Hit on the Middle Class: My Thoughts and Observations

This concludes our review the Federal Reserve Bulletin for June 2012 on Family Finances

Most of the posts for the past two weeks contained quotes and summaries from the Federal Reserve’s report Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances.  I would like to share my thoughts, observations, and cautions in today’s post. I hope not to offend, but pray that I can voice the good, the bad, and worrisome.

The Good

I see several good trends and hope they continue in spite of possible changes in the future economy:

• Families reduced debt and spending on debt. While consumer-based economies encourage spending and frequent updating of electronics, cars, and more; I hope that we continue avoiding debt. Credit card debt also decreased.
• Family savings inched upward. I also commend this trend and hope to see it increase. I feel we must save our money for emergencies, family events, education, and future purchases.

The Bad

Many of the factors that impacted family finances negatively originated long before the economic crash in 2008:

• Incomes failed to keep up with cost of living increases for a decade and a half. The economy indicates this trend will continue for the short-term. In addition, I doubt that salary decreases made for the recession will return quickly. 
• Unemployment rose more than 4% leaving hundreds of thousands without income. We still do not know how many of the jobs will come back.
• Housing values plummeted reducing family assets. Housing prices inflated beyond incomes and sustained value. An increasing appetite for bigger and more luxurious homes spurred the housing bubble which collapsed. Hopefully, we learned from the mistake and do not continue building and buying bigger homes than we need.

The Worrisome

The following indicators worry me:

• Debt-to-asset ratio increases jeopardize future security. Continued home-equity loans and debt consolidating refinancing will prevent improvement.
• Retirement accounts and savings share mixed messages. More people contribute to pension savings and accounts. Contributions fail to meet full vesting.

Wednesday I would like to share a few thoughts on today’s job market and the economy