Life at Median Income Means
Scrimping, Bargain Hunting

The dreary economic headlines that land on front doorsteps these days affect families living in Midwest towns as well as executives on New York's Park Avenue.

Yet while Wall Streeters often cash out portions of their portfolios during an economic downturn, middle-income earners who have little or no investments must ride the rollercoaster in subtler ways. In a struggling Massachusetts fishing town, for example, a middle-aged couple is debating whether to hold off on making their first investment in a 401(k) plan. In Iowa, a young banker is bringing home less money because his income is tied to his clients' sputtering investment gains.

In an economy increasingly compared to an hourglass by economists and the media, middle-income earners tend to be squeezed or forgotten, as companies cater to the high or low ends of the market. But according to the latest U.S. census, median household income shot up by a greater percentage than in the prior two census surveys combined. In 2000, the median income, or middle value, for U.S. households was $42,148 a year. That's up a steep 40% from the census 10 years earlier.

Of the 106.4 million U.S. households counted in 2000, 32% identified themselves as nonfamily units: homes of one person or unrelated people. The rest were families, defined as at least two related people. The median income of family households, $51,751, was slightly higher than that of all households.

How far does a median income go these days? To find out, The Wall Street Journal visited a median-income household in four different regions of the nation. These households show how planning, patience and perseverance can make a little go a long way. Yet all face sacrifices and trade-offs.

Today, we describe the life of a single mother in Louisville, Ky.

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Erika McMurry is picking her way through the pork and ground beef at a Meijer Inc. supermarket and making mental calculations out loud.

"Here's five pounds of hamburger meat for $10, but it's not on sale. I know I can get six to seven pounds for $8," she says, sighing and steering her three fidgeting children to another part of the store.

Later, she throws two packages of hot dogs into her cart as a cheaper substitute for the hamburger. At the checkout she makes one last tally before her groceries go through the scanner. She traveled a half-hour from home just to get sale meat at Meijer, but she is going home nearly empty-handed. "I'll wait another week and a half for the hamburger," she says resignedly.

This Saturday shopping ritual of sacrifice and substitution is a staple of the McMurry family's financial survival. The 30-year-old Ms. McMurry, along with a son, Daveion, and two daughters, DeA'dre and Jameicka, makes do on $35,781 per year -- slightly below the South's median household income of $38,410. The income provides limited wiggle room and even fewer savings. But despite the limitations, Ms. McMurry says her family is doing better than they ever have, even as the economy in her city wilts under the national economic slowdown.

The McMurrys live in Louisville's California community, a mostly black, low-income neighborhood nestled among the city's skyscrapers to the northeast and the stately Victorian mansions of Old Louisville to the south. The family's tidy, six-year-old detached house sits on a street sprinkled with vacant lots, apartment buildings and "shotgun" houses that date back to the early part of the 20th century.

But with a long, lime-green nail, Ms. McMurry points to an abandoned Philip Morris plant, a looming neighborhood reminder of what has been happening to the city's economy recently. Louisville residents, who had enjoyed strong job growth since the early 1990s, were hit hard after Sept. 11. Unemployment rose steadily starting in October and peaked at 5.4% in January. The rate slipped to 5% in June, the most-recent figure available. The manufacturing sector was hit particularly hard, University of Louisville economist Paul Coomes said. At the end of 2001, manufacturing employed 5.5% fewer people than a year earlier.

"It was really a manufacturing recession in Louisville," Mr. Coomes said. "We almost squeaked through until Sept. 11th, but that was more than we could take."

Her stable job as an executive assistant at the Presbyterian Community Center has helped Ms. McMurry skirt the local slowdown. But health problems force the family to live paycheck to paycheck.

Ms. McMurry suffers from systemic lupus, a chronic disease that leaves her with arthritic joints, migraine headaches and $80 in monthly prescription costs that exceed her insurance plan's coverage.

Ms. McMurry often has to visit specialists and when that happens, the family suffers. "When I have extra medical procedures not covered by my insurance I try to pay $10 here and there or try to make payment arrangements [with the doctors] to cover it," Ms. McMurry says. "It's just touch and go."

On top of that, Jameicka has 13th-ring chromosome abnormality, an extremely rare condition that has left her severely deformed and unable to talk or care for herself. Although the 13-year-old wasn't expected to live past infancy, she surpassed doctors' expectations and is in a special class of sixth graders at Western Middle School. Jameicka's health care, fortunately, is covered by Medicaid, and her brother and sister fall under their mother's health plan at work.

Earning $21,000 a year, Ms. McMurry says the household's remaining annual income is rounded out by $8,880 in child support from DeA'dre's father and $5,901 in supplemental security income provided by the state for Jameicka's disability. The family receives no financial support from Jameicka's father, and sporadic support from Daveion's father.

The family's main monthly expenses -- totaling more than $1,500 for items like the mortgage, insurance, car and utility payments and groceries -- leave barely any savings for emergencies, a problem that constantly worries Ms. McMurry.

In a good month, she has an extra $300 saved in a checking account, something Ms. McMurry has tried to boost by getting rid of credit cards altogether. She plans to participate in her employer's retirement plan next year, when she's eligible. Despite persistent health hurdles and a relatively set income, Ms. McMurry makes the household budget work through self-discipline, luck and a perpetually positive outlook. She shops for clothes only at discounters like Wal-Mart Stores Inc. and Fashion Shop Inc., and limits family recreation funds to around $30 per week. Movies are too expensive, so the family waits for features to come out on video. When the foursome goes out to eat, it's usually to Golden Corral, a buffet restaurant where they can load their plates with hot food for around $18 combined.

The McMurry children are taught how to budget their money from an early age. Five-year-old DeA'dre gets a $3 allowance each week from her grandfather, while 9-year-old Daveion gets $5. Their mother keeps the money on her dresser in her bedroom and teaches them to save for the toys they want.

"I wanna buy an ice-skating Barbie!" blurts DeA'dre when pressed about what she's saving for. Daveion shyly says he's thinking about a new videogame.

Ms. McMurry says the tragic events of Sept. 11 reinforced how important her role is as the family's sole breadwinner. After holding more than seven jobs in a little less than 12 years, she is more focused on how she'll "set the pace" for the family's income during the next six months. That means fewer compulsive purchases, more cooking at home rather than eating out and setting long-term goals. In five years Ms. McMurry says she wants to open her own day-care center called "Mary's Angels," named after her mother, who died of lupus a year ago. Her biggest goal, though, is to take Jameicka to her high-school prom in about six years, an event that will involve the whole family and plenty of celebration.

Cruising down her street with a trunk full of groceries, Ms. McMurry laughs when she thinks about other mothers who marvel at how she makes such a tight budget go so far.

"People ask me how I do it with so much on my shoulders," Ms. McMurry says with a shrug. "I tell them my shoulders only hurt from arthritis. It's not because of my burden."

Write to Elizabeth Weinstein at elizabeth.weinstein@wsj.com¹

Updated August 19, 2002