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From his column It’s Your Money

its-your-money-11-14-1We celebrated our seven-year-old grandson’s birthday last night. We talked about how much he has grown; sometimes he seems to get taller by the minute. Seldom does a week go by without my wife or me commenting on a photograph of our six grandchildren and how much different they look today than when the picture was taken. Our snapshots provide a window through which to gauge progress.

The Federal Reserve takes a snapshot every three years with its Survey of Consumer Finances (SCF). This study seeks to trace trajectories for household issues such as income, financial and non-financial assets, and various forms of debt. The most recent study was conducted between May and December 2013, and the report was released in September 2014.

Income Lags

The 2013 SCF indicates those with higher incomes have seen increases at a faster rate than those with lower incomes. Average income increased to $87,200 in 2013 compared with $84,100 in 2010 (4 percent gain). The median income, however, fell 5 percent in the same period; in 2013 half of the households in the United States had income below $46,700 compared with $49,000 in 2010. Households at the bottom end of the income distribution fell further behind and households in the middle stayed about the same. Only those households at the very top of the income range had gains between 2010 and 2013. Households headed by a college graduate fared better than those without higher education.

Assets Decrease

The SCF distinguishes between financial assets and non-financial assets. Financial assets include such things as checking or savings accounts, certificates of deposit, stocks and bonds, and retirement accounts. Non-financial assets include the value of vehicles, houses, and business equity.

According to the 2013 SCF, less than half of those eligible to participate in retirement savings actually took advantage of the opportunity. This continues to be a downward trend. Not surprisingly, the higher the income, the higher the percentage of participation in savings plans. For those in the lower half of income, only 40.2 percent saved anything for retirement. The average value of a retirement account was $194,800. This amount will provide only $16,983 per year for 20 years in retirement (6 percent return rate). That is well below the federal poverty level and could create financial difficulties for the retiree.

The percentage of households who owned their primary residences was 65.2 percent in 2013, down from 69.1 percent in 2004. The average value of primary residences declined from $280,100 in 2010 to $262,600 in 2013. For example, households that owned a home (nonfinancial asset) and not a retirement account (financial asset), showed a larger decline in net worth because the housing market has been slower to recover from the recession than the stock market.

Credit Amounts Decrease, Except for Education

The average balance on a credit card account, for those who carried a balance, increased to $7,600 in 2013 compared with $5,700 in 2010. But for the most part, folks are doing a better job of managing consumer credit. In 2010, 17.3 percent of the households reported being late with a loan payment; late payments decreased to 14.9 percent in 2013. The percentage of households that paid the full balance on their credit cards each month increased from 56.2 percent in 2007 to 64.0 percent in 2013. Generally, when looking at all debt, households are in better shape than they were during the three years prior.

Educational debt is the exception. In 2001, for families in which the head of the household was 40 years or younger, 22.4 percent carried an average of $16,900 in educational debt. In 2013, 38.8 percent of young families had an average of $29,800 in student loans, according to the SCF. The Government Accountability Office reported in September 2014 that student debt plagues the elderly too. Among persons 65 years and older, student debt liability has increased six fold since 2005 to a total of $18.2 billion in 2013.

Insights for Pastors

I currently serve on a committee of denominational leaders and theological educators wrestling with personal finance issues facing pastors. Since most congregations in the Church of the Nazarene are on the smaller end of the continuum, many pastors are in the lower income group that is not keeping up as the economy shifts. These pastors are less likely to participate in a retirement savings program. Some have undergraduate and/or graduate debt with monthly payments that weigh heavily on family finances.

There is a growing number of pastors employed in jobs outside the church walls. From the perspective of time management, multiple jobs create challenges for ministers for whom there is always something more that needs to be done and someone else to visit. From the perspective of financial stability, however, having multiple sources of income can reduce anxiety by providing financial relief. It appears pastors may find it increasingly necessary to diversify income streams.

Further, pastors should intentionally diversify the type of assets they hold. All pastors should participate in a retirement savings program. The Nazarene 403(b) Retirement Savings Plan can be funded with just a few dollars a month if that is all a pastor can afford. This is a financial asset. The nonfinancial asset of a house can be an important element in the quest for financial stability especially when retirement rolls around. Holding a variety of types of assets will lead to greater financial stability over time.

Finally, dispose of debt. You can’t get any clearer than that. This is critical for persons in lower income groups. Debt can strangle a family and must be ushered out of the house as quickly as possible.

The 2013 Survey of Consumer Finances hints at recovery from the Great Recession that started in 2007 and gained momentum in 2008. The 2013 snapshot shows some economic improvement, but gains have not been enjoyed by all households. Persons must intentionally take steps if they are to achieve greater financial stability.

Keith Schwanz has served as a pastor and educator and currently works as a writer and publisher in Overland Park, Kansas.


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