Here's why your net worth might really be negative

There are really two ways to be poor. Some people just don't earn much money. Almost 15% of Americans, or 47 million people, live below the poverty line, according to the U.S. Census Bureau. Then there are the people loaded up with debt. Even people with good jobs can owe so much on credit cards, student loans or mortgages that, on paper, they're worth less than zero. About 14% of U.S. households fall into this category, with a negative net worth, according to an analysis this month by the New York Federal Reserve. Add up all their possessions — cash, property, retirement accounts — and subtract all their debts, and one in seven Americans ends up in the red. Overall, U.S. households have $12.3 trillion in debt, according to another New York Fed report, released this week. At least Americans are doing better at managing their debt than during the dark days of the housing bubble that led to the Great Recession. The total debt load is up 10% from the middle of 2013 but is 3.1% below its 2008 peak. The biggest improvement since the recession has been in housing debt, which is still more than $1 trillion below its peak. Credit cards have become more manageable as consumers have paid down debts (and switched to debit cards), regulations have gotten stricter and banks have become more cautious about giving cards and other credit to borrowers with low credit scores. In mid-2008, 68% of Americans had at least one credit card. That's now at 61%. Credit card balances have fallen, and since 2008, total credit card debt is down 14%, to $730 billion. Delinquency rates have fallen to levels not seen since the tech boom years of 1999 and 2000. Still, about 14% of U.S. households have a credit card balance of more than $10,000, and student loan balances have soared. From the middle of 2008 to the middle of 2016, Americans' total student loan debt went from $590 billion to $1.26 trillion. It turns out credit cards and student loan debt are the main reasons Americans are ending up with a negative net worth. Mortgages are a minor factor, the New York Fed found. Only 19% of people with negative net worth are homeowners, compared with 75% of those with positive net worth. People with negative worth are a diverse group that defies stereotypes of the poor. One in eight has a graduate degree, and 43% have a college degree, only a few points lower than those with positive wealth. Their average income is $39,077. That's less than half of households with positive net worth, but it's high enough to suggest the group's income ranges from the very poor well into the solidly middle class. Those with negative net worth can be split into three groups of equal size. A third are in the hole by less than $12,500, their debt dominated by credit cards. Another third owe $12,500 to $47,500, net of their assets. And a third owe a net $47,500 or more. For these last two groups, student loans dominate the debt burden. It doesn't feel good when your net worth is a negative number. But many of these debtors aren't necessarily doing something wrong. It can make sense to borrow when you're young — to get an education, buy a home or even sometimes to meet emergency expenses — as long as you're pretty sure you can pay it off later when you're earning more money. The average age of those with negative net worth is 43, compared with 51 for those with positive net worth. The worry, especially in an era of stagnant wages, is that there might never be enough income, or enough time, to pay off those debts and start building real wealth.