Income vs. Net Worth

Yesterday afternoon, while my sister was visiting, the subject of debt/net worth came up. I mentioned that we had a negative net worth, and she couldn't figure out why- by her reasoning, I make far more than her and her boyfriend combined, plus we have a second full income... so Hubby & I make about 4X what they do.

Not counting the money we've sunk into repairs and improvements (about $30k over the past 3 years), we've lost quite a bit on the house due to fallen property values... around 20-25% from what the purchase price. The house has dropped over $40k in value, and we're currently upside-down on the mortgage by $25k. Our monthly mortgage & utility payments are roughly four times greater than their monthly rent & utilities... so having a higher income hasn't really helped to give us a greater net worth in that area.

We owe over $50k in student loans currently, all locked in at low interest rates. Since we have so much other debt, it's not worth paying this off quickly - but it's a huge hit on our net worth. By comparison, they have less than $10k in loans... though they're still in school, and that balance is rapidly growing (while ours is slowly decreasing). We are paying on three out of four of our student loans, whereas theirs are all deferred right now.

We have two newer vehicles that we're making monthly car payments on, costing us nearly $800/mo. Since we have loans on both vehicles, we also are required to carry full coverage auto insurance, which adds about $100/mo in expense (solely for collision & comprehensive) - we'd still have to pay at least for basic liability if the cars were paid off. They own both of their vehicles outright, saving them on monthly payments and on insurance, but their cars are high-mileage and have numerous mechanical problems. They both function reasonably well, but I certainly wouldn't feel comfortable relying on either vehicle to get me to/from work daily, at least not without several thousand in repairs and maintenance.

And finally, we have far more consumer debt. It's down quite a bit from it's all-time high, but we still owe over $24k. Our minimum monthly payments are currently over $900/mo. By contrast, they owe less than $5k in credit card debt, and are seriously delinquent on it. They're planning to save up some money and offer the credit card companies a settlement for about 50% of the original balance (before all the late-fees, over-limit fees, and interest were tacked on). If they can convince the card companies to take it, they'll pay less than $1500... but in the meantime, they aren't paying a dime.