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Updated on Monday, June 1, 2015
We’ve added jobs. Unemployment has decreased to 5.4%. Inflation remains at less than 1%. So, why aren’t we feeling encouraged by the United States economy? Wage stagnation.
Economists were disappointed by April’s hourly earnings growth of .1%, but despite five promising years of growth, American wages are still 1.2% below what they were at the beginning of 2009.
Why is this happening? Some experts claim leverage disappeared when millions of Americans dropped out of the workforce during the recession. Some cite the heavy power shift from workers to investors as the primary issue.
Wage stagnation may continue to be a missing piece in our economic recovery, but there are ways we can improve our financial situations to offset our losses.
Enhance Your Value by Adding To Your Skill Set
Last month, Chris Messina published a Medium think piece about the rise of the full stack employee. A full stack employee is described as having a diverse range of skills, being easily adaptable, and able to communicate efficiently between departments.
“Full stack employees have an insatiable appetite for new ideas, best practices, and ways to be more productive and happy. They’re curious about the world, what makes it work, and how to make their mark on it,” says Messina.
While Messina’s article focused on the tech industry, his idea about the value of a multi-skilled employee applies across all industries.
In today’s economy, you’re quickly falling behind if you stop learning and gaining additional skills. Graduate school is too expensive for many Americans, but there are a number of high quality, affordable online education options.
Websites like Coursera and Edx offer free classes from some of the world’s top schools. Affordable sites like Udemy, Lynda, or Code Academy focus on teaching more specific technology, creative, and business skills.
These courses conveniently allow workers to build real-world skills that can add value to their current role and may lead to higher paying positions in the future. Some employers may even reimburse workers for continuing education expenses.
Make Your Money Work Harder
The 401(k) Match
As an American, you’re lucky if you have access to an employer-sponsored retirement plan. If your employer offers a 401(k), you owe it to yourself to make sure you’re at least taking advantage of the company’s match. If not, you’re missing out on a valuable portion of your compensation and its future compounding returns.
After you’ve made this initial contribution, you should weigh the pros and cons, such as contribution limits, eligibility for a Roth IRA, fee structure, flexibility, and overall retirement goals before continuing to stash additional funds there.
Take Savings Seriously
Ready to improve your personal savings rate? Americans’ average personal savings rate recently dropped to 5.3%. With a savings rate that low, it’s difficult to funnel adequate amounts for retirement, long-term savings, and a healthy emergency fund.
Luckily, high-interest savings accounts offer nearly at or above 1.00% APY vs. the .01% many traditional banks return.
Once you’ve determined where to park your hard earned cash, it’s important to find ways to increase personal savings rate by reducing expenses and increasing income.
Trim the Fat and Pocket the Difference
When was the last time you closely examined your budget? It’s difficult to increase your personal savings rate without tracking your monthly expenses.
Pull out your bills and take a magnifying glass to these recurring expenses:
- Rent or mortgage
- Car payments
- Utilities (electric, gas, water)
- Insurance (health, automobile, homeowners or renters)
- Cell phone
- Cable and internet
- Alarm system
- Entertainment subscriptions
Can any of these monthly expenses be reduced or eliminated completely? Are hidden fees making bills more costly? Did you know many bills are negotiable?
I was able to easily save a few thousand dollars a year by cutting cable, ditching my home warranty, finding a cheaper cell phone plan, and opting for higher deductible insurance plans.
While living below your means and cutting expenses is important, it’s difficult to build wealth without aggressively saving. If your skill set still hasn’t prepared you for a higher paying role, you may want to consider adding side work to beef up your income.
The rise of the sharing economy has shown us ways to earn extra money through companies like Airbnb, Uber, or Lending Club. Are there areas of your life you’re willing to lease to others for some extra cash?
You don’t necessarily need to rack up miles on your car, sacrifice your privacy, or take a risk on a stranger with peer-to-peer loans. In fact, if you’ve got a hobby there’s probably a way to monetize it.
My sister helps subsidize her expensive Bay Area living expenses by regularly playing music at dancehall parties and baking vegan cupcakes for local events. My cousin helps make Boston more affordable by tutoring students and is working as a choreographer for a children’s musical this summer.
My previous experience as a concert promoter made my most recent side hustle with an online ticketing company a no-brainer. I loved working from home, the ability to schedule shifts around my full-time job, and the additional perks like wellness and food delivery stipends. As an added bonus, I polished some soft skills working for a large, well-respected tech company.
What skills could you generate side hustle revenue from? How much free time are you willing to part with to increase your cash flow?
Don’t Allow Wage Stagnation To Get You Down
Our economy has shown several signs of improvement, but it’s difficult to predict how long it will be before workers see that growth hit their paychecks. This feels especially discouraging as costs of living continue to increase. However, by improving our skill sets, making our money work harder, reducing expenses, and picking up a side hustle, we’re less likely to feel the pain of wage stagnation.