This paper analyzes the two simultaneous goals of debt elimination and wealth accumulation for homeowners.

Written in 2007; 4,163 words; 6 sources; APA; $ 111.95

This paper examines methods whereby US homeowners' debt load can be reduced and ultimately eliminated while building wealth as homeowners. To this end, this paper provides an overview of the current financial situation facing many Americans, followed by an analysis of how some people have approached these dual goals. A summary of the research and salient findings are provided in the conclusion.

Outline:
Introduction
Review and Discussion
Background and Overview
The Path to Debt Elimination and Wealth Accumulation
Debt-Reduction and Wealth-Accumulation Strategies for the Whittingtons
Conclusion
References

"On the one hand, the need for debt elimination strategies is more pronounced today than ever. Many American families that have worked diligently for years now find themselves little better off - or in many cases worse off - than they were a decade ago. In fact, in the United States, almost one-half of the wealth is in the hands of just 3.5 percent of the households, and the majority of the other households do not even approach the upper levels (Stanley & Danko, 1996). In this regard, Reich (2001) reports that, "The dirtiest little secret about the Roaring Nineties is that average working families gained almost no income, while their health care costs soared. From 1986 through 1997 (the latest year for which detailed IRS data are available), the average income of the richest 1 percent of Americans rose 89 percent, to $517,713" (p. 56). During this same period of time, though, the average income of the bottom 90 percent of Americans increase a meager 1.6 percent, to just $23,815 after all federal income taxes were paid (Reich, 2001). At the same time, healthcare costs increased even faster than inflation, a trend that especially affected middle-income Americans families; by the end of the 1990s, fully 44 million Americans lacked health insurance, almost 8 million more than those without health insurance a decade earlier (Reich, 2001). Furthermore, by the end of 1997, even those who were insured paid substantially more, through higher co-payments, deductibles, and premiums (Reich, 2001). Likewise, consumer debt because of credit card use is at an all-time high, and Brown (1999) suggests that, depending on their personal circumstances, consumers should first eliminate this source of debt as a debt-reduction strategy because of the exorbitant interest rates involved: "[Consumers] should carry out an aggressive debt-reduction strategy over the next three to five years in order to eliminate their outstanding debt. Otherwise the interest from their credit cards will erode the profits from any portfolio. Earning 10 percent to 12 percent on your investment portfolio and paying out 18 percent to 21 percent in consumer debt doesn't help you realize a profit on your portfolio, no matter how well you are invested" (Brown, 1999, p. 60)."

Tags: debt, elimination, wealth, accumulation, mortages, retirement, budgeting, homeowners, middle, income

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