too about Dow 10,850! Whoo hoo! Next stop, 20,000! :)

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Keigu – kudos to a wonderful post. humorous indeed . . . numbers aside, this post brings up a very important concept of relativity. looking at some of the comments that conclude whether the avg is poor or not, it’s all relative to the benchmark isn’t it?

good post

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Hmmm… Maybe my standards are too high, but $182,000 doesn’t seem like much. In a paid-off house and with no car payments, it costs me about $29,000 gross to live in moderate comfort. While I don’t furnish my life with thrift-store goods, that means rarely eating out, never going to movies or concerts, never traveling, and buying most of my clothes at Costco. That means $182,000 in cash holdings would support a retired person for 6.27 years. If the person were collecting Social Security, it might support her for about twice that long…and given that our longevity (many people now live into their 90s and 100s), if she retired at 66, she would very likely run out of savings before she ran out of years.

If Igotadose is correct that the median net worth is $77,000, that’s even scarier, since median net worth is a more credible figure than average net worth. Seventy-seven grand will support you for almost two years and eight months. Assuming you don’t pay a mortgage or rent and your car is paid off. Take real estate equity out of the figures, and the remaining 18 grand will last you one year and seven months — if you can keep expenditures down to $29,000 while paying a mortgage or rent.

A paid-off house provides a de facto return on investment equivalent to the amount you would have to pay for a mortgage or for rent. In my parts, $300/month will rent you a hole in a dangerous firetrap; $800 will rent a modest two- or three-bedroom house. So if the theoretical American is paying for the roof overhead, you have to adjust the number of years or month the average or median net worth would last in retirement downward. Way downward.

To generate $29,000 a year from a 4% drawdown from savings, you would need cash savings of $725,000. If you were getting $15,000 a year from Social Security, then you would need a retirement fund of $350,000. That’s cash, not including the value of your home or car.

With an average net worth (possibly including the you-can’t-eat-it value of home equity) of $182,000, a median net worth of $77,000, and a median net worth not including home equity of $18,000, most Americans are looking a future of poverty.

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ian Reply:
January 31st, 2011 at 9:17 am

think outside the box, who says you have to stay in the country? There are many countries with a lower cost of living, with near equal standards and all the amenities.

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Funny about Money Reply:
January 31st, 2011 at 10:08 am

Maybe public education is better in your part of the country than in mine. But few of the Americans I know speak any language other than English fluently (or, for that matter, at all!), unless they happen to be native speakers of Spanish. It’s not easy to pick up a new language in your 60s — research shows that the older you get, the harder it is to learn new languages.

How many people really want to relocate — leaving family and friends behind — to a country where they don’t even know how to order a week’s worth of groceries?

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I have an average net worth, live in a average house, drive an average car, have average looks and weight, have an average job in an average midwest city. You just confirmed my AVERAGENESS. Now I’m depressed. Thanks a lot man!

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@Igotadose

Overpopulation in poor areas is a very serious concern, yes, but in the end, does one additional human being add to or subtract from the society’s net worth? I would argue that one additional human in a more prosperous area will tend to add to the society’s net worth.

After all, you don’t know how many Einsteins, Vincent van Goghs, or Edisons haven’t been born. ;) So overall, I see population growth as a mixed bag. In some areas of the world, it’s bad, but in others, it’s good.

As for China and their currency manipulation… it will be interesting to see how this one plays out. A lower yuan means lower prices for Americans but it also means that the Chinese have to pay more for imports. They’re not entirely getting a free lunch. An end to currency manipulation would be fairer, but you know that saying, “be careful what you wish for…”

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@Kevin@InvestItWisely

I should add, Chinese policy also screws over savers. Because of the high inflation rate, people dump their money into properties (which has led to the property bubble) and now gold and jade. Were there a sudden change of policy, that would mean that relative to yuan prices, gold, property, etc… would experience a sudden decline in value. A lot of Chinese would not be very happy about that…

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ian Reply:
January 31st, 2011 at 9:20 am

why are you blaming the chinese for US inflation? Just because they are buying our bonds? blame the proper people, the US government for the inflation.

inflation is used by all nations with a fiat currency as a hidden tax.

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The US population according to the CIA factbook is around 307 million (today). It’s growth rate is nearly 1%/year (Wikipedia and Census data) this means a 10% growth (roughly) every ten years.

Chinese are among best savers in the world. It’s no coincidence that their economy boomed when the number of children dropped. Parents could put much more resource and energy into 1 child versus many. People chose *not* to have children and instead, have careers.
Surely Kevin’s not advocating the US as a model for savings?! Until recently we had a *negative* savings rate. We’d not be in this mess if we saved as well as China!

The Yuan/USD issue is a tricky one, because, in our pro-natalist, hyper consuming style, we are in such huge debt to China if they decided to ruin the dollar, they could. We’ve borrowed way too much as a nation to finance wars, entitlements and, sadly, to service our debt. Promoting a ‘pay for it later’ lifestyle has gotten us into the mess we’re in.

If you advocate for more population in ‘prosperous’ areas, where are they? The US? Growing at 10% a year with a staggering, long term debt, more people than ever in poverty, hunger, with one of the lowest life expectancies of a Westernized country? Is that prosperous? Let alone the enormous crowding we all experience as part of our daily lives. Ever try to get anywhere in LA traffic? NYC? Seattle? I’ve lived or visited all of them. There’s just. too. many. people. THe environment can’t support them, the economy can’t support them, the planet is bursting at the seams. The Chinese came up with a solution that seems to work. I expect the US to do the same in our lifetimes.
As for Van Gogh, he committed suicide at 37 when he was penniless. Is that what you’d want to happen to *your* kid? Einstein nearly didn’t make it out of Nazi Germany..

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Financial Samurai Reply:
October 7th, 2010 at 10:10 pm

Perhaps it’s better to live the American way… the way of living way beyond your means and dying so one doesn’t have to pay for it?

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Median non-home net worth of $13,000 seems a lot more accurate. You have to live somewhere. If you really want to be humbled, calculate your total liquidated non-home net worth. As I mentioned in my previous comment, if you had to liquidate all your investments (and if you’re married cut it in half), including retirement accounts.

I conservatively estimate my liquidated retirement accounts at 60% of their value since much of it is in Roth accounts. Of course, once I reach 59 1/2, it’ll be better.

As for China, I see a revolution in their near future. The peasants are growing restless. The longer they keep the yuan low, the worse off they’re going to be. With the huge imbalance of trade, China has been collecting hundreds of billions of dollars that they can’t or won’t spend. It cannot continue indefinitely. They’ll eventually have to allow the yuan to rise, which will lower our standard of living, but it should allow US small business to grow again.

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Kevin@InvestItWisely Reply:
September 25th, 2010 at 8:03 pm

China lets Yuan rise: Middle class Chinese sees value of investments drop. However, everyone has higher purchasing power.

Does the US actually want the US dollar to fall? First there is the sabre-rattling against China’s peg, but more importantly, in case anyone hasn’t been noticing, it’s been falling for a while now; whenever it gets too low, other countries (*cough* Japan *cough*) intervene so Americans can continue to afford their exports. It’s a ridiculous game, and I don’t know what the final outcome of all this will be, but economic power might shift to China a lot faster than we expect.

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Financial Samurai Reply:
October 7th, 2010 at 10:11 pm

A median non-home networth of $13,000? Huh? Sounds way too low. Are you telling me that’s what your net worth is?

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On second thought, liquidated retirement accounts should probably be valued at 50%.

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Sam,
I don’t think people are trying to “discredit the WSJ”. I think you are misunderstanding the significance of median vs. mean. It is VERY significant. If you don’t like the Bill Gates example, which is quite relevant, let’s look at the hard data. Here’s an independent listing that shows median AND mean net worth in the same table across various years. You can say, “It’s not recent” but in fact, the distribution of wealth has only worsened in the past few years, so you don’t want to use that argument. Here’s wiki:

http://en.wikipedia.org/wiki/Wealth_in_the_United_States

Check out the table at the bottom.

Median net worth is always about 1/4 to 1/5 of Mean net worth. So, in this recent figure, with mean net worth at 182K, assume the typical American has about 50K net worth or so.

Big difference and nothing you can plan on retiring on any time soon.

I think you’ve gotta make sure you understand the difference when our wealth distribution is so skewed toward the top. Not making judgments on that fact, but that’s how it is in US vs. say, European countries.

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Financial Samurai Reply:
September 25th, 2010 at 11:03 am

I understand the difference, trust me. Run ur billfates example, makes no dif.

Why did the WSJ use average then?

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igotadose Reply:
September 26th, 2010 at 3:16 pm

Because the WSJ is a tool of the pro-natalist, pro-corporation universe of greedy banksters and avaricious wall street sleeze that invents CDS’s and, as was memorably quoted in “The Giant Pool of Money” NPR podcast, gave out mortgages to people who “Couldn’t get a loan from a local loanshark!”

So sad there’ve been so few jailings. But, as long as we keep cranking out offspring to throw into the Corporate maw that runs this country, we’ll never be free.

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Financial Samurai Reply:
September 26th, 2010 at 4:25 pm

Wow! What is a “pro-natalist” though?

You are saying it’s the banks fault for the homeowners who borrowed, and not the borrowers who borrowed more than they could afford?

Can I blame my gym for why I still only have 4 pack abs instead of 8 packs like I see on TV?

Do you concede the significance of the difference between the two then? Sometimes, it’s insignificant, other times it’s not. This is one of those times that it makes a HUGE difference. As to why WSJ, why your college professor, why a politician cites one over the other? I’d outlined it here at DarwinsFinance back in the day. Most people don’t really ponder the difference or examples; here are some clearly laid out examples and why it matters.

http://www.darwinsfinance.com/median-mean-definition/

Essentially, sometimes it’s intentional to try and prove a point when the alternative route would not show what you’re trying to prove, and sometimes it’s due to lack of understanding.

Sam, the title of your article is that the average American net worth is “huge”. By average, if you’re referring to the arithmetic mean, I would not even concede that. But more importantly, the more telling measure of what “most” Americans look like financially shows that their net worth is about a quarter of the number you’re relying on in the article – thus, anything but huge.

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Financial Samurai Reply:
September 25th, 2010 at 11:19 am

Is your net worth not larger than 182k? If so, why do you not believe the average?

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Darwin's Money Reply:
September 25th, 2010 at 1:48 pm

Umm, where’d my reply go? I spent 5 minutes typing it up.

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I don’t understand the relevance of that question at all. We’re talking about “America”, not Darwin. Much would depend on how the calculation is performed. Do you count a large mortgage against you? Do you count unexercised stock options? Do you count the future cash flows from my online activities? If I move into a larger home (mortgage higher) tomorrow, does my net worth drop? Do I count the present value of future cash flows from my pension and social security (whatever’s left)? This would become a real science project and it really depends on the definitions used, which are never covered in big media fluff pieces. In essence, my net worth is a dozen different numbers depending on how you classify net worth. I don’t know why the WSJ published what they did, but it appears to be deceptive based on an obvious error in using mean instead of median.

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Financial Samurai Reply:
September 25th, 2010 at 3:09 pm

The calculation used the same variables for everybody. So if all our net worths are greater than $182,000, including yours, why would you even think twice that $182,000 isn’t a plausible number?

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Robert Muir Reply:
September 25th, 2010 at 4:36 pm

Not to speak for Darwin, but while it’s a perfectly plausible number it just is NOT that *huge* a number, given yours and the WSJ’s definition of “net worth”.

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@Igotadose

“Surely Kevin’s not advocating the US as a model for savings?! Until recently we had a *negative* savings rate. We’d not be in this mess if we saved as well as China”

I don’t know when I ever gave off this impression, but that is certainly not my position at all! I am all for savings.

Of course, to play devil’s advocate… if you listen to the MMT guys, savings are responsible for deflationary depressions :P

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@Igotadose

As for the US’s problems, they are wholly political. The US could be an incredibly productive place even without population growth.

Were it not for the giant social and physical barriers, immigrants could provide a very useful service in whichever tiers of society they could fit. Maybe you guys don’t remember, but the US is an immigrant country and was built on the backs of immigrants. People came to this continent with nothing and, through hard work, made a life for themselves.

Today, due to insane regulations and restrictions as well as a welfare state, they are either a drain on society or are forced to work in shady places underground without legal protections. The rest are excluded from coming in the first place. That is really a shame.

Places like Canada and Russia are very sparsely populated and wouldn’t hurt much from additional people, either. It’s not so much about total population growth as people moving from where there are too many people to where the social and legal structures are much better and where they can be much more productive.

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igotadose Reply:
September 26th, 2010 at 3:27 pm

You can’t change simple supply and demand laws, though.
I found a statistic somewhere that the average number of applicants (PhD’s all) for College Professorships last year was something like 600. That’s 600 people for *every* job. So, if you are lucky enough to land one, and believe me, the higher ed industry is one of the worst of all when it comes to equal opportunity and fair hiring practicies, you’ll have beaten out over 500 other applicants.

Sure that PhD’s worth it? And *why* is this happening?

1. H1B’s. What a farce. How about that program simply goes away. There’s more than enough applicants per job – but the infrastructure that supplies them (esp. from India) is so corrupt and profitable that the program will last forever.
2. Too many people. Been over this again and again. If you can’t *afford* a kid, don’t have one. And if you do, expect to pay around $500,000 to raise that kid to college age, especially if you consider the opportunity cost of one parent abandoning the workplace to stay at home.
3. Solving overpopulation isn’t just a matter of shuffling people around on the planet. They need food. Clean water. Places to live. Jobs. In Russia, where you can earn a living, it’s packed (Moscow, for example, is 3d world infrastructure brimming with people.) Sure, Siberia’s empty, so “on average” it seems pretty empty, but there’s nothing there, it’s a giant ice-desert. And, not surprisingly, the bulk of the Canadian population is near the border with the US. I imagine igloo space is plentiful in the upper Yukon.

It’s just mathematics. More and more mouths to feed, less and less resources (look up Hubbert’s peak if you really want a good intro into what’s going to happen), and the result will be economic collapse. The US is consuming much more than it produces, had a brutal trade deficit and national debt, and until the resource demanders (population) gets under control, we’ll continue to spin towards badness.

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Financial Samurai Reply:
September 26th, 2010 at 4:20 pm

Have you read this post?

http://www.financialsamurai.com/2010/04/19/please-dont-have-children-if-you-cant-take-care-of-yourself-orphans/

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Kevin@InvestItWisely Reply:
September 26th, 2010 at 4:39 pm

First time I see this post, Sam. I agree that people should only have kids if they are going to be responsible and will be able to take care of them.

Kevin@InvestItWisely Reply:
September 26th, 2010 at 4:45 pm

Without an increase in energy supply and energy efficiency, total population growth will reach a limit. No argument from me there. I’m not one of those guys that thinks there will be no problem in everyone consuming like an American. :)

I don’t exactly say to shuffle people around, but instead, people should be allowed to go to where the opportunities are better. Is Sam saying that instead of having children, you should consider adopting an orphan? If you can provide the child with proper care, then I think that would be a very noble thing for anyone to do.

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Don’t you think that people who hang out in the comments sections of financial blogs would be more likely to be better with money, therefore having a higher net worth than someone who didn’t care so much about finances?

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Financial Samurai Reply:
September 25th, 2010 at 8:18 pm

Maybe, or maybe people reading personal finance sites are those who are in the worst financial position and are looking for tips and inspiration.

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@Igotadose

The world still benefits from their existence! Lots of people commit suicide and the world never even knows their name.

There are cities in Asia that dwarf most American cities except for NYC and are very well managed. The problems of the US are political. In the current political structure I agree with you that the country will probably not benefit from more people. This is a political problem though, not a resource problem. The country is very rich, just very mismanaged.

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As a Canadian, every time I travel around the US – and when I lived there, I’m struck by the poverty – and wealth disparity. I’ve only been to about 25 states or so, but it seems to hold true in every one. There are small pockets where things appear fine on the surface – but I’m not sure that the savings are there or people just have nice houses and no cash.

In 2005, the median net worth of Canadians was just under $150k.

With respect to a breakdown for Canadians by age group (again, 2005):

< 35 – $15,000
35 to 44 – $140,000
45 to 54 – $230,000
55 to 64 – $407,000
65+ – $300,000

And here it is for the US (median) in 2003:
< 35 – $11,600
35 to 44 – $77,600
45 to 54 – $132,000
55 to 64 – $181,500
65 to 74 – $176,300
75+ – $151,400

Source: http://money.cnn.com/2003/01/23/pf/millionaire/fedsurvey/

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Financial Samurai Reply:
September 26th, 2010 at 4:21 pm

Thanks for the stats! Looks spot on, especially since there has been an increase of wealth since 2003.

I think the poverty you see is just the American way of humility, ironically. We are less showy than the world thinks.

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Jacq @ Single Mom Rich Mom Reply:
September 26th, 2010 at 4:56 pm

Sam, you kill me. ;-) I only lived in the US for a few years, but I never would have thought that humility was the answer. LOL
My dad used to call it “Big hat, no cattle.”

What I find interesting is that the Canadian net worth goes up with age to a greater degree than Americans – so much for being presumably overtaxed due in part to socialized medicine!

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Sandy @ yesiamcheap Reply:
December 8th, 2010 at 8:51 pm

Must be all that free healthcare. I’m moving to Canada. Who’s with me?

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Jacq @ Single Mom Rich Mom Reply:
December 9th, 2010 at 6:10 am

Ha! The Huffington Post did an article a while back on US citizens immigrating to Canada. We didn’t experience the same recession you guys did. You all just need to take some lessons from your northern neighbors.

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I don’t know when I ever gave off this impression, but that is certainly not my position at all! I am all for savings.

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Even my mom has a higher net worth than $182K (from her pension lump sum and house sale) and her taxable income is below poverty level. She qualifies for no tax status and is retired so she gets a lot of credits. I think this amount of savings is quite low for a retired person who needs to live off it for the rest of their days.

I would expect most baby boomers are above this number too because of their age and hopefully not all of them used their home as an ATM, so if nothing else, their home equity alone could make up that number.

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Financial Samurai Reply:
September 27th, 2010 at 6:01 am

Indeed, and your mom will get Social Security as well? Or does she not get it bc of the pension lump sum?

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Sam,
I don’t most people are suggesting that the average is inaccurate as much as they are arguing that it doesn’t represent the middle. That’s not denying reality as much as limiting the ability extrapolate from the data: since the average net worth is X, why don’t people do Y and Z. You definitely keep things entertaining my friend.

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Financial Samurai Reply:
December 7th, 2010 at 8:42 pm

I’m a believer that $182,000 represents the middle.

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Sam, I love your posts! You just keep pushing people a little further with every comment!

I’ll add another comment about mean vs median. Of course mean isn’t appropriate for this type of analysis, even the article stated that when bringing out these numbers:

“…left average net worth at about $182,000 a person – though the average is pulled up by a small group of the very wealthy.” So it seems like they believe that the average isn’t the best way to get a true picture.

It’s clear that the numbers would be skewed toward the high end, especially when we talk about net worth considering all sources. Money tied up in a retirement account or assumed equity in a home when you live in an area where no one is buying doesn’t do much to boost your current financial situation.

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Financial Samurai Reply:
September 27th, 2010 at 5:09 pm

Thanks Khaleef, but if the WSJ didn’t believe in average, then they would have used another measure! Who are we to question the WSJ?

Remember, everything is rational! http://www.financialsamurai.com/2009/12/24/everything-is-rational-the-answer-to-all-things-irrational/

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That is really huge! It is better rather than nothing! People should be satisfied in everything they are having and make more out of it.

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Huge? Are you kidding?
The median would obviously be the more important figure here (as pointed out by another comment) and it’s at $77k. So a family right in the middle is worth about one year’s pay. Hurray.

Or let’s go with the average- If the average household sold absolutely everything they had, including their house, they could buy a small house or maybe live off of the money for a few years.

And you see this as a good thing?

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Financial Samurai Reply:
October 7th, 2010 at 10:12 pm

$182,000 sounds like a good thing to me! I’m proud of the American people for averaging this amount. Move to the inner states and live like a king! Move to another country and live like a Sultan!

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I’m sorry, mr. samurai, but your perspective is frankly ridiculous. To claim that the average cannot be skewed because there are so many people in the denominator shows that you have not only a basic misunderstanding of statistics, but also of the income (and wealth – not the same thing) distribution in america. It just came out that the 74 highest-income people in the US in 2009 made more than the bottom 19 million workers. I’m not making a mistake, income of the top 74 people is more than the bottom 19 million workers combined. http://www.democracynow.org/2010/10/26/headlines
And it is widely known that the wealth distribution is far more uneven than the income distribution.

Also, you end your article by saying “Do you think $182,000 per person is actually low for net worth now that the good times are back?” Employment markets remain incredibly weak, demand is non-existent, and we are in a liquidity trap. What good times are you referring to?

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Financial Samurai Reply:
November 3rd, 2010 at 5:22 am

Gerald, do you have a job? If so, how you doing?

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BD Reply:
December 8th, 2010 at 12:40 pm

I think I’m more likely to believe Gerald. I simply don’t know anyone who’s well off, other than my parents, and they’re well off due to my dad having been in the Marines for 20 years (so the Gov. pretty much takes care of him).

Myself and all my friends have far less than $182,000, and we’re all frugal (and I’m debt-free).

For the record, I’m middle-aged, unemployed and have been looking. Poverty level. Going back to school for a Master’s in Accounting in hopes I’ll be able to secure a job eventually.

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Financial Samurai Reply:
December 8th, 2010 at 4:58 pm

I’m sorry about your situation BD. Education is great, however I thought a Masters in a business related field is very expensive? Perhaps you can do it part-time? What about taking on minimum wage jobs in the meantime? Has the government’s unemployment program been able to help you? Hope so!!

Worthless number and statistic particularly if u consider that 1% of the population control roughly 40% of the national wealth so 3mm people out of 300mm control 40% of our national wealth. Expand it a little bit more and we have 10% controlling 70% of our wealth.

If u have studied finance and economics you should know that a wealth concentration of such a magnitude creates a volatile, unsustainable and unstable economy. At some point there will be a redistribution of wealth. America needs to find a way to rebuild its middle class and reduce the polarization of wealth between the ultrarich and the ultrapoor.

Free markets is not the solution nor is govt policy; what u need is an intelligent partnership between the markets and policy that benefits the entire country.
Our politicians and intellectuals have completely lost the plot

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Financial Samurai Reply:
December 7th, 2010 at 9:55 pm

So you’re saying your net worth is below $182,000? If so, it’s understandable especially if you just graduated from college recently.

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Sir, I am a gentleman and gentlemen do not discuss their financial wherewithal like common jobbers. I will say that I do have the means to live the life of a gentleman.

it is quite obvious that you take some modicum of pride in your concept of an acceptable net worth or beating some benchmark or keeping score. Tis clear to me you are one of those khaki and polo shirt wearing fellows that spawn more khaki and polo shirt wearers by the litter.

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Financial Samurai Reply:
December 7th, 2010 at 10:23 pm

Again, I think it’s fine if your net worth is below $182,000. Like you believe, the $182,000 figure is overstated, hence there’s no shame at all in being below average especially if you’re under 30. You’ve got your whole life to make money so it’s no rush. Cheers

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Sam, hate to be pedantic, but $182K or $77K net worth doesn’t really matter, what matters is cash flow and disposable income. As the checkbook at the end of the month or pay period gets closer to 0, that $90K of home equity is not of much help. You can’t eat sheetrock, not even with hot sauce.

But the WSJ article was indeed typically silly. The featured retired insurance executive was going get down and dirty frugal, and cut out the golf outings and membership to a California wine club (!!??). Household cuts do hurt, I presume the Swedish au pair was next in line for the axe.

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BG Reply:
December 8th, 2010 at 11:12 am

Is that the Swedish au pair, with hot sauce?

$182,000 PER PERSON! I have two kids (with $0 networth), so my family is FAR, FAR, below the average — and I make 6 figures.

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Financial Samurai Reply:
December 8th, 2010 at 4:50 pm

Sorry mate, do you mind explaining how you have a 0 net worth given your six figure income? Is it due to negative equity in property?

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Looks like I’ve already left my fair share of comments here. My net worth is nowhere near that, but I’m also not an American, nor do I live in a place like SF where engineers get paid 6-figure salaries. Am I a bit green? Perhaps. :P

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Financial Samurai Reply:
December 8th, 2010 at 6:25 pm

Ah, but if you are not the average age, then it’s OK… you have those years to accumulate to $182,000!

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I think average is a bit misleading.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

The top 20% [61.6m people] hold 85% of the wealth [$47.6 Tr] for an average of $773.5k per person.

The bottom 80% [216.4m people] hold 15% [$8.4 Tr] of the net worth in this country for an average of $34k per person.

I’m not saying this distribution is wrong because further analysis of the above link will show that the top 20% put more of their money at risk in the market, and given that risk and return are proportionate, it’s not surprising that the wealth distribution ends up this way.

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I actually think this should give faith to America’s creditors. 182k > than our average national debt per person (13 trillion / 300 million = 43k per person). Quantifying a nation’s assets is beyond a quick post here, but based on the populace alone – we’re below 25% of our net worth. Thoughts?

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Financial Samurai Reply:
December 24th, 2010 at 7:08 pm

Eh? If our net work is 182K, and our debt is only 43K per person, then we are in freaking great shape yeah?

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If you think $182,000 is “huge” you’d better think again. If you had to RETIRE on that much money, it would not be much of a retirement – for very long.

While you could go out and buy a Porsche, once you retire from working (or more likely, laid off at 55 and never work again) you can’t EAT a Porsche.

If you want to retire comfortably, you’d need at least five times that amount.

And bear in mind, this “average” includes the top 1% (average net worth $14 mil) which tends to skew the numbers. Many poor people have negative net worths, and your median is a lot lower than the average numbers shown above.

You can’t be too rich or too thin….

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Financial Samurai Reply:
December 24th, 2010 at 9:00 pm

Who is retiring with only $182,000? I would say only a small minority. This is the AVERAGE net worth for Americans who AVERAGE 31-33 years of age. Not bad if you have $182,000 at that age and can accumulate for another 20-30 years for your retirement.

America is living large!

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“Maybe that number takes into account share of the debt too? ” when calculating your net worth, you have to factor in your share of debt. Are you talking about taking the nations debt, and dividing it up by the people? ooooo never thought about that… the 150k average net worth probably doesn’t take that into consideration.

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The dollar will cease to be the world’s reserve currency before the end of 2012. China is unloading all of it’s US money as we speak and pushing in private meetings for the Euro or Japanese Yen to replace the dollar as the new reserve currency.
Like you said yourself, look at the bell curves (history has them too); a graph you might like to overlay are the financial graphs of stock trends in the dip before the great depression through the great depression itself, and what we have gone through the past few years. It is an almost perfect overlay; we have reached the peak of our post ‘pre-depression dip’ recovery and are about to dive. With these two facts stated, understand that the United States is TRILLIONS AND TRILLIONS of dollars in debt, while we’re also facing trillions of dollars in internal deficits over the next few years. China has already started collections of the majority of the United States debt over the past few years; what most people don’t understand is that because the US dollar is the world’s reserve currency it is the only country legally allowed to print it’s own money, and that’s what we’ve been doing since 2009 to pay off our debt. This will not last forever though because the dollar is quickly becoming obsolete, as facilitated by own government (intentional or not).
Furthermore, the media has never been obligated to tell the truth and it is naive to assume that they will. The fact is that the richest people in the world, and the government, control the majority of the media– and they already know all the facts I have just stated to you. If they let you know what’s going on then you would be more likely to try and protect your own money. That is the exact opposite of what anybody in their position would want however, because the only thing it would do is make it more difficult to protect their own money by trying to unload all of it on you ‘the peasants’–( a phrase used to refer to working-class Americans in multiple business and legal documents, look it up!).

In conclusion: people are perfectly ALLOWED to lie to you about the fact that ALL the money you have today will likely be worth next to nothing (.000001). in around the span of a year. Like I said earlier, look it up. AND check who has a stake in telling you what you’re seeing. Please.

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The average net worth says nothing about the financial state of health for most Americans since the net worths of America’s mega-rich heavily skew these figures upwards. A more reliable indicator is median wealth. That figure is MUCH lower, well less than 100K.

If you look at these more indicative statistical indicators, your boy oh boy cheery optimism might be due for a reality check. But it is much easier living in ignorant bliss, I guess.

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Financial Samurai Reply:
March 5th, 2011 at 9:21 am

Well, when I happily invested another couple hundred thousand in the market last summer, my cheery optimism 8 months later has made about a 33% return. I’ll take it :)

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Prince Roy Reply:
March 6th, 2011 at 12:57 am

good for you, that’s great–I did pretty well myself–but that has nothing to do with your claim that the average American net worth is huge. It is clearly not.

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Financial Samurai Reply:
March 6th, 2011 at 7:03 am

Of course you did well. That’s my point, EVERYBODY is doing well, and we are everybody, which is why the average American net worth is so huge!

Fact is though, that 80% of Americans own less than 7% of America’s net worth. So 4 out of 5 Americans have the average net worth of $13,340, not $182,000. America is decaying from ineguality it would seem.

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Financial Samurai Reply:
March 9th, 2011 at 10:26 am

And how are you doing? Are you one of the haves or have-nots?

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The top few % control about half of America’s wealth. Once you remove them (how many 50 millionaires are in YOUR circle of friends?), the average drops close to the Median net worth of about $80k. Net worth does NOT mean cash. Much of that is trapped in retirement and pension accounts as well as difficult to extract home equity.

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$182K is considered high? Let’s have some reference points to compare with:
Our national debt about $500K per capita.
The average Taiwanese net worth is $282K in 2007. Taiwan has lower standard of living than the US.
Singaporean publications suggest citizen needs to save up US$3M to retire in Singapore.

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Financial Samurai Reply:
June 18th, 2011 at 9:38 pm

If that’s true for Taiwan, that’s awesome! Happy for them.

And, I assume you think $182K is low, and it’s actually much higher. Makes me all the more bullish on our economy.

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Jim Taylor Reply:
July 23rd, 2011 at 4:44 pm

Yes, I believe the US is OK. We are going through changes and not on a path to demise. Ultimately our competitive differentiation is our creativity and our ability to convert creativity into wealth. That has not changed.
The wealth distribution around the world is changing. Our industries know it and will take advantage of it. At least the capitalist theory is that wealth among nations is not a zero sum game. US is not getting poorer. Many other nations are getting wealthier.
We’re sort of in-between the European socialist system (heavy tax and benefits) and the extreme right system of the East Asian nations (low tax and benefits). East Asians have to save a lot partly because many of them do not have the benefits of a social security system like ours.
I believe our gov’t is doing the right thing – trying to sustain the social security system, joggling the priorities among items such as defense vs welfare cost.

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The median – mean discussion is important, and those posting that the median is probably more informative are correct- the skewness of income distribution is legendary. And of course, even if one does include “negative net worth,” there are a LOT fewer with negative net worth in the 100 million dollar range than those with a positive number in that range and above.

I suggest people take a look at some information put together by the US Census, which looks at median net worth (by quintile, so you get five numbers- the median worth for those in the bottom 20%, the next 20%, and so on ,up to the median net worth for the top 20%). It also provides information breaking things down by age, whether people are married, etc. The data are from 1999 and 2000, but the basic information is extremely robust. Check it out at http://www.census.gov/prod/2003pubs/p70–88.pdf. A couple of major points- the median for the bottom 20% is a little less than $7500. The median for the richest 20% is…. $185,500. That alone demonstrates the skewing issue and why it is so important in figuring out where the majority of people are.

Note that for most people, the largest component of net worth is home equity (sensible, really- for an avaerage person, at least. The importance of home equity decreases as net worth increases. The often cited Bill Gates could not spend enough on a home to make it the major source of his equity). In 2000, home equity accounted for about one third of all household net worth. Obviously, as real estate prices decline, net worth declines- and the percentage decline in net worth is greater for those most relying on home ownership to boost net worth.

Median net worth when you exclude home equity, according to the Census data, for those 55 to 64 years old, was only $32,314. That is the highest figure once you look at things like age- for those under 35, it is about $3300. For those over 75, it is a bit under $20K.

Another point- $182,000 may sound like a lot of money, and it is. But, when you look at the decreasing percentage of Americans who are part of any defined benefit pension plan (from what I can see, usually not included in net worth calculations, and not included in the Census calculations) and recognize that the WSJ and other calculations DO include things like IRAs, Keoghs, etc, you start seeing how much most people have saved up to help them in old age. Does anyone think that Social Security plus a cushion of under 200K is enough for retirement (bear in mind that 200K also includes home equity, so if you have 200K in the bank, you are renting)?

Additional, and a bit more recent, data from a Federal Reserve Boards “Survey of Consumer Finances” (2007) seem to agree largely with the Census figures. The Federal Reserve Board uses averages instead of medians (easier to get the information, I suspect). Here is what they reported – remember, this is 2007 data.
Bottom 25%- average net worth $4600
25 to 50%- $21,700
50 to 75%- $78,900
75 to 90%- 242,800
top 10%- $1,606,600

Again, the skewing is pretty clear- just compare even the top 10% to the bottom 25%- if you see a bell curve there, it is a pretty oddly shaped bell.

I would love to see some good statistics of more recent vintage- I suspect we will be gettign some in another year or two from the US Census- and I suspect they will indicate that for most people, net worth has decreased over the past several years, and that the %decline will be greater for those on the lower end of the economic scale. I hope I am wriong, but that is certianly what it looks like.

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Financial Samurai Reply:
July 4th, 2011 at 2:00 pm

Thanks for your detailed comment! What is your net worth then to help us get a better picture. Thx.

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Why is there no dateline on this?

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I am retired and would like to ask the community whether it is legitimate to figure my SS and my wife’s SS as an annuity in our net worth?

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Financial Samurai Reply:
November 14th, 2011 at 3:31 pm

Sure why not. It’s a real asset that is paying you a cash flow. You can even NPV it. Just hope the government doesn’t welch!

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This guy is nuts. Over 24% of Americans have no net worth or a negative net worth. So then the average is much higher for those at the top. Apparently some people are ok with the greed mentality over compassion for human beings.

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In Italy and EU the net worth average is much more.

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Why do you ask what each commenter’s net worth is, and why does it matter? Do facts change depending on who is presenting them? Is this like the Heinsenberg uncertainty principle or the theory of relativity?

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uh, dont forget that the millionaires and billionairs at the top blow the curve. What would really be more interesting would be the median. This would let you know what the average American makes.

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I came across this site while researching American’s net worth for a college class. None of the other sources came close to $182,000. Most say the number is $77,300, and that that is according to the Federal Reserve. I am not close to either number but it’s amazing how much this number varies from one source to another, and reminds me not to believe everything I read on the internet.

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Financial Samurai Reply:
September 29th, 2012 at 12:48 pm

Definitely do your own due diligence. I would read this post if I were you: http://www.financialsamurai.com/2012/05/14/the-average-net-worth-for-the-above-average-person/

It talks about the ABOVE AVERAGE person.

If you can’t tell by my writing in this article, I have my doubts that the WSJ says the average net worth is $182,000. The latest Federal Reserve stat says for 2007, the median net worth is about $107,000.

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