Our family is struggling to remain a part of the middle class. And darn it; it seems like it's getting harder and harder these days to do so. Frankly, it's kind of making me mad. According to MSN Money, "This has been an uneven recovery, with the benefits accumulating to the rich and the corporate sector while regular folks have largely been left behind amid stagnant wages, rising living costs, mediocre job gains and persistent long-term unemployment."
But I'm not really mad at the rich 1 percent; I'm not mad at the poor; and while I'm mad at the politicians, they're only politicians, not economists or financial gurus.
So who am I really mad at? Well, maybe I'm mad at myself for making certain decisions that have made it difficult to recover in what is proving to be a poor recovery to begin with.
Crushed by housing
MSN Money notes that, "While home prices are recovering and are back to early 2004 levels -- up nearly 14% nationally from their lows, but still down around 27% from their 2006 highs -- many Americans aren't participating in the rebound. Foreclosures, short sales, negative home equity and other maladies have prevented many from tapping into this wealth recovery."
Our family lost tens of thousands of dollars -- actually nearly six figures when all was said and done and including closing costs, taxes and agent commission -- on our home during the housing market bust. It was terrible financial decision to buy a home at the time and a huge financial setback.
To attempt to recoup some of our lost value, we downsized significantly, moving into a much smaller, much cheaper two bedroom one bathroom condominium. In the process, we've reduced things like utility costs, property tax and insurance costs, and are now mortgage free, all of which combine for thousands of dollars in savings compared to our previous living situation.
The stock market is back, but…
My IRA dropped nearly 50 percent during the financial crisis and it's only just recently made it back to where it was in late 2007. While I would have loved to have been able to reap the rewards of the bull market since the recession supposedly ended, lower income has reduced my ability to do so with extra cash. However, with the easy money monetary policy the government has been taking lately, I'm actually okay with missing the boat on this since I think there will be other buying opportunities. According to MSN, I'm not alone. They note that, "…since the S&P 500 suffered its harrowing drop to 666 in March 2009, the average household has been steadily pulling money out of investments. Those households lost on the way down yet they haven't benefited from the market's rebound.
This is fairly typical of what happens in market downturns, and it's too easy to say the middle class just made a bad call. Families struggling with lost jobs and lower wages in the recession often had no choice but to tap investments to get by.
So even though corporate profits are riding high in this post-recession era, the middle class isn't seeing the gains."
I have made one good decision in this area though. Rather than just letting my IRA sit in the funds it was in, I moved it into a dividend reinvestment fund. In this way, I can reap the rewards of dollar cost averaging as my fund pays out monthly dividends that are reinvested as additional shares. So while I haven't increased my own investment in the fund, I have increased my share total without adding another dollar of my own money.
Hurt by higher prices and lower income
My income dropped dramatically when I became self-employed. While I love my work, I can't say the decision to leave a stable employer-sponsored job exactly helped my personal finances. And after six years, while I've gradually begun to rebuild my level of income, it's still far below what I left when I exited my old role in the hospitality industry.
Meanwhile though, inflation has continued on its ever-present march, inexorably pushing things like gas costs, food prices, and the general cost of living higher. This means that since income has stagnated, I've had to find ways to reduce expenses. Doing things like avoiding higher priced meat and dairy products, finding store like Aldi and Walmart that offer goods at often greatly discounted prices compared to competitors, reducing food waste through better meal planning, and shopping at resale shops and garage sale have been great ways to keep costs low and compensate for my reduced income.
So while I'm a mad, struggling middle classer, I'm doing my best to battle back as best I can.
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The author is not a licensed financial 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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