<p>Yes, it amazes me how much the very poorest people in our society spend on cigarettes and alcohol–it can be such a HUGE portion of their income and it is scary! It’s great that your cousin and her H were able to quit smoking AND have a fab vacation–what a win/win! </p>
<p>Drinking in a bar is a luxury, but I think even the working poor deserve to set aside enough to have a can of beer at home every day … poverty without any pleasure would be even worse.</p>
<p>…yes, there are ways Mr Hypothetical could be living cheaper ( although thats a lean budget) He could also be a new dad with a wife who is unemployed.</p>
<p>The exercise was to show that $30,000 a year…around $ 15 an hour income…twice the minimum wage …is not much money. It shows that one problem, one financial blowup could result in hardship. $30,000 a year. Look at the charts.</p>
<p>Around half of the people in the US are making this or less than this.</p>
<p>It does not surprise me that so many people cannot get there hands on $2000,</p>
<p>This guy doesn’t do ANYTHING extra with this budget. He could use a drink. He works hard and is barely making ends meet. </p>
<p>My S graduated college at the height of the recession and had difficulty finding a well paying job. He came back home to an area with a very low payscale and took that 15/hr (30k) job. His company paid insurance and there was opportunity for advancement. He lived at home for 6 months (paid his own phone, car insurance, personal expenses, etc), packed lunches from leftovers, rarely went out, and banked about 10k for emergencies/cushion. Then he moved into an apartment with 2 roommates (total cost with utilities @600/month), lived frugally, and worked hard. He has gotten 4 promotions with substantial raises over the past 3 years, contributes to 401k and is doing really well. Granted he had a few distinct advantages: he didn’t have student loans (attended State U, scholarships, worked, plus help from parents), had an older, but reliable car, and was able to live at home for a little while. He had to dip into his emergency fund for medical expenses ( surgery) but he “pays himself first” and has since replaced the funds. It’s doable.</p>
<p>I’m not the best with money, but luckily DH is a Dave Ramsey clone. DH is a professional with a good salary yet he drives a 19 year old Honda with over 200k miles. He says maintaining the Honda is cheaper than a new car payment. In contrast, I see co-workers making far less buy fancy new cars, financed at high rates for long periods (because they can “afford the monthly payment”) without regard to total cost. When DH was a bachelor, he furnished his entire house through garage sales and items friends no longer wanted. While circumstances play a role in living paycheck to paycheck, I think good choices over an extended period of time make a huge difference in one’s financial security.</p>
<p>I find interesting those posts basing wages on 40/hr work weeks or lamenting overtime. I make decent money, but I also work an average of 60-70 hrs/week to earn it. Everything in life is a trade-off. </p>
<p>Car repairs can definitely wreak havoc on a budget for sure. That is why it is so important to learn the basics of car maintenance before leaving the nest. My DH once changed a set of rotors on my car in a parking lot in Tennessee when were were on vacation lol (although car repair is his business). That is a little extreme but knowing how to change your own oil (which can be done in an apartment complex parking lot if need be), or change a belt on a car, or even having enough knowledge about cars to be able to get something fixed before it becomes a more costly problem than it should have been. </p>
<p>My DD rents a 3 floor apartment with 3 roommates in a major US city, great neighborhood. Rent is $525 for each girl (includes water), cable/internet $19/each, gas/electric were about $120/each this winter at max (includes heat - it is an old building), DD spends about $150/month on food (mostly ordering in and gets a few meals out of one order), there is a washer/dryer included with the apartment. She does not have her car in the city and walks almost everywhere. Laundry supplies since September have been under $20. That makes a total of $814 if I calculate. She also has a car outside of the city that is $30/month to park and insurance runs her about $50/month (basic coverage, not a nice car). No car payment.</p>
<p>So that puts her at about $900/month expenses. Just waitressing 2-3 times a week she makes an average of $500/week. She has squirreled away just about every extra penny for the last 2 years and has not only NOT touched her savings from before she went to college she has an almost additional $5000 in the bank at this point. She will be covered by my dental/health insurance until she is 26 or until she gets a job with a plan. Like her father she is very frugal. She buys most of her clothes on clearance or secondhand and does her own cuts and coloring. For extra cash she has cut friends’ hair in her apartment as well for the last two years (she has a license). She will be moving to a new city in the fall and plans on working a salon job and waitressing in addition to dancing with the ballet company she just signed with (as most know, dancing generally pays even less than Walmart). </p>
<p>Nothing wrong with working a couple of jobs when you are young. My husband worked 3 jobs at times over the years to get us in a position where we could have a nest egg. When my kids were young, I worked a graveyard shift (thank goodness for the bankers who are awake in Asia while the US sleeps) to save daycare. I don’t think anyone starts off in life with a good emergency fund. It takes a lot of little sacrifices to get to the point where you can sleep a little easier knowing that if something happens you are covered.</p>
<p>@Momof3stars - I agree and S was fortunate to be able to “start” with an emergency fund. DH was dirt poor when he started. He did ROTC and worked multiple jobs to pay for college. And he continued to moonlight after getting a job in his field out of school. It took years of good choices for DH to get where he is today. I’m still trying to recover from medical expenses and a prior divorce (and have one more to put through college!), but I’m learning from DH to change my habits. I’ve had to let go of the “I work hard and make decent money so I should be able to go to Starbucks if I want” mentality. I’m not denying myself everything, but I have found that the nickels and dimes add up. </p>
<p>The fact of the matter is that those who make that little money most of the time lean heavily on others. They often have family, friends who are subsidizing. Yes, there are some who are keeping that budget lean and are making their way through this,but that’s not the case for many. It’s easy to do, when there is a parent with a house, food, extra bucks for crises around. The truth of the matter is that my kids, and I, in my day, were not truly one of the vast majority who not only were living on this amount of money, but were pretty much not going to go beyond that and have no back up at all. Even at the times when we were most strapped, I always knew deep inside that there would be better and more soon. There is no reason many have to believe this, and for some, that’s it. It’s a banner year to make that amount. Hours could be cut the next year, the job disappear. </p>
<p>DH’s home area, has a median income of about this amount, maybe less. So just about everyone there lives like this, so it’s the norm. </p>
<p>I used to spend $150-$200 a month eating out for lunch, and my fiance spent $200-$300. That was back before we even lived together, we could both afford it then, but when things changed we needed to realize how much those lunches were adding up to. It’s an astronomical amount and most people don’t take the time to actually count how much it adds up. We did, so we don’t eat out anymore, maybe once or twice a month tops if that. It isn’t worth it. I can buy more than a month’s worth of groceries for EVERY meal plus snacks and incidentals for the cost of eating out for lunch. </p>
<p>We can put our hands on 2k at all times, but 5k is questionable, and 10k definitely not. I am finding now that I have a house and will soon have a family, being able to put my hands on 2k doesn’t mean much-- that can be needed and be gone and we could need more before we’re able to replenish it. When it was just my “I drive an unreliable car” fund it was better. I’d be a lot more comfortable with the 10k-- because that would keep building, the likelihood of needing more than 3-5k at a time in a short enough span to deplete it is minimal. 2-3k can deplete fast if it takes you months to save it and you have an unlucky few months. The trouble is, even with all the fat trimmed out of our budget, we can only absorb “emergencies” under $500 without having to tap into savings-- I budget that much for things like car repairs, minor home repairs and maintenance, hair cuts, doctors appts, etc and whatever isnt used goes into savings on top of our usual deposit, but usually if something happens we can use all of it for whatever it is and push all the “incidentals” back a month. So any time anything more than $500 happens we have to tap into savings, and that hurts us. We deposit at least $600 a month into savings, frequently more like $1,000, which is a HUGE percentage of our income, but at this income level savings build so slowly. It’s hard. I have probably 10k worth of home projects that are going to need to be done sometime within the next 3 years, some will become emergencies if not done, some just need to be done to maintain the house… no idea yet how I will do that and keep building a sizeable nest egg at the same time, it will take a lot of work and strategy. I like to think in 10 years when I am not fresh out of school it will be easier, but then we’ll have kids. I can only hope we get better and better at this. Before we had the house I could easily save 5k in 3 months, but there are much leaner days ahead of us as we set up house and start a family. We would work as many extra jobs as it takes to at least have some savings, I can’t live without it… only having $600 a month guaranteed for savings is stressing me out. That’s only 7,200 a year assuming I NEVER have to tap into it, which isn’t realistic, and I am not comfortable with that level of savings. It’s too easy to deplete that if something REALLY bad actually happens.</p>
<p>We have really cut our expenses a lot in the last year to afford the wedding and cope with a job loss a few months ago. While it is really, really hard, there is also almost a high that comes from finding a great deal or learning a new way to cut more expenses while still living well. It feels good and is really rewarding to figure out how to take care of your family on what you have. I wish everybody could find that! But I know for many, myself included, it is not as simple as brown bagging lunch or forgoing the starbucks latte. It is possible to trim all the fat and still be at bare bones. Life is hard. The important thing is not to give up and start throwing everything on credit knowing you’ll never be able to pay it. </p>
<p>@Emaheevul07, good job saving, but your mention of your wedding reminds me of what I’ve told my kids: I will, happily, give them 2x what I would have spent on a wedding if they instead have a civil ceremony followed by a fun but low-key party for their friends. Car, down payment on house (although I think owning a house is unwise for young people), pay off debt vs. a wedding? No-brainer. </p>
<p>The whole marriage game is a drag on young people’s finances. Don’t get me started on engagement rings. 
</p>
<p>I’m pretty sure my daughter dated this guy. He lived in a house with 3 roommates and he was one of the stable ones. The rent sounds about right all though I’d be shocked if any of them have renter’s insurance. He does have employer insurance so there’s 209-dollars. But, no doubt the ACA would cost him money, otherwise. Young men are the category getting soaked there. $15.00 a day on food is too much. And, there’s no way he does 2 loads of laundry a week or spends 20-dollars per month on haircuts. </p>
<p>That must be nice for your kids. My parents don’t believe in financing their adult kids in any way and do not contribute to house or car, but they do throw weddings for their daughters. To them it is the last hurrah of childhood and a way to help us on our way towards life as an adult, much the way other families feel about paying for college. So my parents paid for most of the wedding, and I paid my portion. If you include the honeymoon, we about split it down the middle. We had planned our finances responsibly and got cars, our house, our emergency fund, and enough money to throw a modest wedding squared away before we even thought about an engagement ring… so no need to do away with the wedding traditions we’ve been keeping for generations just to save for a down payment, we’ve been in our house two years.</p>
<p>My philosophy is you should start off buying cheap stuff on sale, and as you get a better income, you can buy more expensive stuff on sale.</p>
<p>Just got a call that requires a quick $2K. And even now, it’s not easy for me to get my hands on it. </p>
<p>EmaheevuI07: I think you are doing a great job of saving and making sound financial decisions for someone so young. I know people who have forgone the big wedding to use the money for other things but if your parents were offering to pay (and I assume you received money as wedding gifts - you sound like the type that would not squander that) then I don’t think it is a crime to take them up on their offer. Like lxnayBob I plan on offering my kids a smaller wedding and giving them a nice cash gift if they choose but I am willing to bet at least one of my girls will want a big celebration (and who am I kidding - I love weddings too). </p>
<p>Don’t stress about needing to hit up your savings for emergencies either! That is the whole point of this conversation, that you actually have a savings to hit up for emergencies. It takes time to build and you are doing way more than I would expect anyone your age to be able to put away. You sound like a very smart young person.</p>
<p>@Emaheevul07, money is fungible, and I don’t see an important distinction between paying for a wedding and giving cash. Granted, it would go against the spirit of the agreement if my kid then used the money to pay for a wedding, but they’re not like that.</p>
<p>My parents started with nothing and were relatively comfortable at the end. I have been poor and I have now come to the point where normal things are not a financial concern (e.g., we can afford coach plane tickets and even business class, but flying private would be an astounding and irresponsible extravagance – in practice we pay for coach and sometimes upgrade via mileage awards).</p>
<p>It is not always easy as a parent to navigate the terrain around finances for kids. I don’t want spoiled and entitled kids, but I also don’t want kids living in unsafe housing, not attending a school that they’ve been accepted to, driving an unsafe car, etc. I also understand that not every parent has the options that we have; I am sorry about that and realize every day how lucky we are (and make no mistake, in addition to hard work, luck plays a part).</p>
<p>I understand. Every family has different priorities. I had no idea my parents would pay for the wedding and I’d planned to have a dinner party for 20 in a cute local historical home on my own dime originally. My mom expressed to me that she always assumed she would throw my wedding and it was a very important gift she wanted to give to me that meant a lot to her, and I did like the idea of having our “traditional” family wedding. So, that’s how it worked out! I get to use the money to work on the house instead… I am determined to fence the backyard and replace the cigarette smokey carpets from the previous owners before we have babies. It will take a lot of scrimping and saving to do that and still keep at least 5k in the emergency fund, but that’s the goal I want to start with.</p>
<p>We are careful because I have made mistakes. I signed for student loans I couldn’t afford and by the grace of God have an understanding fiance who is willing to shoulder the burden with me, and in 7 years they will be gone and I will not assume any more debt before then so I can have my clean slate. I learned my lesson. But avoiding debt means you have to be religious about that emergency fund, it’s not optional. People who can’t stretch their dollars that far have my sympathy, it is hard. We had an emergency a couple of months ago that was very scary and gave me a taste of what that might be like, and I don’t want to ever go back there. I just hope someday we get good enough at this to have that nest egg and a nice college fund for our kids! I’d love to be able to at least send our kids to one of the directional state Us without significant debt. We already make too much to qualify for need-based aid-- ugh.</p>
<p>@Emaheevul07, you are on the right track. I didn’t turn myself around financially until I was 30 years old – at the time I had negative net worth. Einstein called compound interest the 8th wonder of the world, and things do begin to accelerate when you’ve attained a critical mass of savings. </p>
<p>Happy to see some repeat the ideas I expressed back on page 1, so many in poverty or near it, may be smokers, drinkers, or too many kids(than they can afford).
Those are examples of people making poor choices, and for me, it’s hard to feel sorry for them, plus, I hate to be forced to subsidize their habits and choices. But, there are many well-intended social programs. If they succeed at their intent could be too political. I won’t touch that.</p>
<p>I read somewhere(so I can’t cite it) the more formal education, the less likely to be a smoker. And, the more formal education the smaller the family. Of course, no one here needs to point out exceptions.
But if both of those statements are true, it means those with less education have less money to provide for their kids growing up, and tougher to break the cycle, of low formal education and poverty or near poverty income.</p>
<p>Yes, there are moral objections to smoking, drinking, and Starbucks. What about other things? A few cans of soda a day? Muffins? Frosted Froot Loops? Watching late night movies? Premium green tea?</p>
<p>It’s basically instant gratification and not thinking beyond today, tomorrow, next week, or next month. The hypothetical guy can save a little every week for the future and seek to move up the career ladder. Or he can spend every penny he makes and get his girlfriend pregnant. Then his problems get bigger. My educated guess is there are plenty of him in the typical Starbucks line. </p>