Since the Great Recession, that expected annual pay raise has morphed into an annual pay cut. All the positive thinking in the world hasn't changed the fact that I'm making less. Many companies are still downsizing and trimming costs even during the so-called economic recovery. Although I can't control how much I earn, I can control how much I spend and save. I recently read an article by NBC News about "survivors and scrapers" in the middle class. I've had to make hard decisions and sacrifices to get ahead in the middle class. The article cited a recent U.S. Census Bureau report that showed the nation's median household income of $51,017 barely changed last year compared to the prior year. Data also revealed most Americans still aren't making as much as they were in 2007, which was the start of the recession. I'm making less money than I in 2017, but my net worth is steadily climbing. Experts say middle-class Americans are treading water, but that's not going to dampen my resolve to get ahead.
Becoming an financial match maker
One of the ways I get ahead is by matching my new expenses with either new income or old expenses that can be slashed. If I can't make extra income by freelancing to cover my new expenses, I find current expenses that can be immediately cut so I can keep my budget balanced. This year, the challenge will be to cover the higher costs of health insurance. I will be spending an extra $100 a week on health insurance. My plan is to stop spending money at the garden nurseries as well as the non-essential food items and supplements. I'm also going to save a little on car insurance and my home owner's insurance.
Contributing to my retirement plan
I've never been able to max out my retirement accounts, but I can always save something. To get ahead financially, I automate my retirement savings with paycheck deduction. I lower the percentage that gets deducted when I need to, but I never let my savings rate fall below 6 percent. While I could invest money in stocks outside a retirement account, I don't want to be responsible for the taxes. It's easier to get ahead by investing in a Roth IRA account because I know I can access the money I put in. If my investments go up, I can't touch the interest now. However, my future self will benefit.
Preparing for setbacks
My strategy for preparing for setbacks is to live below my means. I don't just think about what I can afford right now, but what I could afford if my economic situation dramatically changed. I avoid credit-card debt so I'm not stuck paying interest charges. Instead of paying down my mortgage, I put the money in savings so I can keep paying my mortgage during rough patches. I bought a home that I could afford to pay off in 15 years so that I wouldn't have a mortgage when I retire.
It's possible my income will continue to stagnate as I grow closer to retirement. My hope is that the stock market will go up while I'm in my 40s instead of becoming a sideways market. My solution is to be as flexible as I can be with my savings, investing and spending. If I can get ahead during tough economic times, I know I can become wealthy when my income soars.
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