Many a nest egg has been gobbled up by the recession. Image from Wikimedia Commons.

It was recently announced that the recession is officially over, but that almost seems meaningless. Recessions technically end when economic contractions cease, but some things are still depressed, such as employment and household wealth. The wealth of a household, or net worth, is determined as assets minus debts. For instance, the value of a home a person or family owns or investments held are assets. The amount of debt a person or family holds in personal loans and credit cards are counted against assets. Whatever is left over is the wealth of a household. Net worth is almost at an all time low.

Household wealth plummeted

Household wealth has been on a roller coaster ride throughout the last couple of years. This summer was dismal, as household wealth over all fell through the floor. The Federal Reserve, according to CNN, recently reported that after all debts, the net worth among all Americans had dropped 2.8 percent. That amounted to $1.5 trillion of instant cash down the drain. Most of the evaporated value was held in stocks, mutual funds and retirement savings. Stocks on the open market were the hardest hit, as individual stocks lost $912 billion over the second quarter.

The little real estate market that could

Employment and housing are still the largest problem areas. Real estate, despite the bottom having practically fallen out, is slowly working its way back up. Real estate values have increased by $46 billion. However, this is an improvement of 0.3 percent. Overall, the real estate industry lost $17 trillion between mid 2007 to the end of 2009. It seems housing and employment are the areas that really need extra cash, but those statistics have not seemed to benefit at all from the cash advanced from stimulus programs.

Rebound beginning

However dismal the news seems, there is almost always a positive corollary. According to USA Today, stock markets have already begun to gain lost value back. A double dip recession doesn’t seem likely, as slow but steady recovery is expected.

Sources

CNN

USA Today

Never Confuse Net Worth with Self-Worth

One problem that is often lamented in two-income relationships is that one person either feels superior to another based on his or her higher earnings, or another feels inferior. Unfortunately, this happens when individuals inextricably link their self-worth to their overall net worth.

When people are defined by the numbers on a paycheck, they are often misled into believing that they are more or less important to a relationship because of this. In an effort to avoid this detrimental pitfall, it is imperative that couples remember that love, trust, loyalty and sincere companionship cannot be bought. Therefore a person’s presence in the relationship should never be valued or devalued based solely on their earnings.

Allow Both Parties to Contribute to Household Expenses

While it is tempting to allow the person who earns the most to pay most or all of the household expenses, this is not advisable. In order for each party to feel a sense of unity in caring for the home, each should have a relative stake in the financial maintenance of the home. It is a good idea for two income earners to sit down and create a realistic budget according to what each can afford.

One may be taking on the task of paying for groceries, credit card debt and utilities, while another pays for the mortgage and car payments. Of course, one is paying more, but this isn’t the point. The point is that everyone has an important role to play in financing the necessities of the household, which fosters a sense of equity and unity for both individuals.

Plan Income Appropriate Activities

One partner may be able to afford expensive trips and lavish spending sprees, while the other cannot. In order to create a level of balance in recreational activities, these should be planned according to what each can afford. Low-cost activities can and should be enjoyed just as readily as ones with larger price tags.

Even in cases where one spends the most on the primary activity, such as plane tickets or hotel costs, activities can be arranged where the other can pay for sightseeing, souvenirs and food costs. This is just an example, of course, but the main point is to be sure that each plays a role in paying for recreational activities and entertainment so that each person feels a valuable part of the fun memories created within the relationships.

Express Appreciation

Finally, the most important tip for two-income-earning couples is to always show appreciation for the other and what each contributes financially. Couples should never take the other’s efforts for granted, nor should they forget to express appreciation for monies contributed, no matter how great, how often or how small. Everyone works hard for what they earn and being considerate enough to spend money on the wants and needs of both parties always deserves a word of appreciation and thanks.

Find out if you are in fact making money or losing it

A net worth statement is a simple tool used by both professional financial planners and savvy self-planners to determine where you stand financially at any given time. This knowledge helps you determine what actions you can afford to take in order to reach your financial goals.

Essentially, a net worth statement takes the value of your total assets and holdings (your gross worth) and then subtracts from this amount all of your outstanding debt and liabilities. The resulting number tells you if you are in fact making money or losing it and helps inform your financial planning by determining what options are available.

Everything has changed over the last two years

From the emergence of the subprime mortgage crisis to present, the entire financial world has experienced an enormous amount of turmoil. Virtually everything with a tangible monetary value, from securities to personal collectibles, has faced significant fluctuations of value. While most people recognize this in the real estate market and in the stock markets, in reality almost everything has been affected in one way or another.

Further, the different types of assets have all seen their values change at different times and due to different pressures. Although one asset may have held its value during the stock market crash in September 2008, that doesn’t mean the same asset is still holding that value today.

Assuming the worst is over

Many analysts and much of the financial media have been watching the stabilization of the foreign markets – many of which are now in active recovery – as well as the performance of the U.S. stock markets. The conclusion that many of them are drawing from these is that the worst shocks of the financial crisis have passed, and though recovery will be slow, it is presently underway.

Nevertheless, there are still a number of wild cards that may disprove this optimistic assumption: declining foreign investment due to the weak dollar, a bursting of the commercial real estate bubble, or undermining consumer spending through increased household savings. These possibilities notwithstanding, many of the indicators suggest the worst may be over, in which case, it is time for people to reassess their individual positions.

Valuing your assets properly

One of the hardest parts of calculating your net worth is properly valuing your assets. Mistakenly overvaluing or undervaluing your current holdings can easily render your entire net worth statement worthless and give you a very mistaken view of your current position. This is always a problem for people calculating their net worth even in the best of times, but it is even more of a problem today due to all the recent instability. Basically any valuations that come from 2007 or earlier are worthless today, so in order to make your net worth statement worth the effort, you will need to go back and have all of your major assets and holdings revalued to reflect the current reality.