Living on Reduced Incomes and Starting Over After the Recession
From 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.