It seems that having enough money to cover all your expenses has never been harder. The cost of living in the United States has steadily increased, in part due to inflation. However, the Bureau of Labor Statistics found that prices on everything from groceries to real estate have risen in excess of the inflation rate. At the same time, wages have remained largely stagnant over the last two decades. What does this mean for the average American in 2020? Read on to find out.
What has happened to income over the last 20 years?
Wages have not significantly increased over the last 20 years. According to the government census for 2000, the median household income was approximately $42,148. Based on yearly inflation, the median household income should be about $65,191 in 2020. However, as of the 2018 census, the median household income was just $63,179. Even if wages had increased significantly since 2018 (which they didn’t), it would be highly unlikely that they would be able to exceed the rate of inflation.
What does this mean for the average American? It means that every dollar you make now is worth a little bit less than it was 20 years ago. You may appear to make more money, but the reality is that your money cannot buy as much as it could in the past. However, this is just the beginning of the problem for many Americans.
The decreased value in wages has made it harder than ever to save. Unfortunately, with the future of Social Security in question, it’s never been more important to save. As a result, many Americans are turning to retirement planning software and calculators to help them organize their savings and finances in these troubling times.
What has happened to expenses over the last 20 years?
While income has remained relatively stagnant, expenses have risen drastically over the past two decades. Just like income, expenses like housing costs, food, healthcare, and non-essential goods and services are expected to rise with inflation. However, the average cost of living has risen far in excess of the inflation rate.
For example, the average price of a car in 2000 was a little over $21,000, which — adjusted for inflation — should be nearly $32,000 in 2020. The real average price of a new car in 2020 is over $37,000. This represents an increase of about 14% in excess of inflation.
While the general cost of living varies greatly in different parts of the country, most Americans have seen increases in their expenses that far exceed the value of their income. As a result, the economic situation is hitting American’s wallets on the front end and the back end at the same time. It’s now extremely difficult to maintain the lifestyle many Americans had a mere 20 years ago.
How to cope with low income and high expenses
Fortunately, there is hope for Americans who are struggling to pay their bills. In the wake of the COVID-19 pandemic, the need for economic reform has never been more clear. Congress has already enacted several stimulus packages, with more aid to come in the near future. As a result, the government will likely step in to raise the federal minimum wage and enact legislation to protect consumers from profiteers and the sky-rocketing costs of housing and healthcare.
In the meantime, there are ways that you can manage your finances to help cope with the current economic climate. First and foremost, you will likely need to cut back on non-essential expenses. Second, you might consider getting a part-time or freelance job to supplement your primary income. Finally, be sure to find out if you qualify for any financial assistance programs in your state or locality.