5 signs Americans are flat-out broke

Despite improvement in certain areas of the economy, the Great Recession never truly ended for millions of Americans. Households across the nation are still trying to overcome a sluggish labor market, stagnant wages, and rising living costs. Making matters worse, the struggle does not appear to be ending anytime soon.

The Federal Reserve’s wealth effect is in short supply.

Many households in the United States have been tested by the Great Recession. Large-scale financial strain at the household level ultimately fed into broader economic challenges for the country, and the completion of the national recovery will ultimately be, in part, a reflection of the well-being of house- holds and consumers,” explains the report.

Let’s take a look at fives signs that Americans are broke and struggling in the current economic environment.

1. Higher education

The cost of obtaining a degree and the associated benefits are making some Americans think twice about the college experience. With soaring tuition prices that regularly outpace other forms of inflation, the days of a degree virtually guaranteeing material wealth early in life are over.

2. Cars

Americans have a long history of obsessing over automobiles, but that relationship may be running on fumes. The average auto loan term increased to sixty-six months during the first-quarter, according to Experian Automotive. That is the highest level since Experian began publicly reporting the data in 2006. Nearly 25% of all new vehicle loans originated during the quarter had terms extending out seventy-three months to eighty-four months, representing a 27.6% surge from a year earlier. The average amount financed for a new vehicle loan also reached an all-time high of $27,612.

3. Real estate

Home ownership has been a critical component of the American Dream for decades. However, affordability issues and the recent housing-bubble collapse are keeping many buyers on the sidelines.

4. Savings

Saving money continues to be a losing battle for many Americans. Twenty-six percent of Americans do not have any money placed aside for emergencies, according to a new survey from Bankrate. In fact, 67% have saved less than six months’ worth of expenses, and 50% have saved less than three months’ expenses. Over the past year, the number of Americans with at least three months’ expenses in savings declined from 45% to 40%.

5. Wealth

A brutal combination of falling stock and home prices has decimated wealth gains over the past decade. Net worth at the 50th percentile (median) totaled $56,335 in 2013, down 36% from $87,992 in 2003, according to a recent report from the Russell Sage Foundation. In fact, the 90th and 95th percentiles were the only groups to report wealth gains between 2003 and 2013. Although, as the chart above shows, wealth inequality was increasing prior to the Great Recession.

“The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near term,” the report states. “It is possible that the very slow recovery from the Great Recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace.”

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