According an article published on Yahoo! Finance by the Associated Press U.S. consumers are spending more, despite making less. The article explains Americans saw a decrease in their paychecks thanks to inflation and the end of the Social Security tax in early 2013.
My husband and I are among the people who saw a decrease in our income this year. Just the 2% Social Security tax increase alone lowered our income by $1,000 a year. To be honest, when I learned we would see a loss that large, I was very nervous. I keep our money on a strict budget, so finding a way to cover a loss of $1,000 is quite the chore. However, thanks to some smart planning and a little luck we are actually in a better financial position now than we were before.
Here is how my husband and I are able to spend more, despite our early losses.
Our goal to reduce our overall debt had nothing to do with the pay cuts we've seen in the last few months. That goal started some time ago simply because we wanted to live a less stressful life. In 2011, we took the first step by paying off my credit card balance. The second step was completed in February 2013, when we used our federal tax refund to pay off our auto loan six months early. Lastly, we used the savings from auto loan payment to pay off my husband's credited card balance. The 2013 changes alone save us $410 a month, which would nearly cover our loss five times.
Of course working more usually means bring home more money, which can lead to having more money to spend, and that is the case for my husband and I. We have both seen an increase in our work load over the past four months. I'm a freelance writer, and I have so much work that I can barely keep up. My husband is a logistic coordinator, and he has been working no less than five hours of overtime a week. That is a huge change from a few months ago when his employer was laying people off. I estimate that our extra work hours have increased our income by about 3% a month.
In January 2013 my husband and I made some huge lifestyle changes. We started a diet, and even though I once believed it would cost us more to eat healthy, the truth is, we are saving around $60 a month on food costs while dieting.
All told, we are seeing an estimated increase of around $920 a month in our gross income. So, despite the loss from inflation and the end of the Social Security tax, we are spending more simply because we have more to spend.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.More from this contributor:
- Retirement Benefits
- Investing Education