When a $50,000 Salary Can Feel Like Minimum Wage.

How can $50,000 seem like minimum wage? According to the Social Security Administration’s National Average Wage Index, the national average income for the USA in 2011 was $41,673.83. That means that to half the country, $50,000 a year would be a $8,326 raise, and yet this woman says $50,000 feels like minimum wage !

Well, if you read her story it makes a lot of sense.

Basically, she went from working at home to a full time office job and once she totaled the change in her spending she realized she was making about $7.50 per hour.

Here are some of the things she attributes to lowering her effective income:

• Commuting costs – increased wear and tear on her car, the cost of gas, etc…
• Childcare expenses
• Eating out more – less time to prepare meals at home means eating out or buying take out more frequently, which is more expensive.
• Increase in clothing and personal care expenses (i.e. hair and nail care, proper office attire, etc..)
• Coping with stress by spending more on vacations, or entertainment.. buying more wants than needs.

Her change in lifestyle brought about a change in spending with no increase in saving. It happens to a lot of people and it’s not always easy or even possible to fix. She could do some things differently. She probably doesn’t need to spend $40 a week on clothes, and she could plan ahead to prepare more meals at home, but that takes work too.

This is the kind of situation my wife and I work very hard to avoid. We avoid debt whenever possible to keep as much of our income as possible. I work hard to secure a steady income, and she works hard (sometimes harder) to make that income go as far as possible.

She’s the coupon clipper and meal planner. She’s turned comparison shopping into a competitive sport. She scours thrift shops and consignment stores for children’s clothes, and puts a healthy low cost meal on the table every day of every week all year long.

It’s not easy, but it’s cheaper than if she went back to work full time. And we believe it’s better for the family. Living on a single income is not easy, but it is possible and I believe better in most cases for families. The key is twofold: 1) limit expenses as much as possible, and 2) increase income.

It’s really no different than what most people should be trying to do regardless of their employment situation, but as the Yahoo! article makes clear, it’s so much easier to lose control of your spending when both people work out of the house. Those little money leaks turn into an effective loss of income over time.

Related Posts:

• Living on a Single Income: 7 Years and Counting.
• Bottled Water Out, Tap Water In.
• Living on a Single Income – You can do it! Here’s how.
• What To Do With Found Money, or a Windfall.
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)

Living on a Single Income: 7 Years and Counting.

This year my wife and I are celebrating our 7th year anniversary of living on a single income. It doesn’t seem possible that it’s been so long. We had a beautiful newborn when we started out, and since then our family has blossomed to 3 wonderful children. My wife and I felt that our children would benefit more from having one of us as the caregiver instead of someone outside the family. So without much forethought, my wife left the workforce shortly before the birth of our 1st child.

In many ways, we were lucky to have been successful without much planning. Today, many couples and families find themselves living on one income out of necessity rather than choice. The Great Recession has left millions of people unemployed, and many millions more wondering if they could get by on one income if they had to.

The good news is that anyone can do it, but having a higher income may mean you need less planning.

Here are some lessons I’ve learned along the way that may help you, whether you’re thinking of life on a single income to help raise a child or you have to live on a single income because you have lost or may lose your job.

How to live on one income

Communicate. Being in agreement with your spouse or partner is absolutely essential to living on a single income. If one of you is not upholding your part of the arrangement, then both of you will fail. It’s important to talk about how each of you view your role, as well as your feelings and concerns along the way. It’s very easy for the bread winner to feel more important than the partner who is staying at home, but both have parts to play.

In our house, I’m the one who works to bring home a paycheck, but my wife views her role as making that paycheck go as far as she can. To that end, she clips coupons, only buys items on sale and looks to cut costs wherever she can. She makes her own bread, and cooks all the meals for the family. We simply would not be able to live on my income alone if she didn’t do those things. Living on one income is a team effort.

Keep a close watch on your spending. Some people create a budget and stick to that for all their expenses. Others simply automate savings plans and bill paying, while keeping tabs on their discretionary spending. Whatever method you use, you need to be able to account for all the money coming in and all the money going out. It seems ridiculously simple, but the truth is that the American standard of living is such that many double income families spend well beyond their means on an daily basis. That simply is not possible to sustain for very long on one income.

Trim more than just the latte. Cutting your expenses is a necessity for making the transition from a double income to single income, but skipping the extra latte alone isn’t going to make that transition happen. You’ll need to make a serious assessment of what is essential and what isn’t, and cut the extras. While you may get by without cable, you can’t do without other expenses like auto insurance for example. If you live in a state where insurance is mandatory, shop around and save on car insurance.

Wave ‘goodbye’ to the Joneses. I can say from experience that there is no way you will keep up with your neighbors spending while they are on a dual income and you aren’t. But the good news is that you will likely find yourself much happier, since you won’t be so focused on materialistic aspects of living. My family and I simply don’t have the extra money for the latest video games or movies, but we still have fun with things like family game night. And I think we’re much closer as a result.

Don’t trim too much. While it’s imperative to cut spending, you shouldn’t touch savings. You’ll still need to save for retirement, for example and you’ll find that saving up to buy that big ticket item is also a necessity when you’re living on a single paycheck.

Take baby steps. If you have the opportunity to take a trial run, then do it. Living on a single income is not a stress-free lifestyle. Some couples don’t get to make the choice. If one partner is laid off, then adjusting to life on one income is a new reality. My wife and I were fortunate enough to have had the choice. When our first daughter was born, unemployment in the U.S. was near 5% and I was riding the wave of yearly, automatic pay raises. These days, few people are lucky enough to be able to count on a yearly raise, and millions more can’t even count on having a job.

Lessons from living on a single income.

Even though my wife and I have to live on a single income, we still didn’t plan or prepare enough ahead of time. Another thing we’ve learned along the way is that most people really can’t afford the car they drive. Living on just my income has really driven that point home. We have a 2 year old minivan that we bought used when our 10 year old family car couldn’t hold 3 car seats, and I drive an 11 year old car to work every day.

Another sacrifice we’ve made is paring back our lifestyle. Most of our friends have flat screen, hi-def televisions sets, but we still have a 27-inch CRT television. We have used furniture that has been gifted to us by our friends (the Joneses) when they buy newer, more stylish models. Our kids know all about hand-me-down clothes first hand. Besides wearing their siblings used clothes, we’ve even purchased many clothes from consignment shops. All our kids wore generic diapers, and passed toys on to younger siblings.

The result of much of this has been that our kids view material things differently than other kids. They don’t think of things as disposable. They don’t expect to get the latest fad simply because “all the other kids” have one. Sure there are times when they shed some tears over not having the name-brand gizmo their friends have, but in the end I think they’re far less materialistic than their peers. Besides, they’re learning important money lessons that will serve them well throughout their lives.

Lastly, avoiding debt is a big factor in success. You aren’t going to be able to get ahead, much less stay afloat if a sizable chunk of your income is going to pay off something you bought yesterday or last year. You have to get used to living below your means, but once you make that adjustment you’ll find that saving, investing  and reaching your goals is not only possible but much more satisfying. Living on a single income isn’t as difficult as it seems, but living comfortably on a single income is damn near impossible if you’re saddled with debt.

Related Posts:

• 5 Small Sacrifices to Save Big.
• Minimalism vs. Simplicity – Are You Missing the Point?
• When a $50,000 Salary Can Feel Like Minimum Wage.
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)
• How to Waste Your Money in 15 Easy Steps.

15 High stress, low pay jobs.

I stumbled across this a few days ago, and thought I’d share it. It’s CNN/Money’s list of 15 jobs that offer high stress, and low pay.

I’m not sure what their criteria were or how they determined the amount of stress. The low pay aspect is fairly easy to determine, each is below the median household income and most require a degree or two. But I question some like Commercial photographer. I mean, is the % who say their job is stressful really 100? There are no commercial photographers who don’t find their work to be high stress?

And what does high stress mean? I love my job. I think I have things pretty easy, compared to many. I’m in the IT field, but I still have stressful days. I suppose the best way to look at this list is that a percentage of the people who hold these jobs find the rewards do not outweigh the stress.

Still, that seems odd since Minister is also on the list. I’m not surprised they don’t make big money, but you can’t tell me their job doesn’t have moments of satisfaction that can’t be found in other careers that outweigh the stressful times.

At any rate, here’s the list. You can read more detail at the original site.

• Social Worker.
  Median pay: $43,200
  % who say their job is stressful: 72%

• Special events coordinator.
  Median pay: $35,900
  % who say their job is stressful: 75%

• Probation officer.
  Median pay: $38,400
  % who say their job is stressful: 58%

• News reporter.
  Median pay: $32,900
  % who say their job is stressful: 62%

• Music ministry director.
  Median pay: $40,800
  % who say their job is stressful: 67%

• Membership manager.
  Median pay: $42,600
  % who say their job is stressful: 67%

• Fundraiser.
  Median pay: $42,700
  % who say their job is stressful: 67%

• Commercial photographer.
  Median pay: $43,600
  % who say their job is stressful: 100%

• Assisted living director.
  Median pay: $46,000
  % who say their job is stressful: 67%

• Minister.
  Median pay: $45,300
  % who say their job is stressful: 71%

• Marriage/family therapist.
  Median pay: $44,400
  % who say their job is stressful: 61%

• Curator.
  Median pay: $46,500
  % who say their job is stressful: 89%

• Substance abuse counselor.
  Median pay: $32,400
  % who say their job is stressful: 71%

• Film/TV producer.
  Median pay: $47,600
  % who say their job is stressful: 78%

• High school teacher.
  Median pay: $43,000
  % who say their job is stressful: 65%

And for those looking for the alternative, here’s a companion story detailing the 50 best jobs in America

Related Posts:

• College Grad Unemployment and Useless College Degrees.
• When a $50,000 Salary Can Feel Like Minimum Wage.
• Most Americans Feel the Same About Job Security as They Did a Year Ago. (infographic)
• Living on a Single Income: 7 Years and Counting.
• Money as a Debt Magnifier.

Money as a Debt Magnifier.

I don’t know if you are a Dave Ramsey fan or not, but I’ve been listening to him casually on the radio during my evening commute now for a few months and I had to write about something I noticed time and again on his shows. It seems like just about every person who gets on the air with Dave to ask for advice about a debt problem always answers with something in the 6-figure range when Dave asks what their salary is!

I swear that 85-90% of those callers say they make somewhere between $100,000-200,000 a year.

The first question I had for a while was, “How in the world can you have a problem with debt when you make 6 figures a year?!”

Then the answer gradually became clear to me – these people don’t have a problem with debt, they have a problem with spending! It’s a money management problem, made worse (magnified) by a large salary.

Think about it- we see it all the time with celebrities. They have multi-million (sometimes billion) dollar incomes and somehow lose it all. How does that happen?

The answer lies with the fact that money is a lubricant that greases your financial skids. But if you can’t steer the sled, you’re apt to fly off a cliff and the more money you have (lubricant) the faster (and farther) you’ll fly off that cliff.

The Dave Ramsey callers, like Ed McMahon, M.C. Hammer, Michael Jackson, and hundreds of other celebrities should serve as a reminder that more money alone will not solve your problems. In fact, it may make them worse! You should first get your financial house in order, then grow your income. Chances are, you’ll actually keep more of it that way.

Related Posts:

• When a $50,000 Salary Can Feel Like Minimum Wage.
• Debt is Really a Good Thing?!
• Living on a Single Income: 7 Years and Counting.
• Dave Ramsey’s Truth About Debt Collectors.
• Anna Nicole Smith’s Bizarre Bankruptcy Claim.