First Person: Feeling Poor Is About More Than Just Income

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According to the NY Times, "Although median annual household income rose to $52,100 in June, from its recent inflation-adjusted trough of $50,700 in August 2011, it remained $2,400 lower - a 4.4 percent decline - than in June 2009, when the recession ended. This drop, combined with the 1.8 percent decline that occurred during the recession, leaves median household income 6.1 percent - or $3,400 - below its level in December 2007, when the economic slump began."

I myself have been feeling poor lately. Given, as a self-employed individual, I'm making significantly less now than I did in hotel management. However, my feelings of being poor are more than just about a lower income.

No returns on savings

Finding any sort of reasonable return on low-risk savings these days isn't easy. With interest rates still low, things like most high-balance savings accounts, interest earning checking accounts, certificates of deposit, and the likes aren't providing decent returns or require incredibly high investment amounts to get them.

According to a article, "The FDIC reports that as of early August (2013), the average interest rate on savings accounts was about where it was in early May (2013)."

At my own bank for example, the annual percentage yield on a standard money market savings account with a balance over $50,000 is .13 percent. For a one or two year certificate of deposit with a balance between $50,000 and $99,999.99, the interest rate is a paltry .05 percent.

This is why I'm a holder of I series government savings bonds. The buy-in for these bonds can be quite low ($25), and the associated interest rates are partially based upon and adjusted for inflation. Rates fluctuate, but currently (as of August, 2013) the going rate is 1.18 percent, which I admit isn't great, but compared to other options, it may not be that bad.

Inflation…but no inflation

From prices at the pump and the prices we pay for homes, to what we pay for the products we buy at the store, inflation is all around us. However, the government is assuring us that right now inflation is minimal.

Last year, our family's personal rate of inflation, which I can determine year-over-year through expense tracking, was right around 5 percent due largely to increased health insurance premiums.

While I can combat some of inflation's affects through things like I series government bonds, I'm still at the whim of the government-determined inflation numbers. Therefore, we have to do most of our inflation fighting through our regular purchases. Even simple things like using to find the lowest area gas prices or buying an older, box version television for $10 at a garage sale versus a new flatscreen for $300 at the store helps us combat inflationary effects on our personal spending.

Taxes, taxes and more taxes

Between income taxes, property taxes, and sales tax, over 40 percent of our annual expenses are tax related. Sadly, this amount doesn't even factor in hidden taxes like fuel tax, amusement tax, utility taxes, etc., which would probably bump this amount up by another 5 percent.

There isn't much we can do about the majority of these costs. However, by lowering our discretionary expenses by shopping resale at places like resale shops or garage sales for things like clothing, furniture, home goods, books, etc., we're able to at least minimize our sales related tax amounts. We also eat out less and do more of our own home repairs to minimize tax repercussions in these areas as well.

Still, when you pair high taxes, with inflationary pressures, low interest on savings and diminished income, I'm finding it hard not to feel poor these days.

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The author is not a licensed financial or career professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.


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