This downward trend in Net Worth of people in their 30s is the direct result of them taking big vacations or buying new cars instead of saving and investing. The supposed "struggles" of the middle class are directly tied to our expectations that we should have two new cars, a big vacation each year and the pleasure of eating a nice restaurants a few times every month.
Do 30-year-olds take more big vacations and buy more new cars now than previous generations did? Cite a study proving it, please, because I don't believe it's actually true!
Well, there's a lot of evidence showing this is exactly the case. I will use links vs embedding graphs or else this post will get very unweildly.
For starters, household disposable income has been steadily increasing, both as a percentage and in absolute (real-adjusted) dollars. Using DPI strips out any differences with income taxes.
http://www.abc.net.au/news/image/4582126-3x2-940x627.jpghttp://s3-eu-west-1.amazonaws.com/cjp-rbi-communities-blogs/wp-content/uploads/mt/icisweb/blogs/chemicals-and-the-economy/2012/02/06/US%20incomes%20Feb12.pngSo; we have more disposable income but (as per the topic of this thread) we have LESS in net worth.
My post used spending on cars, vacations and housing as examples of how we are spending more money now than before. Certainly there are other sources, but since these make up the majority of the average person's budget, let's focus on those.
Are we spending more on cars? Yes! One metric is to look at total car loans. It's not perfect because it doesn't include cars that are paid off, but it shows a disturbing trend. Since 2003 total US car loans have gone from $630B to $1.1T. That's a 78% increase in just over a decade.
This, curiously, despite
an upward trend in how long cars are staying on the road each year, going from 9 years to 11.4 years in the same time frame.
Are we spending more on homes?
First, in real-adjusted terms the
cost per square foot of new-construction homes has remained stable over hte last 40 years, hovering between $100 and 120/sqft (in 2013 terms).
However, we keep buying bigger and bigger homes.
Median house size has increased from 2100 to 2500 sqft in the same time period, even while the number of people in the household has steadily declined.
It's also worth noting that we have more mortgage debt now than we did 10 years ago, whether you measure it
as a function of total GDP or relative to disposable income (the latter looks much closer, but remember we have more disposable income than before).
So are we spending more on vacations? Here I will admit the data does not seem to support my accusation;
US citizens seem to be taking fewer and spending slightly less on both domestic and foreign vacations than they were a decade ago. Maybe because we're already spending so 78% more on our cars and 15% more on our homes...