I recently read a post entitled How to Get Wealthy on Minimum Wage by Jacob over on the Early Retirement Extreme blog.
I am all inspired to try to tackle life with a minimum wage income. I have no intention of actually earning that little, but I wonder if I could handle it if I did.
The minimum wage in my state is $7.15/hr. Using the hourly paycheck calculator at paycycle it looks like I could bring home about $219/week after taxes if I work 38hrs/wk. If I figure I won't work for about 3 weeks of the year for sick/personal days my average monthly take-home would be about $900. Ohkaay... can my living expenses fit within that? Let's find out.
Family I am single so I only have to cover my own expenses. If I had someone else to take care of I would definitely be working a lot more hours.
Health Insurance I will assume that health insurance is not provided. My employers have intentionally kept my hours below 40hrs/week so that I wouldn't be considered full time.
Location Exactly where I am living right now. I know the cost of living here.
Debt I will assume that I am carrying some consumer debt. I don't know much about how minimum payments are calculated at different interest rate levels so I will leave this part fuzzy until I do some further research.
Rent This is easy. I actually own my house and rent out one bedroom for $325/month which includes all utilities, wireless internet, and laundry. My roommate has free use of the rest of the house as well. If she could find this deal, then I will assume that I would be able to as well!
Utilities Included in the rent.
Health Insurance I have pretty low risk tolerance so the thought of going without health insurance would be a huge source of stress for me. I would sign up for a high deductible health plan. I can find a state sponsored plan administered by Blue Cross & Blue Shield for $115/month without Rx drugs. I very rarely get sick so I would be willing to accept that risk. I would also budget another $35/month to put into the attached Health Savings Account (HSA) to use towards the deductible if necessary. The great thing about an HSA is that even though it is tax deductible like an FSA, you don't lose it at the end of the year if it is unused. You can withdraw any unused money at retirement age for any purpose without penalties (but it will be taxed at that point). So $35 out of my monthly budget would actually mean that more is deposited into the HSA.
Transportation I imagine that if I made minimum wage I wouldn't own a car like I actually do. My current gas budget is just over $75/month so I will use that for bus fare. I live within safe and easy walking distance to two grocery stores which will even help with comparison shopping. Bonus! I would also look around for a used or freecycled bike that I could use during the summer months.
Groceries I have lived on a $1/meal budget before and I could definitely do it again. However, I do believe strongly in the importance of good nutrition so I would make sure to include sufficient fresh fruits and vegetables which can raise the cost per meal significantly. I would budget $200/month for groceries. This would have to include toiletries and supplies etc.
Debt I could budget $100/month to pay my debts.
Retirement I would sign up for an automatic investment plan for a Roth IRA and deposit $50/month. Earnings on a Roth IRA grow tax free but I can withdraw my actual contribution any time I want without paying penalties. I like this option if I am earning such little money in case I need to tap this money for an emergency.
So where does this leave me?
Health Insurance $150
Total Expenses $900
Total Income $900
The fact that this budget leaves me no wiggle room is unacceptable.
One thing I won't compromise on is taking three weeks off from work. No human being should have to 'work' all 52 weeks of the year. I like my personal time. Time to stare at the wall, time to walk in the grass, time to visit friends and family. Not giving that up!
I am, however, happy to work a lot more hours per week. In fact, as a salaried person I currently work an average of 50-60 hours every week... and love it.
If I want wiggle room in my budget, I would add an extra 10 hours of work each week. This would pump up my take-home pay by about $260 each month.
Where would I spend my second-job wiggle-room money?
Debt I would add another $100 to snowball debt repayments.
Emergency Fund Another $100/month would go to an emergency fund
Wiggle Room $60/month... just in case! If I don't use it up one month, it goes into the emergency fund.
Once the emergency fund is fully loaded, I would focus in on eliminating debt. (f I wanted to get serious about blasting that debt I would be working an additional 10 hours a week.) Once the debt is eliminated I would put all of those payments now totaling $300/month towards the retirement fund or towards improving my education if I wanted to move up the earnings ladder.
What about entertainment and special toys and luxuries? If I want anything that doesn't fit into the budget, I'm going to have to go hunting for more hours or get some entrepreneurial juices flowing.