If I was like 93 percent of households in America, I should have lost 4 percent of my net worth during the first two years of the so-called "economic recovery." Instead, I actually doubled my net worth during that time. According to a recent Pew Research Center study cited by USA Today, the rich got richer while the average American's net worth declined. I'm not wealthy, but I managed to come out ahead by paying down my debt and investing in the stock market.
1.) Explaining the widening gap
Experts say the reason the net worth of the richest rose by 28 percent between 2009 and 2011 is because they own stocks that increased in value. Meanwhile, the average middle-class American depends on his or her home value to boost net worth, the sum of all assets minus all debts. The Standard & Poor's 500 stock index rose 34 percent during the study period. While many of my friends and colleagues stopped investing in the stock market during the Great Recession, I continued to invest. The value of my 401(k) doubled between 2009 and 2011.
2.) Breaking even on our home
During the same period of time, the Standard & Poor's/Case-Shiller index for home prices fell 5 percent. Even though we had negative equity in our home in 2009, we were able to get back to even by 2011 by paying extra on our mortgage. Now we finally have $30,000 of equity in our home so we are no longer underwater on our mortgage. I expect the value of our home will continue to increase in the next 10 years, which means our net worth will grow with no effort on our part.
3.) Comparing ourselves to others
One of the reasons I love watching the "Suze Orman Show" is because she lets me be a voyeur into the financial situation of average people. By gauging her reaction, I can figure out how I'm doing. According to the new Pew Research report, the average net worth of the less affluent people studied fell from $140,000 to $134,000. Meanwhile, the affluent saw their wealth balloon from $2.5 million to $3.2 million. My net worth is definitely more in tune with the less affluent segment of our society. I'm still proud of the financial progress I've made going from a negative net worth to a positive one in the last decade.
I know the stock market won't necessarily continue to rise. However, I plan to keep saving at least 10 percent of everything I earn. By living below my means, I can stay out of debt. In the past, debt stunted my net worth. I couldn't grow wealth when I had high-interest rate credit cards that ballooned. I took the money I used to spend on paying down my credit cards and use it to save for my retirement in another 25 years. I don't mind if I get rich slowly as long as I get there.
1.) Explaining the widening gap
Experts say the reason the net worth of the richest rose by 28 percent between 2009 and 2011 is because they own stocks that increased in value. Meanwhile, the average middle-class American depends on his or her home value to boost net worth, the sum of all assets minus all debts. The Standard & Poor's 500 stock index rose 34 percent during the study period. While many of my friends and colleagues stopped investing in the stock market during the Great Recession, I continued to invest. The value of my 401(k) doubled between 2009 and 2011.
2.) Breaking even on our home
During the same period of time, the Standard & Poor's/Case-Shiller index for home prices fell 5 percent. Even though we had negative equity in our home in 2009, we were able to get back to even by 2011 by paying extra on our mortgage. Now we finally have $30,000 of equity in our home so we are no longer underwater on our mortgage. I expect the value of our home will continue to increase in the next 10 years, which means our net worth will grow with no effort on our part.
3.) Comparing ourselves to others
One of the reasons I love watching the "Suze Orman Show" is because she lets me be a voyeur into the financial situation of average people. By gauging her reaction, I can figure out how I'm doing. According to the new Pew Research report, the average net worth of the less affluent people studied fell from $140,000 to $134,000. Meanwhile, the affluent saw their wealth balloon from $2.5 million to $3.2 million. My net worth is definitely more in tune with the less affluent segment of our society. I'm still proud of the financial progress I've made going from a negative net worth to a positive one in the last decade.
I know the stock market won't necessarily continue to rise. However, I plan to keep saving at least 10 percent of everything I earn. By living below my means, I can stay out of debt. In the past, debt stunted my net worth. I couldn't grow wealth when I had high-interest rate credit cards that ballooned. I took the money I used to spend on paying down my credit cards and use it to save for my retirement in another 25 years. I don't mind if I get rich slowly as long as I get there.
