US may be headed for long decline. You don't have to follow.

Americans can avoid income decline by spending less and earning more. Here's how.

On the conference call I had last night with Vicki Robin, one of the listeners (I believe his name was Crispin) brought up an interesting topic of conversation. In a world where globalization is a fact and many jobs can easily be moved anywhere in the world thanks to the power of the internet and the information economy, we’re gradually going to see a global marketplace. In other words, all of the nations of the world will gradually see their average standard of living even out, as many of the workers are competing for jobs with everyone else in the world.

My belief is that, for the most part, the standards of living everywhere else in the world will rise rapidly to meet the standard of living in the United States. However, I also feel that our standard of living here will probably never grow at the same rate as it did in the twentieth century. In short, I think our growth rate will be much lower than that of the rest of the world and may in fact be a slow reduction over a long period of time.

I don’t really think it’s anything to panic about, though. This decline has been happening already for a long time, starting in roughly 1970. Real wages – meaning the amount that people get paid when you get rid of inflation – have essentially remained unchanged since then.

The real change in our financial lives has been the big increase in costs. There are countless services we have today that many of us consider essential – and that we pay for every month like clockwork – that simply didn’t exist thirty five years ago. Cell phones. Home computers. VCRs and DVD players. The energy required to run all of these devices. Internet access. Non-extortionary long distance telephone access. The vast majority of Americans consider these expenses a requirement – and they didn’t exist in 1970.

My prediction for the future is that these trends continue. Real wages won’t go up, but our expenses will go up.

So what do we do? As always, there are two key solutions for this – and they’re solutions anyone can follow. Plus, they’ll benefit everyone regardless of whether they believe such change is happening or not. And these two key solutions are summed up in one phrase: spend less and/or earn more.

We can spend less by recognizing that we don’t need every service or tool that comes down the pipe.

On a regular basis, step back from your life and look at how you spend your money. Keep track of all of your spending for a month. Then, sit down and honestly evaluate it. Where are you spending money on things that really don’t add value to your life? Then, cut them hard.

Five years ago, I was a cell phone addict. I never went anywhere without it. I was constantly calling and texting people. Over the last two years, I have essentially weaned myself from cell phone usage. Now, I rarely pick it up and, when my contract expires, I’m going to simply cancel the phone and get a pay-by-the-minute el cheapo phone. Why? I realized I didn’t actually need what it provided. What I wanted was connection to the important people in my life – and cell phones didn’t really provide that. The only actual need it fulfilled in my life was additional security while traveling and, on rare occasion, contacting a friend to make sure we were meeting up at the correct time and place. I can do that for a lot cheaper with a prepaid cell phone, so I’m going to make that switch in the very near future.

On the flip side of that coin, we can earn more by improving our soft skills.

What do I mean by that? Think about it this way. There are two very competent mechanics in your town that charge roughly the same price for the same quality of work. One of them is very gruff with customers, doesn’t explain repairs well, and doesn’t provide documentation or assistance. The other one is very friendly with customers, explains the repairs in common terms, and gives documentation to his customers. Which mechanic will eventually have most of the business?

This is true in any field. Everyone has hard skills that they can provide to the world. We’re all good at something – and some of us are good at several different things. When you have your choice among people who are good at a particular task, you don’t choose because of the hard skills. You choose because of the soft skills. Do they communicate well? Do they listen well? Are they organized? Are they responsive? Do they spend their time improving themselves or improving the community?

Those soft skills and attributes pay off regardless of what the economy is doing – if anything, they pay off better in a down economy. That directly means employment for you. That means raises. That means job opportunities.

If you really focus on these two things regardless of where the economy is right now, you can handle almost anything that the future economic situation will throw at you. You’re prepared for it.

We can all have a brighter future no matter what happens if we spend some time today preparing for it. The future is an opportunity, not a place of fear.

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