Personal Finance

It's About the Wages, People!

I don’t often agree with Ben Stein (you may remember him saying, “Bueller, Bueller, Bueller…”) but in his Sunday column in this weekend’s New York Times, Señor Stein raises a very good point that I’ve been wanting to scream from the rooftops: It’s about the wages, people!

When I graduated from college, I owed around $28,000 in student loans, $1,800 in credit card debt and had an entry level salary of $26,000. Even then, before landing in personal-finance land, I knew that something was up. Many grads were in the same boat with me, owing more than we made—like a bunch of crazy salmon struggling to swim upstream—but only a generation ago, few had this problem of debt-upon-graduation. But it wasn’t just the debt—adjusted for inflation, the average American wage hasn’t budged since 1974. It’s actually gone down. And we have less and less discretionary income as well—so much of our money goes toward the basics like gas, food and housing that we have but a smidgen left over for ‘fun’ or even saving or investing.

If the average American is being asked swallow this new, expensive reality, it would be much easier—and much less pricey—if wages went up at least in unison, if not beyond basic consumer costs. But let’s control what we can control: our consumption of 'wants' as opposed to 'needs'. If we want the government to do its part to stimulate the economy (hello, billions of dollars in stimulus checks), we need to do our part in taking control of the money we do have.

Make sure the spending decisions you make with your money take into account your actual income, not how much debt you can handle. Think of your monthly income as a whole pie. If you want to free up more money either to pay off debt or take a vacation or even just save, it should come from another piece of your pie. The truth is, slicing your pie right can make you feel a bit less squished. Borrow from someone else’s pie too much and you’ll be baking forever.

What piece of your pie have you cut into these days? How’d you do it? Write me!

My thoughts?

1. The government should give the people more relief on taxes so we can make a comfortable living like the generation before me. Inflation and a slow economy generates promises that are never kept by our elected officials. The parties must learn to work together for the good of the people, not for their own special interests. They have to decrease NAFTA quotas and especially keep the health records of the Americans at home so those records can't be used for identity theft. HIPPA is not law for the records sent out of the country.

2. People need to stop depending on their credit cards to live the lifestyle they think they deserve. Credit cards should only be used for emergency purposes; i.e., appliance breakdown and payday in 2 weeks, then pay off that expense with the pay. The lifestyle you live should depend on your net income after all bills are paid.

3. Find a financial planner that looks out for your best interests and stick to his plan even if it hurts in the beginning. Make sure to ask questions. We didn't. He deducted full depreciation on my husband's work truck the first year so we can't deduct his $1400 payment every month, so our income shows a $16,800 net income OVER and ABOVE what he truly netted, which snowballs into a very large tax bill each month.

I'll get off my soapbox now.  -- S.F., PA

Posted on: 08 Jul 2008 2:40 P.M.

I have made my pie a little larger by getting a second job. I work as a weekend manager at a bowling center. I average 23 to 25 hours on Saturday and Sunday. This is not possible for everyone but I believe we must take responsibility for our debts. I use 90% of my pay from my second job to pay down my debts and 10% to invest. With the 40 to 50 hours I work in the construction field this makes for a long week. The only way I know to get ahead is to work for it.

Life will kick us all down at sometime. The question is whether to stay down or get back up.  --David, KY

Posted on: 07 Jul 2008 1:43 P.M.

Your column on wages has certainly struck at the core of the consumer's dilemma in this economy or lack thereof. My pie is probably going to be insurance. Food will have to come ahead of health. Everything is up and wages are down. Can't live without either but I will have to make a choice.  --R.P., NH

Posted on: 07 Jul 2008 11:59 A.M.

I do appreciate your optimism on the economy. I work for a large bank in the mortgage dept. I take about 40 calls per day regarding mortgage refinances. Based on my daily conversations...we are a LONG way from being out of the woods. What is going to drive a recovery in home values? Throw in oil, job loss, tighter credit standards and inflation...the perfect storm has arrived!  --Terry, MN

Posted on: 01 Jul 2008 6:38 P.M.

You hit the nail on the head. I wondered when someone would say this out loud.  --Darrell, TX

Posted on: 01 Jul 2008 2:58 P.M.

With the raising cost of consumer goods and inflation, its only proper for the peoples to begin to demand salary and/or wage increases. This is the proper way to deal with inflation.  --LG, PA

Posted on: 01 Jul 2008 2:11 P.M.

I cut out buying lunches (bag 'em now), parking (hoof it a mile from outside the CBD) and vacation this summer (went to Utah in March and Arizona in January, anyway).

I am not hurting, mind you. But I just spent 11K on two vintage motorcycles and I gotta pay for em!  --Tom, D.C.

Posted on: 01 Jul 2008 12:15 P.M.

I just graduated from college have over 40,000 in student loans ($412/month), I'm about to purchase a condo (all in at $1000/month). I was a little nervous at first b/c i've never had to pay bills like this before, nevermind paying for gas,food and fun. However, i figured if i cut out Dunkin's from my "pie" i could have an extra $50/month! and i'm sure there are a few other things i could go w/o that would help out as well.  --Casey, NH

Posted on: 01 Jul 2008 11:34 A.M.

It's a bit silly for Ben Stein to say that the solution to this problem is increase wages. Profits are down across the board (other than energy for the most part). Isn't the solution to charge our wants and our materialistic culture. Isn't pain, humiliation and a sense of failure a good thing if you deserve it!?! If we are the great country I think we can be, then we should just accept that people are going to hurt - its going to be bad.

Of course this wont be what happens... Which is why our governement is proving how temporary our way of life is...... there is nothing sustainable about the current policies!  --Justin, NY

Posted on: 01 Jul 2008 10:55 A.M.

One of the biggest problems that we are facing in our economy and country is that everyone attempts to place blame for their situation on outside factors... wages are not high enough, we have too much debt out of college, taxes are too high, and so on. As a 25 year old I'm very saddened by the lack of especially those in my generation willing to pull themselves up by their bootstraps and find success and create opportunities... so many would rather have a fair system where everyone is equal and the government will provide handouts; however, that isn't ever going to happen and the only opportunity you'll have for the good life is the one you make.  --Bill, WI

Posted on: 30 Jun 2008 10:12 P.M.