Meet the Average American Family (Infographic)
paul.kedrosky.com
paul.kedrosky.com
Here is a link to a much bigger and more readable version: http://c1334262.cdn.cloudfiles.rackspacecloud.com/average-am...
"$117,951 average debt" includes home mortgage. The poster states 95k of this is in mortgage and 2.2k in credit cards, but not where the other 20k is located.
"25% of people have no savings", while over 25% of the population is children.
"40% of working Americans are not saving for retirement", taking into account that working Americans include those between 18 and 35, I would say that is in line with expectation. We are not told if this counts those with pension funds payments from their employer.
"24% workers who have postponed their retirement age in the past year," which population is this a sample of? Are they only counting those whose retirement is imminent?
Cars?
I'm a Russian guy and it is mostly gibberish to me. No saving for retirement? No mutual funds, stock or bonds? Is it supposed to be striking or what?
Also: less than 4/10 of American adults have an emergency fund to fall back on. This is still pretty big fraction of prudent people if you ask me, isn't it?
That's referring to private retirement savings.
It doesn't include Social Security which is most/all of retirement income for a large fraction of retired people. (The rest also get SS but get more money from their savings.)
The same goes for mutual funds, stock, bonds and. Are all people supposed to have them? Or bank accounts, even. Sure, most people have them now, but some don't. 7% or 16% looks ok to me.
I wanted to communicate that I (and probably many other people) have no frame of reference to relate the information in this infographic to, while the it implies that anyone does. Well, maybe this is not a good infographic after all.
One weird aspect: where I live, buying a house would count as "saving for retirement". Not sure how they counted it in that infographic.
As for being reckless: just wait, thinking about retirement might become more prevalent for you the older you get...
Incidentally I think this is why many young people accept bad salaries: they have no idea yet how much money real life really costs.
As for (private) saving for retirement: where I live every now and then there are big campaigns for it. But it also is big business, so it is questionable how much of that campaigning is for the benefit for the people, and how much is for the benefits of the banks. Ie is owning stocks and bonds and stuff good for you, or for the banks and funds?
I might Mechanical Turk that, it'd be worth a few bucks to see.
I can't stand infographics btw.
That's like treating a fresh steak the same as a can of corned beef. Yes it's beef, but one will last a few hours sat on the counter and the other will last god only knows how long (I've yet to see a can with a best before date).
In general a mortgage is a pro, it's going to cost you but in the long run you've got a good chance of breaking even or even profiting. I know my parents bought their house for 75,000GBP and sold it for 250,000GBP in the space of 15 years, because of their mortgage agreement they were paying low rates for the longest of times.
Right now is the ideal time for mortgages when the banks are offering lower rates, but the house values have little choice but to go up from now, giving you a major boost to your equity at the reevaluation and possibly giving you a rate drop due to the added collateral with no effort.
Edit: It's worth noting that a $1000 mortgage is a shitload better than $1000 in rent.
Not necessarily, as there is a marginal utility involved with owning a home versus renting that this statement does not account for. For instance in a rental there is no lawn maintenance required, no responsibility for repairs or upgrades to either major appliances nor infrastructure, rental incurs decreased liability, and the availability by location and public features is often greater.
I am a home-owner, but the belief that rental payments are a waste of capitol is a myth.
I have family members who have $1000 mortgages in the middle of the country, and make about $38,000 per year.
Similarly I have friends who have remained in rent-controlled apartments in NYC for LESS than $1000 and make over $150,000 per year.
Robert Shiller, the Yale economist who pretty much invented modern techniques for housing market valuations (the Case-Shiller index), analyzed this question in his book Irrational Exuberance. Based on a centuries worth of housing data, he concluded that the return on investment for housing was very low, on the order of 0.4% per year (you could do worse than read http://realestate.yahoo.com/promo/renting-makes-more-financi... ).
Look, if the price to rent ratio in your area is suitably small (taking into account property taxes, transaction fees, insurance) AND if you can commit to being in that area for at least 5 years AND if you have either surplus time or money to spend on maintenance and improvements, then switching from renting to owning might be a good idea. The trouble is that buying a house means buying two goods bundled together: an investment and shelter. Homeowners often sink most of their wealth into the investment part. But housing makes an awful investment for most people: transaction costs are enormous, they can't diversify, and market liquidity tends to be very low just when you need to sell. It would be a disaster if people decided to sink most of their wealth into a single undiversified stock, but people do that all the time with housing.
Many people end up buying a house even though that decision doesn't make sense because we have a cultural expectation that you're not really a serious adult until you've bought a house.
I know my parents bought their house for 75,000GBP and sold it for 250,000GBP in the space of 15 years, because of their mortgage agreement they were paying low rates for the longest of times.
Making major financial decisions based on anecdote rather than data often ends poorly.
It's worth noting that a $1000 mortgage is a shitload better than $1000 in rent.
This is just not true. It depends. If you think you might be moving somewhere else in the next few years to get a better job, than paying rent will probably be much smarter.
Mortgages are good if you want to own a house outright. For many people, this is actually an economic disadvantage, because now they have this big expensive asset that demands a lot of attention and is hard to get rid of. Unless you are gonna be there for a decade plus, better to let a property manager worry about it.
[citation needed]
This is flat out wrong.
Despite being the most prosperous nation in history, that chart would make us look destitute. Using different forms of averages hides an extremely significant factor: our income gap.
While good by world standards, it's poor-to-mediocre by developed nation standards and getting worse. I'd argue it's the biggest threat to our long-term stability because it compounds all of the others, but I suppose that's getting off-topic.
Its like I am saying I am worth more than 1 year of your income.
More here: http://rodrik.typepad.com/dani_rodriks_weblog/2007/11/is-mar...
I suspect most English people would struggle with it too if it wasn't hijacked by xenophobes and soccer nuts.
On the other hand, the US spends a higher percentage of GDP on education than most countries, which is a different form of investment in the future.