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Feb. 12th, 2015

Living on Minimum Wage

Tax Time and AFA enrollment reminder.

We’re now into February. This is the month we always encourage everyone to figure their taxes. You should be getting all your paperwork soon, if you haven’t already. Getting an early start means either an earlier refund or more time to budget if you owe money. If you owe, you don’t have to actually pay or file until April, but that extra planning and double check time can be very valuable.

Particularly with the new AFA changes this year, you will want extra time to make sure you’ve filled out the right forms.

Here’s a chart from the IRS to help explain which AFA forms apply to you.
(Most of them won’t.) http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Health-Care-Law-and-Your-Tax-Return

If you normally fill out the 1040EZ, it may be worth your while to fill out the full 1040 along with form 8962 this year, so you can claim the Premium Tax Credit. I used a company to Free File this year, which I'm particularly glad of after trying to read through the 8962 by myself.

You should go through the appropriate forms even if you didn’t make enough this year to be required to file. You may find you’re still eligible for a refund, and even a small one is better than nothing.


Reminder:Open enrollment through the Healthcare.gov market place has a February 15th deadline this year.

(If you don't have insurance, best to apply. If you have insurance, you don't need to worry about this deadline.)

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Jan. 28th, 2015

Living on Minimum Wage

Home Buying Without a Credit Score...

Last year, I helped my brother (who for privacy purposes we’re going to call Mike on this blog) hunt for his first house. I felt this event worth documenting since until purchasing his home, Mike had never borrowed money and had no credit history. For the sake of brevity, we’re presenting this story in interview style.  I do not recommend most people on minimum wage run out to buy a house, but it may be a good time to start preparing for that long term potential.

Mike is a single man with no children just under the age of thirty.



Hi, Mike, would you mind telling us what you do for a living and how much you earn?

I’m a full time cashier at a grocery store. I usually work nights and afternoons. My hourly pay is $12.60 to $13.10 depending on my shift, which means I gross approximately $2193 each month.


How long have you been working there?

Twelve, close to thirteen years. I started as part time at minimum wage, and it took several years to get full time. The company I work for gives a small automatic raise every 9 months until we hit a top pay. I’m making the most I can get in my current position.


What made you decide to buy a house?

A mixture of things. My roommate was moving away, and with rising rents, it was going to cost me about as much to rent as to buy [monthly rent vs. mortgage payment]. I had saved up enough money for a down payment of $10,000 while still keeping enough for a sixth month emergency fund and covering closing costs.

I wanted a stable place to live, since I’d had to move frequently (every couple years or so) due to roommates coming and going. I also like the idea of the mortgage payment being a fixed amount while rent was likely to keep rising.

While this encouraged me to start looking, my dad’s offer to chip in $10,000 towards the down payment sealed my choice. With my own down payment, I was limited mainly to houses in the $80,000 range, and the larger down payment allowed me to look in the $100,000 range. In our area, this was difference between a massive project and move-in ready home.


Did you have any trouble getting a loan?

Yes, some places would not talk to me without a credit score.

Other places would allow me to establish an alternative credit history using utility payments. However, my water was included with my rent, my phone was part of a family plan (which made my line cheaper but the bill was not in my name), and the cable was in my roommate’s name. With just rent and electricity, I didn’t think I had the required three to four sources. Later we learned I could use my car insurance, which had we realized earlier would have saved a lot of time and headaches.

At one point, we tried to use my dad as a co-signer, but the rules have gotten strict. They would approve my dad but not me.

In the end, once I had my three sources for establishing an alternative credit history, I was able to get the loan on my own.


There was another big problem you ran into as well, wasn’t there?

The first house we made an offer on had electrical issues, and the bank would not give us a loan until the issue was resolved. We had some trouble getting the owner to comply, and the offer fell through.

There were several other houses that the bank wouldn’t approve because there were various degrees of structural issues, and not having credit meant my loan was more restrictive. This eliminated a lot of cheaper, fixer-upper properties as an option.


Do you think that might have been a blessing in disguise?

A little bit, yes. It forced me to be patient and find a move-in ready place that only needed a few minor repairs rather than investing thousands to make it livable. The place I bought also turned up in a far more convenient location than most of the others I had seen.


What worked in your favor when you applied for a loan?

Solid work history, good rental history, and no bad marks on my payment history. Also I had a sizable down payment. There are options for smaller down payments, but having 20% allowed me to qualify for a better loan with lower monthly payments.


How much house did you buy and what are your mortgage payments now?

I bought a three bedroom house for $100,000. With $20,000 down, it’s an $80,000 30-year loan. The monthly payment is $616.39, but that includes property taxes.


It’s important to note that the mortgage isn’t the only expense when owning a home. What are some other expenses you had while buying?

There was closing costs. Plus home inspection and termite inspection before the loan is approved. The inspections were about $300, and that’s not refundable. And then there were a number of fees involves with closing. It came out to nearly $2600.

Repairs are on me now instead of the landlord, there’s been a few dollars spent here and there on minor repairs. But nothing major yet.


Why get three bedrooms if there’s just one of you?

For location and room mate potential. I’m enjoying a few months of just me, but I’ll be looking for a room mate soon.


What advice would you have for other first time home buyers?

Make sure to have some bills in your name, even if you’re splitting the cost.

Try not to be in a rush and give yourself as much time as possible to look. The housing market is always changing. If you don’t like what’s available now, something may come open in a month or two.

Establishing credit isn’t something you can do at the last minute. I like not having debts outside my mortgage, but there were sometimes I wished I had a credit score to make the process easier. There were points where I considered getting a credit card, but it turns out I didn’t need it. I was able to get the loan anyway.

Be prepared to encounter unexpected obstacles. Sellers sometimes are emotionally attached to their houses, which can draw out the process.

Jan. 21st, 2015

Living on Minimum Wage

What are "good" money choices?

I'm going to pick on Linda Tirado author of Hand to Mouth: Living in Bootstrap America one last time before I move on. The article I'm referencing is an book excerpt on Slate, but I'll quote the part I want to focus on in this post.

"And let’s also talk about the ways in which money advice is geared only toward people who actually have money in the first place.

I once read a book for people in poverty, written by someone in the middle class, containing real-life tips for saving pennies and such. It’s all fantastic advice: buy in bulk, buy a lot when there’s a sale on, hand-wash everything you can, make sure you keep up on vehicle and indoor filter maintenance.

Of course, very little of it was actually practicable. Bulk buying in general is cheaper, but you have to have a lot of money to spend on stuff you don’t actually need yet. Hand-washing saves on the utilities, but nobody actually has time for that..."


- Linda Tirado, Hand to Mouth: Living in Bootstrap America


I actually agree with Linda that the lion's share of books on money and budgeting are written for the middle and upper class. That was our main motivation for writing Living Single on Minimum Wage. And even then our book is aimed towards singles without dependents which doesn't fully cover her situation.

What I found interesting were her examples of being "good" with money. These examples all have to do with domestic concerns and mainly capping the outflow of day to day expenses. If you're a full-time homemaker, then generally yes that is your domain. I've seen the value of a homemaker estimated between $70,000-$80,000 per year based on all the roles they serve for the family unit. So pinching pennies and doing things yourself certainly can add up.

But is that really the only way someone can be "good" with money? I don't think so. Let's break this down to a three-part answer.

A. The Most Important Financial Decisions Are Not Purely Financial. 

The most important and most impactful money choices you make are choices that may not always seems like financial choices as first glance. Do I try a cigarette? Who do I marry/move-in with/have sex with? Do I go to college or a vocational school? What car should I buy? Where do I want to live? When do I do or not do these things?

The #1 indicator of poverty for a woman is whether she has a child, and as states crackdown on child support, this is affecting the wallets of more men. Even though we grate at the idea of money being a factor in our love life, family, and personal decisions, it really should be. (Remember money issues are also the top reason given for divorce.)

Good decisions in these areas have the biggest impact on your finances within the realm of things you can control. (You aren't directly responsible for the general state of the economy or who your parents were. Those are just things you have to deal with.)

B. "Good" choices don't always have immediate results.

Some of the smartest things you can do financially do not show their full benefits immediately. Maintaining health insurance or car insurance may seem like a waste of money until you get sick or arrested for driving without it. Hopefully, you'll never need to use your emergency fund (though probability is good you will at some point). A retirement fund may feel like a hardship until you retire.

C. A "good" Financial Choice For One May Be "bad" For Another.

I've discussed Stockpiling Responsibly before. But it's a financial strategy that makes a lot more sense when you have a stable living situation and extra storage space. If you're short on space and particularly if you may need to pack up and move soon, then heavy stockpiling is more likely to lower your quality of life than raise it. At most you might take advantage of a two-for-one sale and keep your cash liquid to help stabilize your shelter.

Tirado dismisses "Hand-washing" because of the time factor. Which honestly in many cases is quite valid. During a period where you're working 60 hours a week and make $10/per hour, it does not make sense to work two or three hours less to spend hand washing and save $1 or even $5 on your utility bill. And it may be unwise to cut into your sleep or free schedule to do so. You'll see more savings from preparing your own meals. However if you suddenly find yourself unemployed or only working part time, the value of saving $1 or $5 increases. This isn't limited to hand washing but applies in other areas.

$$$

End Note: Any budgeting or money tip related book must be written broadly by it's nature as a mass publication. You should always feel free not to follow financial advice that doesn't work for your current situation. Some of it will become useful when you hit another stage of life armed with that knowledge, and some of it may never apply.

Jan. 14th, 2015

Living on Minimum Wage

The Financial Wisdom of Ebenezer Scrooge - Review

My co-author moved a couple months back, and while we were cleaning out his bookshelf, he gave me a few volumes to read. Among them was The Financial Wisdom of Ebenezer Scrooge by Ted Klontz Ph.D., Rick Kahler CFP, and Brad Kontz Psy. D.

I’ve been reading mainly fiction this past year, so it was nice to find a new addition for my recommended financial reading list. This is a short, easy read which would make a nice supplement to other financial reading. Instead of giving you specific advice about money, The Financial Wisdom of Ebenezer Scrooge uses Dickens’ classic to illustrate the deeply ingrained beliefs we have about money that don't help us and how to start recognizing and dealing with them. The authors call these “money scripts”.

As an example, the article I commented on last week seemed to contain a few money scripts that troubled me. Several are packed into this sentence "It is impossible to be good with money when you don’t have any." (-Linda Tirado, source)

There’s a lot of half-truths packed into that sentence. One article is certainly not enough for anyone to analyze the author, so consider this more a list of potential messages/money scripts that could be derived from the above statement.

Being ‘good’ with money is defined by how much you have.
My choices don’t matter.
Poverty was something done to me.
Poverty robs me of choice.
The system keeps me poor.
Poverty creates bad choices.
People with money can be good with it and therefore bear more responsibility.
People with money are different than me.


…and several variations on those themes. There are kernels of truth in these statements. Yes, if you’re good with money, you will keep more of what you get. Yes, often higher income helps and poverty can limit your options. Yes, poverty can happen through no fault of the person in it. And I do believe those who have more also have a bigger responsibility to help others. However as there are high income earners who make terrible decisions with their money, there are also low income earners who can and do make very good financial decisions.

The Financial Wisdom of Ebenezer Scrooge encourages you to rewrite these money scripts into something more useful through a process which involves looking back to understand where these beliefs about money come from, making efforts to see the present more clearly, and finally making a workable plan for the future.

For example, one might change the above scripts to more productive ones like:

Being ‘good’ with money is about doing the best with what I have.
I must take action to increase and stabilize my income.
My choices are important.
My situation is difficult but not hopeless.
I need to examine why I keep getting stuck in the same pattern.
I need to learn how the system can work for me.
I am not responsible for what is done to me, but I am responsible for what I do with it.
People with money are neither better nor worse than me. They simply have more money.


(Again, these are example scripts. I’m picking on a sentence that bothered me, not the person who wrote, because frankly, I don’t know them.)

What I find encouraging about this process is it works with nonfinancial issues too.

What this book won’t give you is much in the way of practical financial information, which is why I consider it a supplement. But it’s intended to be topic specific, so that’s fine. The authors lead seminars and work as financial planners, so towards the end there’s a bit of a pitch for their services. This was a 2006 release and repeatedly mentions a website with further information which no longer exists. Which is kind of a shame since unlike many other financial topics, this one has a very good shelf life and will continue to be valid regardless of the time period.

Jan. 5th, 2015

Living on Minimum Wage

Understanding the Emergency Fund

I read an excerpt from Hand to Mouth: Living in Bootstrap America on Slate that really bothered me. I'm not dismissing the book in general, because there are a lot of crummy things about working in food service industries that need to be fixed. What bothered me was the idea behind this sentence, "It is impossible to be good with money when you don’t have any."

It's true a budget is useless without income. But the article is not really talking about a case of no money, but not a lot of extra money.

There are degrees of poor. Sleeping on the park bench with a newspaper blanket or moving your family beside a dump so you can scavenge is what no money really looks like. Struggling to find food and shelter working a part time job at below minimum wage is not enough money. But if you have $5 spare dollars that isn't eaten by a need, you have barely enough money.

What you do with that $5 is important. Another quote:

"When I have a few extra dollars to spend, I can’t afford to think about next month—my present day situation is generally too tight to allow me that luxury."

Yes, you do have to make it through the present to deal with the future, but you've also used the word "extra". So for sake of argument, you have $5 spare for the week. Do you blow it on a non-necessity or do you recognize your financial vulnerability and hold onto the $5?

If you do the latter, you now have a $5 Emergency Fund. Let's say for the next 3-weeks you are able to put away $5 and so you have $20. Next week you get an unpatchable hole in your only work pants. New pants will cost you $20, and your Emergency Fund is back to $0.

Are you frustrated? Yes. Are you back where you started? Yes.
But are you still employed? Yes.

Now imagine, you've spent your $5 per week on a scented candle, a fast food burger, a beer, and a new CD. Not wild extravagances but things you could have lived without. Now, you have no work appropriate pants.

Do you still have job? (Depends on where you work, but showing up out of uniform for the next 4-weeks while you save, probably isn't helping your career, and taking out a payday loan is going to eat your $5 for several weeks to come until those pants cost you $40.)

But let's say you were a saver and still employed. Two weeks later you have employment, food, shelter, and another $10 in reserve, and your toaster breaks. There's a poor quality toaster on sale for $10. What do you do?

Save the $10. You can live without a toaster. It's not a necessity and not an emergency.

When we encourage you to save a 6-month Emergency Fund, we understand it's a process. The tighter you are, the longer it will take. The Emergency Fund is intended to be fluid, going up and down in response to your needs. A small one is better than nothing.

There are certainly things that happen which no one can plan for, but when you're poor (of the living paycheck to paycheck variety), you can't afford not to think about next month.

Dec. 15th, 2014

Living on Minimum Wage

Activism vs. Slactivism

Often those of us with limited financial means, also feel like there's little we can do to impact change in the world.  And yes, in some ways we are limited by lack of funds, but don't confuse limited with powerless. Sharing information through conversation and social media can have an impact, but here are a few things to keep in mind to keep you an activist and not a slactivist.

(Remember this blog is aimed as a U.S. audience, though there may be some international application.)

1. Be Aware. It's not realistic for any individual to track every wrong done world wide, but you can try to be aware of negative and positive things going on within your sphere of influence. Take a little time to listen before speaking. If something concerns you, take some time to learn more about it. Verify the reliability of an article or meme before rushing to share it.

For example, The Onion is a parody site, not a news site.

2. Speak up. Remember you catch more flies with honey than vinegar, so speaking with tact is advisable. Many people interpret silence as consent, so if you're aware of something wrong or in need of discussion, try to say something. You may not instantly convince others, but a message repeated, particularly with evidence to back it up, does help sway others. (Be respectful of time and place. A funeral is not the time to lecture someone on issues.)

3. Breath and try to be calm. There are some horrible, awful, upsetting things in this world. It's normal to have an emotional reaction. But balance emotion with reason. If you stay perpetually upset, people will start writing you off as a basket case instead of listening. Check your actions and words and make sure you stay on target with your message. Change doesn't always come quickly, it often requires endurance.

4. Volunteer. If you don't have money, invest time in something you believe in. If you're passionate about homelessness, volunteer at a shelter or with an organization that helps the homeless. If you're passionate about education, volunteer your services as a tutor or teacher's aide. You may not be able to everyone, but helping one person at a time is still a significant contribution.

5. Be Prepared. Learn first aide. Arm yourself with knowledge about how to handle emergency situations. Know when to call child services or animal rescue or 911 (and when not to). Large scale changes often take time, but there are so many small opportunities to help others that will cross your path.

6. Contact Your Elected Officials. If you're an active voter, I applaud you. But regardless of for whom or how or even if you vote, you can still influence politicians by letting them know how you feel about the issues.

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I will not go heavy into politics in this blog, but I do have an issue to bring to your attention.

The House has approved a bill that among other things would take land from the Apache to sell to a foreign company for mining. We can kill this in the Senate. Please take time to read:

San Carlos Apache Leader Seeks Senate Defeat of Copper Mine on Sacred Land

and sign the Petition:

https://petitions.whitehouse.gov/petition/stop-apache-land-grab/rnMfH0WL

and contact your Senator:

http://www.senate.gov/index.htm

Dec. 12th, 2014

Living on Minimum Wage

Healthcare.gov Re-enrollment for 2015 Ending Soon

I apologize for not getting this out Monday as I had intended. I had some trouble with my blog's website.

First off the reenrollment AFA deadline is December 15th:

"If you bought a health insurance plan through the Marketplace in 2014, you can renew or change plans for 2015.

Take action by December 15, 2014 so any changes or updates to your coverage take effect January 1, 2015.

It’s important that you log into your Marketplace account, update your information for 2015, and see all the plans and prices available to you this year. You may find plans that cost less, cover more services that are important to you, or work better for you and your family. By updating your information, you’ll be sure to get the right savings for 2015."
- From Healthcare.gov

If you have insurance that you purchased through AFA or you find that you need it, this is the time to go enroll. They haven't advertised as much this time, so hopefully the site won't crash, but you should go check it out and not trust automatic re-enrollment.

There was a difference of $20 between what the re-enrollment letter from the insurance company said I would have to pay monthly and what I ended up paying for the exact same plan through the website.

I can't begin to tell you how stressful it is filling out an AFA form if you have unstable income.  And I'm dissappointed that they're making everyone re-enroll before we get to see the tax implications.  But if you have steady monthly pay and are making full time minimum wage, you're in the group helped most by the program and should consider taking advantage of it.

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Second my apologies for neglecting this blog. I was supposed to start a new part time job in September. That fell through, so instead I ended up doing a lot of weekend fairs and conventions to sell my fantasy novel, which ate into my time but didn't give me a lot of good budgeting examples to blog about unless you count sharing a room at Imaginarium with three other people.

In other exciting news, my brother managed to buy his first house with no FICO score. I'm hoping to write up some posts on that soon. It was a long, bumpy process, so I wanted to wait and see how it all turned out.

Sep. 8th, 2014

Living on Minimum Wage

Shopping for Produce

019I think the most important thing to know when shopping for produce (fresh fruits and vegetables) is that the prices are always in flux. That can make it harder to plan your shopping trip in advance. But unless you have a recipe that calls for specific ingredients, you might consider writing some vague categories like "$5 of fresh fruit" or "vegetables". Root vegetables like carrots and potatoes tend to have steadier price points, but many others go in and out of season.

In addition to that, stores will have frequent sales on fresh products because their short shelf life means they need to be sold faster.


Second most important thing to understand is that produce is usually sold by weight rather than by piece but not always...which can get confusing. When I was young, the signs for produce really confused me, often making me think they were more expensive than they actually were.

For instance, apples priced at $1.49 are usually a per lb price. Apples vary in weight, but often range between 1/3 and 1/2 a pound (lb is short for "pound"...it's a British thing.). So the actual price per apple would be fall in the range of 49 to 75 cents.

But then some some fruits and vegetables are marked "ea" rather than "lb". "ea" is short for "each". Our local store usually prices Avacados and Watermelons this way.


Third it's important to learn to check produce for quality. There are a number of tests from smell to texture to visual examination depending on the fruit or vegetable. Some blemishes are purely surface and don't mean the food is unfit for eating. Others are signs of rot. Some of the best produce deals are for produce with surface blemishes or just odd shapes, which don't change their taste or health value.


Fourth, know that the bulk price isn't always better. I stopped by Publix the other day and noticed they had the 2 lb bags of pears pictured above priced at $3.49, while loose pears of the same type were priced $1.49 per lb. Even without a calculator, it was clear that the loose pears were a better buy. ($1.49 x 2 = $2.98)

Often there are some savings to buying in bulk, but not everyone is going to want to eat through a 5 lb bag of anything before it spoils. Freezing, drying, or baking are sometimes options, but not always worth the extra effort.
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Aug. 25th, 2014

Living on Minimum Wage

Free Reading and Reading Critically

First the positive. Open Culture has links to over 600 free ebooks: http://www.openculture.com/free_ebooks

Many are public domain, but some are more recent: samples from Neil Gaiman for example. They also have links to some more extensive sites like project Gutenberg, and I found this link through another article about the entire Harvard Classics collection now being available for free as downloads.

There are a number of studies that relate reading to all sorts of positive mental, social, and financial benefits and certainly it helps expand vocabulary. But what you read can be as important as how much you read. And whether you are reading a book or watching TV it's important to exercise critical thinking skills.

We're going to pick on 50 Shades of Grey for a moment. The book has already received a lot of criticism for portraying abusive behaviors as romantic, and a new study from the University of Michican has found:

"Young adult women who read “Fifty Shades of Grey” are more likely than nonreaders to exhibit signs of eating disorders and have a verbally abusive partner," - from the Summary Article on the University of Michigan website (or read the Full Study Report from the Journal of Women's Health).

From the article: "...kids and young adults should be taught to consume fiction, television, movies, magazines and other mass media with a critical eye... We recognize that the depiction of violence against women in and of itself is not problematic, especially if the depiction attempts to shed serious light on the problem....The problem comes when the depiction reinforces the acceptance of the status quo, rather than challenging it.”

This is true of 50 Shades of Grey. It's also true of Plato, Nietzsche, and the local news article that ran this morning. We should be hesitant to accept anything we read, hear, or view purely at face value. Fiction and news articles in particular tend to thrive on conflict and drama and often portray people doing the most dramatic things rather than the best or smartest thing.

And in this critical reading effort, I hope you include anything that my co-author and I say. While we write in the hopes of sharing useful tips and information, there are few pieces of advice that work equally for every situation. Take what is useful to you and feel free to reject what is not.

Jul. 15th, 2014

Living on Minimum Wage

Kindle Edition of Living Single on Minimum Wage is now free until Saturday

Living Single on Minimum Wage is free to download today July 15th through Saturday, July 19th.  (Correction from yesterday's post).  We hope you'll check it out and give us your feedback.

The first day seems to be going well. You can see from the screenshot below that we're #2 in free personal finance books. Hopefully that means we'll get a lot of good feedback as we prep for the second edition. Also hoping people are getting useful advice from the book.


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