If you are caught up in the pursuit to increase your wealth, you are certainly not alone. A lot of us strive for financial abundance – it is something that we seem to be trained for from the moment we start our education. After all, that is the main reason why we get an education right? We want to put our future selves in a position wherein we can earn a living that can financially sustain all our needs.
Since we live in a consumerist society, we need money to pay for our basic necessities. If we want to be comfortable, we need to earn more. That is the mantra that we have been fed since the beginning of time. This is the main reason why you are trying to improve your personal wealth – just like everybody else.
But despite our best efforts, our financial success is tied up with the country’s economic well being. If the national economy is in trouble, you can expect that your own personal finances is in jeopardy as well. In the same way, if the collective personal finances of Americans are in trouble, you can be assured that the economy is in the same condition.
If that logic is in effect today, then the average American household should be in a great position to improve their wealth this year. According to an article published on CNBC.com, the US economy is expected to grow further in 2015. It was steadily growing in the past few years but this year, it is expect to grow at a rate that is considered the fastest in the past decade. The National Association for Business Economics predicted that the economy will enjoy a 3.1% increase this year – which is the first to reach the 3% mark since 2005. Experts are predicting that this will help sustain the global economy.
That is good news for the American household right? After all, if the US economy is expected to sustain the global economy, it can surely sustain you as you try to increase your wealth this 2015.
Apparently, that is not the case.
Study shows that many households do not feel the economic improvement
While the signs are there proving that the economy is on its way to recovery (if it is not yet there), a study revealed that a lot of households do not feel this improvement. It may be true that the American household debt crisis is no longer evident, but that does not mean the overall financial situation of consumers have improved. The jobs may be there and the means to finance a more comfortable way of life is also available. You have most of what you need to increase your wealth but there are statistics that show how a lot of households are not riding the economic recovery of the country.
That is not to say that the statistics are wrong but if you think about it, the cost of living may just be too much for most people to keep up with. This is probably the reason why some people are not feeling the improvements in our economy.
According to the study published on CFED.org, the website of the Corporation for Enterprise Development, there is evidence that millions of households are being bypassed by the economic recovery. This statement is based on the findings of the 2015 Assets and Opportunity Scorecard that uses more than 100 measures to check how households fare when it comes to the pursuit of financial security. While there are some households that are improving, these are oftentimes limited to the wealthier homes and specific races. The difference between the high-income and low-income households are just too great to be ignored.
Among the findings from this study include the following:
- 44% of US households live in liquid-asset poverty. This means when a household is in sudden need of liquid assets (e.g. cash), they do not have anywhere to get it from. That means if an emergency strikes, they are more than likely to be in debt or spiral down into a financial crisis. Those who are not in liquid-asset poverty are those who have cash reserves, stock investments and retirement funds.
- The average annual pay decreased in 36 states and in DC. Those in the lower 20% of the income bracket earn one-fifth compared to what the top 20% is earning ($21,159 vs $106,196). Not only that, 25% of the employment opportunities in the country are low-paying jobs. This is 4% more than last year. The data revealed that women and colored races ar at a disadvantage in the statistics.
- Those with low credit scores (subprime) have reached 56% which makes them unable to get good terms in credit applications.
- Despite the news that the housing market is stable, the rate of homeownership is only 63.5%, which is a low rate for the past 20 years.
- In terms of education, the number of graduates have increased in the past couple of years – probably because of the availability of student loans. But then again, these loans are putting graduates at a financial disadvantage early in their career.
- For health care, the Affordable Care Act is helping to improve this problem but some states have not expanded Medicaid and that left a lot of financially challenged households without an insurance.
If you look at your own finances and compare it with what you see here, you can see how you will fare as you try to increase your wealth. These indicators show how capable Americans are when it comes to saving and wealth building. Despite the increase in job rates and the strengthening economy, it is apparently not affecting all the households in this country.
Tips to help you improve your net worth
While the apparent recovery of the US economy is enough to make you feel confident that your finances will follow suit, you need to stop being too complacent. According to an article published on TIME.com, the economy may be improving but the foundations of that improvement is not as stable as we would like it to be. Although the job growth and the GDP is at its strongest, how sure are we that we can withstand a global crisis that could loom in the future? The article explained that the recovery that we are experiencing today was kickstarted by low interest rates and a $4 trillion budget that were orchestrated by the government. It was not a recovery built on stronger foundations like an aggressive housing market or high wages.
Given that, let us remind ourselves of the importance of securing our own personal finances – regardless if the economy is doing well or not. Here are a couple of tips that you can use.
- Build up your emergency fund. Most of the data that we got from the CFED are only made dangerous because these statistics increase the chances of consumers turning to high interest debts to make ends meet. If you have an emergency fund, no situation will ever lead you to debt – not unless the financial need is very expensive. So build up your liquid assets so you have something to dip your hand into when you need it the most.
- Always be cautious of credits. While credit is a risky move, there are instances wherein it is necessary in our lives. For instance, using your credit cards will help you improve your credit score so you can avail of low interest loans that could finance a new home or a start up business. But it should all be done wisely. Make sure that your credit has a purpose and that you can commit to the payments no matter what. Planned credit transactions should be a must before you take on any debt.
- Invest your money but be aware of the market trends. Investing is one of the ways that you can increase your wealth. However, you need to be aware of the market trends so you know how you can lower the risk that you are putting your money through. According to the 5 rules of wealth building, you need to track your money. That includes your savings, spending and your investments.
- Strengthen your assets. If you have to buy something, it should be assets that grow in value over time. This includes real estate properties and jewelries. You can also invest in your education since your skill is also a great investment. The economy may falter but it cannot remove the value of your knowledge and skills. Buying things like a car that depreciates over time may not be the wisest investment to make – not unless your old car is ripping out more money out of you because of repairs.
It is possible to come up with a plan to help you increase your wealth despite the conditions of the economy. The thing is, you need to start now. Do not wait for things to turn for the worse before you start preparing your finances. Build your wealth as soon as possible.