Living on Reduced Incomes and Starting Over After the Recession

eagle rockFrom the L.A. Times, what do you do when you lose your job and the next one you get pays less than you were earning before?

That’s the case for Victor and Shannon Macias, 40 and 44, who rent an apartment in the Eagle Rock neighborhood of Los Angeles and have two daughters who are 10 and 12. Victor and Shannon used to make $72,500 in combined income but after the recession, now earn $43,000 (median household income in the U.S. dropped from $55,627 in 2007 to $51,017 in 2012).

But the Macias family has managed to live frugally. The only debt they have is from a $17,800 car loan (another car has already been paid off). They have $190,000 in retirement savings, and $2,500 in liquid savings. They would like to save to buy a house. What does a financial planner suggest they do?

Since they’ve already cut back on most of their expenses after seeing a drop in income, the financial planner Victor and Shannon meet with suggest they figure out a way to earn more money or supplement their income—which, yes, is the obvious answer, and I don’t think they needed a financial planner to tell them that. Since Victor and Shannon didn’t complete college, the financial planner suggests taking night classes or online courses to get certified and boost their earning potential. The planner also suggests the Macias family to continue renting until they can find better paying jobs and boost their savings, because they currently don’t earn enough to take care of things like unexpected home repairs and property taxes.

Job No. 1, the planner said, is to find higher-paying work or other ways to boost their income, “especially since they are just not spending a lot of money. I don’t see a lot of room for cutting back.”

Here’s a family that doesn’t need to be told to cut out lattes from their life. Sometimes the solution to our financial problems is to simply figure out a way to earn more money.

Photo: pinkyracer

---
---
---
---
---

11 Comments / Post A Comment

aetataureate (#1,310)

Ohhh this is too relevant to my interests. In 2011 I was unemployed for two months and took a new job that paid less than 85% of what I made before — I got a 3% raise at one point but everyone has been frozen since then. My dad recently guessed at my salary and his guess was a full one-third higher than I make. “Oh my god, you thought I made that much and was still this broke all the time? No.”

bgprincipessa (#699)

@aetataureate yes. I make about 92% now of what I did a few years ago, even though I’ve been at this job longer. When I was unemployed for a bit, my dad casually mentioned something about my savings and a number that was about 3x what I actually had.

aetataureate (#1,310)

@bgprincipessa Was it strangely humiliating for you also? I felt like the Sex and the City where Miranda has to call her realtor or something to be like, No, I’m not married. Yes, I’m sure. and she’s so embarrassed for both many reasons and no reason.

bgprincipessa (#699)

@aetataureate I kind of laughed, in that hopeless way like it’s the only thing you can do, then had a moment of panic that I wasn’t actually going to be able to survive on that much money (spoiler: I survived). I think I scared my dad a bit, actually. He was like “Oh. I did not know that.”

SATC took place in the early 2000s right? I remember that scene. In Mad Men last season, Peggy was looking at places and had to tell her realtor that it wasn’t Abe buying, it was her. 30 years and nothing changed!

andnowlights (#2,902)

@aetataureate I had that exact conversation with my dad, except his guess was 40% higher (and even then it was not very high, which tells you how little I make, ha ha). It was both humiliating and made me sad, because I felt like I was letting him down somehow. I’m not stupid by any stretch, but I’ve struggled in my career/schooling (mightily).

aetataureate (#1,310)

@andnowlights Oh no! Don’t feel sad. For me, it was good to clear the air about it, because damn, the idea of spending an additional X thousands of dollars a year with nothing to show for it was embarrassing. Also I hope you sincerely aren’t conflating being smart with meeting this career or school goal. From one struggler to another.

jquick (#3,730)

@aetataureate I was a single woman and bought a house in 1990, and didn’t have any issues or even a discussion re my single-ness. SATC wasn’t based on reality.

aetataureate (#1,310)

@jquick You intentionally missed the point of my comment in the interest of bragging about your own life.

HelloTheFuture (#5,275)

It’s interesting that I’m living on about 80% of what I used to make but barely miss it after taxes, health care, 403(b) contributions, etc. that came out of that larger paycheck. That is to say, I do miss the 403(b) contributions, but I’m living on a little less than the same amount of cash and it feels “normal.”

ThatJenn (#916)

@HelloTheFuture I wonder about this sometimes when I think about the possibility of making Big Changes in my career. My take-home pay is only 70% of my gross pay because so many things are deducted from it, and the amount deposited into my checking account to live on is only about 50% of my gross pay. So sometimes I fool myself into almost thinking I live on only half my income – but I don’t, really, because I DO get many benefits from the withheld income (not having to save for taxes, not paying for basically any healthcare related costs out of that 50%, etc.). I don’t have any real sense of which of those things I’d actually, realistically feel the need to replace if I switched to, say, being an independent contractor. I can make some guesses but it’s hard to really evaluate what kind of income would be “equivalent.”

jquick (#3,730)

They should have been told to get rid of their $20k+ car (and loan), and buy a beater with cash. Crazy that they make a combined income of $43k and owe $18k on a car. Makes me wonder if all 4 of them have smart phones, 500 channel cable…

That said, impressive that they have saved $190k. Wonder how they did that.

Post a Comment