We can immerse ourselves in all of the statistics we want, but sometimes the better approach is to interview the “man or woman on the street”. And that’s what I’m doing in this article – asking you to report on the most important economy in your life – yours.
Since the economy – on either a national or personal level – plays out on various fronts, let’s look at several different categories.
Your income
We’re hearing and reading a lot about improvement in employment, but statistics on income are not as readily reported. Where they are, they seem to be telling something of a different story. Last August, the New York Times reported that the median income in the US is still 6% below where it was at the start of the recession in 2007.
So ignoring the rosy unemployment figures, how is your income doing this year? Were either your job or your paycheck downsized during the recession? If so, has your income fully recovered from that hit? Are you making more now than you were in 2007?
More jobs and business opportunities
One of the biggest personal stresses that characterized the recession and the years following, was the absence of replacement jobs. People who held their jobs through and after the recession made out okay. But for those who lost a job, replacement was often close to nonexistent – or it meant taking a much lower paying position.
In your career and industry, are you seeing more jobs than there were a few years ago? Perhaps more important, are there more opportunities for promotion? Has upward mobility been restored in your life, or do you continue to feel trapped in your current position?
Cost of living
This is something of an “X” factor. While the Consumer Price Index (CPI) has been providing a steady stream of very low inflation numbers for years, the cost of living for the middle class seems to have exploded nonetheless. This is particularly true if you look at certain important categories, such as healthcare, insurance, utilities, education, repairs, and even food.
Do you feel that your income has kept pace with rising price levels? Or do you feel that the cost of living is slowly but steadily lowering your standard of living, despite a higher income?
Retirement planning
The stock market has been booming for the past 4 ½ years, and many retirement plans fully recovered their losses from the 2007 – 2009 stock market crash. Many have moved well beyond.
Has your retirement portfolio increased overall since 2007? Are your average annual investment returns roughly matching those of the DOW and the S&P 500? Were you forced to liquidate a large chunk of your retirement portfolio during or after the recession, that you have not been able to replace since?
Your savings
In a real way, your level of savings may be the strongest barometer of the state of your economy – and even of the national economy. It’s what’s left over after paying all of your bills. A growing savings account represents a healthy level of surplus in your budget. By contrast, an absence of savings is an indication of continued struggle.
Many households were forced to deplete savings during and after the recession in order to compensate for a missing or reduced paycheck. Have you been able to rebuild your savings since?
Your debt
Scattered reports are indicating that personal debt has been declining in recent years. This has alternatively been explained as either the result of improving household incomes and balance sheets, or the fact that economically shell shocked Americans are increasingly becoming debt-averse. It’s even been speculated that declining debt levels are preventing a more robust recovery, since debt is generally correlated with spending.
How is that functioning in your world? Have you been steadily paying down your debt, as much of the rest of the nation has apparently been doing? Or are you finding yourself going deeper in debt, as a means to deal with either a lower income or reduced purchasing power?
Your home equity
This category is a mixed bag – much depends on your local real estate market. In the past couple of years, some metropolitan areas have seen a rapid recovery in housing prices. Others have continued to languish, and a small number have experienced continued declines. Real estate equity – the difference between the value of your home, and the debt it secures – is considered to be a significant component of American’s sense of well-being. A healthy and growing home equity creates the confidence that encourages people to go out and spend money.
What is the situation with your home equity? Is it greater than it was a few years ago? Has the value of your home fully recovered to the levels of 2006 – 2007? Are you optimistic about future price trends in your area? How quickly or easily do you think it would be to sell your home if you needed to do it right now?
Feel free to step up and answer as many of these questions as you feel comfortable doing. Your feedback may help give others a better idea of exactly where the economy stands going into 2014. You can also refer to bbt.com for many of the answers to these questions. I don’t know about you, but no one ever calls me or sticks a microphone in my face, and asks me what I think about the economy. This is your chance to voice your opinion!
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.
“…median income in the US is still 6% below where it was at the start of the recession in 2007.” This is very alarming because inflation (which hasn’t been fully realized in the economy yet) has certainly been consistent if not higher year-over-year. It’s always disheartening when income doesn’t keep pace with inflation. I would say that there are less job opportunities where I work, mainly because regulation has forced us to cut G&A costs as our profits are capped and that’s one of the few places we can add to our margin.
Hi DC – That 6% number only goes back to 2007; the longer term views are even more discouraging. Offshoring and advancing technology are taking a toll on salaries.
I see your point about regulation, it’s affecting a lot of industries, some more than others. It’s like a tax on employers, and further cuts their ability to hire. I think it’s also why we’re seeing more outsourcing, and it’s having a negative affect on jobs too.
My personal thinking is that employment overall is better than it was a few years ago, but it hasn’t returned to where it was before the recession. I’m hearing that to be the case even in the IT field. More jobs, but at lower pay and fewer promotions.
Thanks for weighing in.
You absolutely cannot believe the numbers the government puts out regarding unemployment The rate is only going down because a record number of people have stopped even looking for jobs. And do you notice that a week after the jobs report comes out a revised report is issued with usually worse numbers. Personally, our situation will be pretty much stable.
Hi Kathy – I completely agree. We also have to wonder if recent college or high school graduates who have never actually held a full time job and are not yet part of the workforce are counted in the totals. After all, they never actually lost a job.
Personally, I think the under-employment rate is more significant because it includes people with part time jobs who want to work full time. That number is double the unemployment number, and looks a lot closer to the truth.
Glad to hear you’re stable in the face of all of the uncertainty. Count yourself blessed!
Our financial picture has gotten better on just about every level between 2007 and now. Became debt free, paid off the house, more than tripled income, multiple times greater net worth…it is an embarrassment of riches. The recession and recovery marked the greatest period of improvement for our family. I imagine this isn’t typical and we’re just one anecdote, but in the middle of any trend are a huge number of contrary stories.
That’s why I’ve asked for opinions in the article! Everyone’s experience is a little different, so we’re looking for trends. That’s dramatic improvement – were you early in your career or business back in 2007? (Paying off your house is really impressive!)
I agree too that the economy is still a mess, and I really don’t expect it to get better any time soon. Our personal economy is improving on many levels, just not at a pace that I’d like, so we’re working hard this year to dump our massive amounts of debt and increase income. I don’t think the U.S. has seen the end of hard financial times – not by a long shot – and I’d like us to be much more financially stable when the real trouble starts.
Hi Laurie – I have to agree. Part of the economic troubles we’re dealing with is that fact that nothing got fixed coming out of the recession, at least not at a fundamental level. That’s not only become a drag on the recovery, but it’s almost certainly set up the next downturn. We have to be better at what ever we’re trying to do than ever. The worst thing we can do is jump on the bandwagon with the “Happy Days Are Here Again” crowd and abandon recession mode.
Overall we are doing better now than we were at the start of 2007. I think the improvement was mostly because we started getting financially savvy about the same time the recession hit.
My husband’s business saw a ~70% drop in sales and hasn’t yet fully gained back. On the upside I got several promotions that funded the gaps (but at an opportunity cost – now playing catch-up with retirement). At least he didn’t lose the business and it’s healthy now.
We’re much wiser now and are trying hard to better position for the next downturn. Our only debts right now are real estate and our youngest turns 18 soon. We’re still trying to regroup – focus on getting the mortgages down so that we’re less exposed before looking into more investments.
Great job Sherry! I think we all learn more in the face of adversity, financial or otherwise. For many of us, the downturn has been a reality check and as a result, caused us to rethink things and be better prepared for the next one. Sounds like you all will turn out just fine, due to the wisdom you have gained.
My economy has looked brighter over the past couple of years. This year, it’s choppy due to my more unconventional path, but it’s still just fine.
Living on as little as possible is always going to be my strategy. I just don’t think things like a steady job and steady income can always be relied upon so living below your means in good times are needed to make sure your personal economy are always running strong.
That is for sure Kraig, best advice you can get is live below your means, pay yourself first, and create a passive income stream!
Hi Kraig – Living below your means is the best strategy because it keeps you in position to be able to adjust to changes as they come. And I have to second what Jim wrote, that you need to save (pay yourself first) the difference, and invest it wisely. Passive income streams could be one of the best ways to build a reliable future.
I’d say it’s a mixed bag for me. I have no debt and lower housing and living expenses. However, I don’t have a steady income now as I’m trying to start my own business and work for myself. My economy doesn’t really look brighter for the new year right now, but it has the potential to be really bright.
Fig, just be consistent, keep doing what your doing and the income thing will work itself out, I promise you it will increase. I hope the best for you!!