When I was shredding old financial documents, I came across my pay stubs from four years ago. It turns out I am making less money now than I did when the Great Recession ended. According to a recent article by CNBC, my situation is quite typical. A report by Sentier Research analyzing Census Bureau data, shows the median household income is $52,098, which is less than $54,478 in 2009. It's also less than the average income of $55,480 when the recession began in 2007. I had a feeling I was worse off than I was four years ago, but I didn't realize many of my neighbors are in a similar predicament. Most of my neighbors drive new cars. My friends always seem to be shopping at the mall or having new furniture delivered. Perhaps they are accumulating more debt. It seems odd that so many politicians are talking about the great economic recovery when people are making less money than ever before. I have made a few adjustments to my budget in order to compensate for a lower salary.
Saving less for retirement
My paycheck is smaller because I received a pay cut that reduced my salary by about $3,000 a year. Because my paycheck is smaller, less money is going into my 401(k) because it's based on a percentage of my salary. In addition, I received dozens of furlough days during the Great Recession. I was expecting to see the end of furloughs, or unpaid days off, but that has not been the case. I recently found out I'd have to deal with about one furlough day per month this year. I had to temporarily suspend my retirement contributions due to the unexpected furloughs.
Putting savings on hold
In addition to temporarily suspending my retirement savings, I've had to put my emergency savings on hold as well. According to the CNBC article, some groups of people have experienced even larger declines in their household income. Young people as well as upper middle-aged people join unemployed as dealing with the sharpest declines in their income. My older son was only unemployed for a few weeks, but even that short amount of time can put a strain on finances. He used up his savings to carry him through.
Opting for community college
My younger son finished his associate's degree at a community college while he was still in high school. Although he could have attended a university to complete a bachelor's degree, it was cost prohibitive. He can complete an emergency medical services degree for half as much as it would cost to obtain a bachelor's degree at this time. Once he has a full-time job, he plans to finish his bachelor's degree.
Although some people would argue that I should get a second job or a higher-paying job to compensate for the lost income, it would be difficult to juggle more work. It makes more sense for us to lower our expenses. I don't like the fact that we aren't saving as much for retirement or in our emergency savings account. I will continue to save as much as I can during the "good times" and just stay out of debt during these bad times. Like many families, we are still waiting for the economic recovery to hit closer to home.
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