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Recession wipes out family net worth, but not income

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Jeremy Hobson: If you’re feeling a little poorer than you did before the recession, you should. The Federal Reserve says the median net worth of the American househeld is down 40 percent since 2007. But it’s worth noting that our net worth is not the same as our income.

Marketplace’s Eve Troeh reports.


Eve Troeh: Your income is basically your paycheck. That affects daily life, the groceries you buy, or whether you go see a movie. Net worth is the value of your assets — house, investments, savings — minus debt. That impacts longer-term choices.

MIT management professor Tom Kochan says when net worth tumbles:

Tom Kochan: People are stuck in one place. They can’t move to take a better job. They can’t sell their house in case of financial emergency.

He says net worth tanked more than income because this recession was rooted in real estate. Inflated home values made people feel and act richer than they were, says Greg McBride at Bankrate.com.

Greg McBride: There were a lot of people leaning against a crutch of credit to support a lifestyle that their income could not.

He says families have eased up on debt. They’ve had to, as lenders don’t make loans based on net worth like they used to.

I’m Eve Troeh for Marketplace.

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