Chuck SalettaThe recession and its aftermath have been particularly brutal to typical American families.

According to a recent Federal Reserve report, median household net worth fell an astonishing 39% between 2007 and 2010, and real (after inflation) incomes dropped, too. It's a devastating combination that has lead to large swaths of people running out of the maneuvering room needed just to keep their heads above water.

In dollars-and-cents terms, the Fed report calculates that the average family is worth about $77,000. To put that in perspective, that's roughly the same place we were back in 1992.

Chuck SalettaBut How Did My Family Do?

The Fed's numbers were so astonishing that they inspired me to look at my family's financial records from Quicken to see how we fared during those dark days from 2007 to 2010.It turns out that, like so many others, our income failed to keep up with inflation. Yet we managed to buck the other trend and actually saw a slight increase in our net worth over that time. Better yet, we managed to do that while having our third child and buying the minivan needed to cart our expanding family around.

Don't' get me wrong -- it wasn't easy, and we're incredibly fortunate to have continued to make forward progress during those troubling times. But looking back at where we are versus where we could have been given the overall economy, it was certainly worthwhile.

Better yet, the way we made it work is by doing some straightforward things that anyone can do.

Simple Steps -- Amazing Results

If you're looking to recover -- or at least keep from slipping even further behind -- here are the simple steps we followed that you can use, too:

1. Cut back on expenses: We knocked several hundred dollars a month off our base living expenses by doing things like dialing back on cable and phone service, adjusting our thermostat, and switching to bulk sizes and store brands. We also curtailed eating out, and our vacations became driving trips to see and stay with out-of-town family. I even taught myself basic plumbing and carpentry skills to tackle the little projects around the house -- including money-saving projects like caulking door and window leaks.

There was no single, major expense that we got rid of -- but trimming a lot of little things gave us a much-needed cash flow boost that enabled us to aggressively pay down our debts.

2. Pay down debt: During those three years, we knocked down a little more than $17,000 of our debt. That may not seem like much for three years' worth of effort. But our financial needs also changed significantly during that window of time when we were blessed with our third child.

We were smack dab in the middle of the recession, our income was losing ground to inflation, we had another mouth to feed -- and we needed a vehicle that could hold three car seats so we could cart our family around.

So we bought ourselves a minivan, a brand new Honda Odyssey.

Sounds crazy, right? But the only reason we were able to both buy that van and continue to pay down debt over that time was by dealing in cold, hard cash.

3. Save for emergencies and expected purchases, and pay cash when possible: You're probably wondering where we got the cash. We knew we'd need another vehicle at some point. We had a few months' living expenses socked away in an emergency fund, so we used a common trick to save money to pay cash for the car: We made a monthly car payment to ourselves.

After my wife's previous car was paid off, we kept making the car payment -- but to our own savings account rather than to the bank. A few years of socking away that money got us more than halfway to what we needed to buy the van. We did have to temporarily pull some cash from our emergency fund to make it an all-cash deal.

That $17,000 in debt we paid down basically ignores money we spent on the van -- and the money we "borrowed" from ourselves and paid back to our emergency fund. Our debt level actually dropped during the worst of the recession, in spite of that major purchase.

Paying down debt and saving for life's expenses certainly kept us from sliding backward during the worst of the recession, but what also helped us make forward progress was continuing to invest.


4. Invest regularly no matter what the market is doing: Yes, even during the depths of the recession, we still managed to invest a little bit every month. It was easy -- automatic, even. Money came straight out of my paycheck and funded my 401(k), which in turn bought stocks and stock funds based on paperwork I had signed years earlier. I hardly even thought about it, but the new money invested and the automatically reinvested dividends were working together to help build our net worth, even during the economy's roughest times.

It wasn't rocket science -- or even a particularly brilliant strategy. In fact, the best I can say about it is that by making regular investments, we were essentially dollar-cost averaging and getting more for our money when prices were cheap. Still, it meant that during the same three-year period when median household net worth fell by nearly 40%, ours actually wound up a little higher than where we started -- and by the time we're ready to retire we'll be really glad we didn't put our retirement savings plan on hold.

We Did It -- So Can You

Moving forward during a period of time when the typical family moved backward took four straightforward steps: cutting costs, paying down debt, saving, and investing. They're not the most exciting concepts on the planet, but with diligence, consistency, and the dedication to stick with them over the long haul, they work wonders. Best of all, if you want to follow a similar path, you don't need any special skills or training.


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