Living on Minimum Wage

When To Hold On

I am much better at not buying new things than letting go of old ones, so a lot of my organizing posts tend to focus on purging rather than stockpiling items. Also this is a blog aimed at minimum wage earners who often have to move frequently and usually have less storage. So minimalism is often financially beneficial.

However, as you settle in life, the assets you have slowly acquired can be a great benefit.  Something as simple as owning a broom, means you don't have to go buy a broom.

If you know anyone who grew up during the Great Depression, you may have noticed they tend to save everything, sometimes to an extreme, but during times of great economic distress holding onto items and repurposing them is an important survival skill.

Things You Should Hold Onto:

Detailed tax records that are less than 3 years old.
(Click here for more detailed advice from the IRS for individuals and here for self-employed individuals )

Receipts for non-consumable items within return date.

Warranties (until they expire)

Instruction manuals for things you may need to take apart or maintain/troubleshoot.

Clothing for next season (If you haven’t worn it in 3 years, it’s probably safe to let go, but there’s no sense in a new wardrobe every six months.  A spacer saver storage bag may be a good investment if space for winter clothes is a problem.)

Deeply sentimental items. (If you’re someone who is sentimental about everything, work your way to minimalism by letting go of the things you care the least about but allow yourself a few representative items which are most precious to you.)

Everyday items that are useful in the long term. (A set of stainless steel utensils may outlive you if you take care of them.)

Useful scraps (any crafter knows this can go overboard, but if you have a ½ foot of wrapping paper left, you can save that by rolling it up with other large scrap pieces and securing with a rubber band, and use this collections for wrapping smaller gifts.)

Useful used items (recycling plastic bags is good, but you can also save them and reuse them as liners for small trashcans.  Unless they're in bad shape, save gift bags for reuse.  My best friend and I sent the same bag back and forth between us for several years.)

A set of tools and extra screws (you don’t need to be a handyman, but you should be prepared to do some basic repair work and/or furniture assembly by yourself. A dollar store bead sorter will give you a place to safely store odd nails and screws which are likely to come in handy at some point.)

Things that are likely to be important for major life goals, particularly within the next five years.

Exactly how much stuff you should save depends a lot on your available space and how frequently you need to change locations.  This is not intended to be an exhaustive list, but I was beating myself pretty badly for holding on to certain items last weekend.  And then I took a step back and realized I was holding on so tightly because these things were still important to my vision of the future.  Because my family does have adequate storage space, it was still more cost effective to hold onto these things than get rid of them (and replace them later).  I did still purge some less important items, but giving myself permission to hold onto the important stuff made that easier.

Living on Minimum Wage

Organizing Your Assets

If organizing your house or apartment does not seem to have anything to do with budgeting, it’s because you are not thinking of your things as assets.  Organizing allows you to take better stock of and access your assets.  Let’s start with defining an asset:

Asset - a useful or valuable thing, person, or quality.

What counts as an asset to you as individual will probably be a little different than how businesses count assets, but the underlying concept is the same.  Stuff isn’t always an asset.  It could be a liability.  Liabilities are debts, but they have a second definition more relevant to personal items:

Liability - a person or thing whose presence or behavior is likely to cause embarrassment or put one at a disadvantage.

Basically stuff that helps you is an asset, and things that cause problems are liabilities.  “One man’s trash is another man’s treasure” applies here.  An item may be potentially useful to someone else but not to you (or useful to past you but not current you).  These are items which are good to sell or barter and turn into a useful asset like cash.  If an item is not sellable, it may still be donated or recycled, or trashed if it’s beyond redemption.  While you might not gain money from recycling, you do regain space and have less to maintain or move around, which could save you money.

Since my parent’s have a full basement, I’ve held on to more childhood toys and apartment items than I would otherwise.  But space is a bit of issue at our house, so I’m in the process of organizing and reorganizing what I’ve held onto.  Letting go has always been a bit hard for me, but I’m trying to use the measuring stick of whether the items are likely to be useful over the next few years or are simply taking up space.

In addition, I’m trying to better group and label the items I’m holding onto, so when I am ready for it, it’s easy to find.  I found some things that I forgot I had or thought I had gotten rid of.  Facing what you’re holding onto can be emotionally exhausting, but it’s worthwhile and allows you a chance to evaluate your goals and progress towards them.

Most of the things I’m getting rid are going into my yardsale pile, and we’ll have a sale later in April.  But a few items will go to ebay.

What’s your favorite way to sell off stuff you no longer need?
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Living on Minimum Wage

And Now We Wait...Also Timing Your Money

So last month, I set up a fresh budget, and this month I've pretty much stuck to it.  Spent a little extra on some clearance priced food, but it wasn't more than my padding can cover.  And I believe it will help me reduce spending for next month.

I did set up that separate emergency fund savings account.  My tax refund covered a business trip to a convention where I was a guest/panelist, but I stuck the remainder into my emergency fund, so I was able to open the account with $2000.

I have a lot of my finances automated, particularly with my business.  Money goes into my checking account through direct deposit and now moves to my new savings account at a set amount ($350) once per month.  I may reverse that at some point in the not too distant future, but at the moment, it helps me avoid any monthly maintenance fees on my checking account.

On the business side, I have several automatic payments staggered throughout the month or on an annual basis, which helps me avoid late fees or periods where I'm not covered.  However, I am careful to stagger the dates, so I can be sure the account doesn't get overdrawn.

Back in the personal realm, I've staggered my monthly outflow as well.  I normally get two checks per month from my day job on the 5th and the 20th.  (I get one from my home business as well, but it's super tiny.)  After the first check on the 5th, I pay my parents and put $100 in my IRA, and I have an automatic transfer scheduled to move money to the emergency fund on the 23rd (which gives me a few days to cancel if something goes wrong with my direct deposit on the 20th).  I tithe based on each check, and on a weekly basis I get $40 cash from the ATM for general spending.

The point isn't that you have to schedule your money the same way I schedule mine.   Do what makes the most sense for your situation.  But I do think timing bills, payments, and transfers so they don't all hit at the same time can be a good way to give yourself some breathing room to figure things out.

The next thing I'm working on is some more concrete goals for savings before I make any significant life changes.  This blog was a lot more engaging when I had my own apartment and food budget, etc.  As my nephew is getting older and I have a job in walking distance of several apartment complexes, I'm looking at doing a YouTube reality series of sorts that will focus on budgeting as a low-income single in an apartment.  However, that won't let me save at my current rate and has the potential to be a money hole (I need better editing software and possibly a system upgrade).  So trying to balance life/project goals with responsibility to my financial future and my family.

Absolute earliest this could start is June, but I need to finish up some other projects before committing to a new one for a solid year.

Living on Minimum Wage

Making Your Own Lunch Kits


My nephew is in love with Lunchables, pre-made lunch kits marketed at kids which come in several varieties and have generic immitators, but crackers+meat+cheese+cookie is the general formula.  They're wonderfully simple and convenient.  But they are generally more expensive than assembling the same foods yourself, generate trash, and cookie/candy without fruit or vegetables is not the best lunch routine.

So I've started making "lunchables" for my nephew in the morning for his lunch that usually look like what I've pictured above.  Since they're only stored for a few hours instead of potentially weeks, it's not important to separate the different foods with dividers.  That's 8 Ritz Crackers, 1 slice of swiss cheese folded and broken into four pieces and stacked on top of four folded thin slices of turkey.  I usually give him fruit in a separate container as well.

I'm bringing this up on a blog for single adults, because you can make adult versions of this.  Reusable divide containers help:

Kind of looks like a meal of party leftovers, but it hits 4 out of 5 food groups.  I had two slices of chicken left, so I used 2 different meats, 2 or 3 different cheeses, and fresh grapes.

Crackers (or other dry sliced bread) + cheese + meat + fruit (and/or veggies)= meals you can prep in advance and grab quickly in the morning.

Vegan version is subsituting the meat with hummus or nuts like almonds or peanut butter, and a calcium rich vegetable like spinach (or something else from this list: "33 Vegetables High in Calcium").

If you compare the price on the adult premade lunches and snack kits, the savings become pretty obvious.

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Living on Minimum Wage

A Time to Save – Part 5

Part of the reason I got so carried away with these scenarios is it reflects where I am financially right now. Sometimes it helps you figure out your own situation if you advise a hypothetical stranger. It’s been a while since I laid my budget out bare for the public, so here goes.

Let’s start with my current assets:

Checking/EF: $1822.04
HSA: $3074.19
Business Investment: $3993.57 (total capital investment) [$1500 (easily accessible), $500-800 approx. (assets that could be liquidated), the rest is mostly intangibles]
Savings: $600.02
Roth IRA: $2105.82

Now on to income:

Currently, I make $295/wk at my day job, and I’m paid twice a month.
I pay myself $145/mo from my home business. I also get a $50/mo gas card from my sister to drive her son to school.

However, my $295/wk job is closed 4 weeks per year, so I need to knock those weeks off in addition to the 2 weeks per year I usually knock off to account for sick days and holidays. So ($295 x 46 + $145 x 12 =) $15,310 is my estimated gross income. However, not all of that goes straight to my pocket.

TN doesn’t have a state income tax, but quora estimates I pay about 12% of my income in taxes ($1837.20). That may be a little high in my case since I take advantage of some pre-tax savings/expenses, but it is close enough for budgeting purposes.

So if I average out my income, my monthly budget should be $1122.73.

Now my expenses:

I do have health insurance through the ACA marketplace. It’s Bronze level, so not the best, but I decided to go with a level where my stipend would cover the full premium. With my home business, I put $100/mo pre-tax into an HSA and have Dental Insurance for $34.28/mo. (I'm treating the HSA as an expense because I view it as part of my insurance to cover medical expenses.)

I drive my parent’s old van, which is on permanent loan to me so I can take my nephew to school and get to work. But it’s a slowly crumbling vehicle.

The $50 gas card covers most of driving, but I often end up putting another $20-$40 per month depending on how social I am or how many weekend events I’m doing.

I'm now contributing $200/mo to cover my vehicle insurance and phone bill (both are part of family plans) and a little extra for general expenses.

I buy my own clothing, hygiene items, and a portion of my own food, but these expenses are relatively low, so I tend to lump them in with my entertainment budget into a “spending” allowance. (I’ve been allowing myself $200/mo. or $40/wk.)

I also tithe based on my net income. So about $110/month.

Summary

Income: $1122.73

Expenses:
$ 34.28 Dental
$100.00 HSA
$ 20.00 Gas
$200.00 Phone/Car Insurance/etc.
$200.00 Spending
$110.00 Tithe
$664.28

$1122.73 - $664.28 = $458.45 Remaining

I’m 35, so trying to get more serious about my retirement account, but I also don’t have a sufficient emergency fund (it comes close if I add all the accounts I could draw cash from, but I’d rather not do that.)

So I’m dividing the remainder this way:

$100.00 IRA
$350.00 Emergency Fund

Once upon a time, it made sense to keep my EF and Checking in the same fund, but doing this budget has made me realize that reason doesn't still hold, so I'll be separating these funds soon.

Living on Minimum Wage

A Time to Save – Part 4

All debts are gone now. You’re living with your parents, contributing $200/mo, and keeping spending down to $100/mo. Emergency fund is full... Now what? Where should that $700 go? Is it party time?

Maybe a little bit. You’ve made a lot of thrifty choices, and the EF is there to help you navigate sudden change, so it wouldn’t be wrong to allow yourself another $50 to $100 a month for spending. Particularly if that spending helps you enjoy life more and achieve your personal goals.

Priority 5: Big Dreams and Entertainment

How this should breakdown depends on a lot of factors like your age, health, and life goals. Do you want your own house? Do you want to travel? Go back to school? Are you likely to retire at some point?

This priority divides into three main categories:

Long-term
Short-term
Entertainment

Long-Term savings is anything that will take more than 5 years or is over $1000. Short-Term savings is savings for anything that will take less than that. And Entertainment is what it sounds like. However, entertainment can be an enriching experience.

Let’s start with retirement, which for most of you should be a long-term goal. Having a well-funded retirement does not mean you have to stop working. For health reasons, I’d suggest at least keeping a part time job in your old age. But having a safety net for your later years is wise (particularly if you’re my age and social security is looking iffy).

Investing can get complex, and I recommend you read some books on the subject to arm yourselves. But let’s start with two common types of retirement accounts.

401Ks are retirement accounts established by your employer.
IRAs are Individual Retirement Accounts.

If your 401k offers matching, this means your employer will put in money based on what you put in up to a certain amount. This is an instant and guaranteed return on your investment, so definitely worth taking advantage of.

IRAs and 401Ks both come in pre-tax (traditional) or post-tax (Roth) varieties. Which is better is a bit of a guessing game as to whether you would pay more tax now or in the future. My current recommendation for minimum wage earners is to go with a Roth or post-tax option.

(A couple articles that go more in depth: Can You Have a 401(k) and an IRA? and 401(k) vs. IRA? Use both if you can )

Let’s say your employer offers 50% matching on up to 3% of your income. In our example, that’s $34.80 ($7.25x40x4x.03) from you and $17.40 ($34.80x.5) from your employer, which means $52.20 is going into your 401K each month if you invest 3%.

You could invest more in the 401K, but the downside of a 401K is you have less control over how the money is invested. So let’s put that in an IRA instead. Most retirement experts recommend 10-15% of your income towards retirement as a starting point, which would mean an additional $81.20 to $139.20 (116-34.80, 174-34.80). However, you can invest up to $458.33 per month ($5,500 annual) into an IRA.

If you don’t have any definite plans or need to urgently prepare to move out, I would recommend maxing out your IRA for the time being. Chances are you will eventually need to redirect your savings elsewhere and this will give you a good head start for those times when you can’t contribute as much.

That would still leave you $206.87 to play with ($700-34.80-458.33).

Urgency of retirement saving depends a lot on your age. If you are 18, it would be good to start, but education (college, trade school, night classes, etc.) might be a better place to put most of that income. However, if you’re 52, you might want to take advantage of catch-up contribution (https://www.tdameritrade.com/retirement-planning/ira-guide/ira-contribution-rules.page) limits to put as much as you can into retirement.

If you dial your retirement contributions down to 15% of your income (which is still responsible), then you will have $526 (700-174) to invest elsewhere.

There’s not a one-size fits all answer to where that money should go, but let’s say you don’t have a definite plan but you’re restless. While you’re figuring things out, you might split the $526 between a housing and transportation fund. To make your numbers round, you leave the $26/mo in your checking as padding/whatever money and put $250 into a transportation account and the other $250 into a housing fund.

Your Savings Plan would look like

Retirement: $174
            $34.80 401K (with $17.40 matching)
            $139.20 IRA
Transportation: $250
Housing: $250

After 1 year, you’d have $2298 [(34.80+17.50+139.20)x12] + interest in your retirement fund, $3000 in your transportation fund, and $3000 in your housing fund.

Stick it out for 5, and you’ll have $11,490 (plus interest) in your retirement account, $15,000 in your transportation and $15,000 in your housing fund.

While that might not be riches beyond your wildest dreams, it is a good nest egg.

Part 5

Living on Minimum Wage

A Time to Save – Part 3

I decided to give an in depth example of Priority 4: Large Debts

(Reminder we’re using the scenario of someone living with relatives, who currently has low living expenses and is trying to make more responsible choices with the remainder in their budget.)

If you have multiple large debts, there are two different methods for deciding where the extra should go first. In cold numbers, it’s best to first attack the debt with the highest interest rate. However, unless there a dramatic difference in interest rates, it’s probably wise to use the debt snowball formula (with credit to Dave Ramsey) to pay off your smallest debt first and then use that freed up cash to attack the next largest debt and so on.

The biggest advantage to the debt snowball is it helps reduce the number of debts you are dealing with, so if you do hit a future rough patch you’re dealing with 1 bill instead of 5... this also means more flexibility.

Let say your current debts have you paying per month $30, $50, $85, $150, and $250, and the debts they represent are $300, $400, $1200, $5000, and $30,000. It’s going to take years to deal with all of them. However, you can knock out the small ones more quickly.

(You won’t have $700 left from a $1000 monthly income, because you’re making $565/mo in debt payments, contributing $200, and still need $100 for spending. Numbers below are simplified but get the idea across.)

With the $135 you have left, you can take out debt 1 in 2 months ($300-2x$30-2x$135=-30) with $30 leftover to throw at debt 2.

Since you are no longer making that $30 payment, you now have $165 extra to attack debt. In another two months you’ve eliminated debt 2 ($400-4x$50-$30-2x$165=-160) with $160 left to throw at debt 3, freeing up a total of $205 per month.

Debt 3 is gone in month 7 ($1200-7x$85-$160-3x$205=$-170).

With your freed up income now at $290 per month, debt 4 will still take another 9 months to pay off ($5000-16x$150-$170-9x$290= -180) in full unless you work some over time or take a 2nd job.

But if you stick to it and get it done, you’ll have freed up $355 in your regular budget. This means you can more than double the payment and half the time on your long-term debt. It also means if you have a bad month or your expenses suddenly go up, you are in a much better place to handle the change.

When you started with $135 extra in your budget, a new $200/mo expense would have put you under, but now you could handle a new $200/mo expense and still have $155 extra to throw at your long-term debt.

However, if you had thrown all that $135 extra at your highest debt, you would still be paying on the three highest debts a year later, and need almost 3 years to pay down the second highest debt. That’s 18 extra months of having $150 tied up in a monthly payment.

That was quite a detour, but let’s say you stick to it. All debts are gone now. You’re living with your parents, contributing $200/mo, and keeping spending down to $100/mo. Emergency fund is full... Now what? Where should that $700 go? Is it party time?

Let’s explore that in Part 4.
Living on Minimum Wage

A Time to Save – Part 2

You can read Part 1 here. On to the example...

(We’re using the example of someone who earns $1000 per month, and because they live with family only has $200 in regular expenses. However, they need to budget with worst case scenarios in mind.)

So let’s take that $1000/mo. Pretend you have to pay $720 for rent, $80 for food, and $100 for utilities. If you can think of other expenses independent living would create you might add them in too. So for us that comes up to $900, subtracted from $1000, it leaves you $100 for other expenses. This may be a far more realistic range for your “spending money”, even if currently your expenses are only $200. The difference between $900 and $200 is $700. If you can discipline yourself to bank that money into savings instead of spending it, you’re going to be in a much better position to weather life’s upsets. And if nothing bad happens...well, look at all the money you’re saving.

So while your living expenses are low, where should that $700 go?

This goes back to our 5 priorities:

Priority 1: Needs
Priority 2: Small Debts
Priority 3: Emergency Fund
Priority 4: Large Debts
Priority 5: Big Dreams and Entertainment


Even while prepping for your worst case scenario, you shouldn’t ignore your current needs. If medication and transportation, etc. mean that $100 in spending money is not going to cut it, that’s okay. Adjust your savings amount so that your current needs are still met. If your vehicle needs a $500 repair, it’s okay to take a break from savings to deal with that.

Small Debts are things you can pay off in a single month with a lump payment. So yes, take care of that speeding ticket, library fine for the book your dog chewed up, or $10 you owe your friend for pizza the other night promptly. That way they won’t be hanging over your head or accumulating additional fines and penalties if things do get worse.

Next is the emergency fund. Now, if you’re living at home so you can pay down your student loans more quickly, then yes, you should continue to do that. But it’s important to have some liquid assets that are quickly accessible for emergencies. So maintain the minimal payment on your loan until you’ve put away 6-months worth of living expenses. Let’s say your regular student loan payment is $350, (if you’ve taken care of the first 2 priorities) that leaves $350 for savings. If you decided that $7,200 is your ultimate EF goal and you’re starting from $0, then it will take you almost 2-years to save that amount. If you’re feeling pressure from your relatives or worried about student loan interest, you might stair step those goals.

For example:

For the first 2 months, $350 towards EF and $350 towards the debt.
For the third month, $300 towards EF and $400 towards the debt.
.....(EF now at $1000)
Continue for the next 8 months, $300 towards EF and $400 towards the debt.
.....(EF now at $3400)
Last month of the year, $200 towards EF and $500 towards the debt.
.....(EF $3600, so you’re at your half way goal)
Continue for the next 6-months, $200 towards EF and $500 towards the debt.
.....(EF $4800)
For the next sixth months, $100 towards EF and $600 towards the debt.
.....(EF $5400)

While not your ultimate goal at the same speed, it’s still a good cushion and you’re definitely knocking years off that student debt. You can continue the $100 to EF and $600 to student debt until you hit your goal or use that degree to get a higher paying job.

Once you have an adequate Emergency Fund, throw the full weight of your income at your large debt(s).

More details in Part 3 (told you this got long).
Living on Minimum Wage

A Time to Save – Part 1

I was most active on this blog back when I was maintaining an apartment with roommates, and to a degree, that makes sense. There are a lot more financial issues to think about when you’re running a household.

But there are a lot of people who have moved in or who are still living with family. This encompasses both young people living with parents and parent or grandparents who have moved in with their children. These multigenerational households were fairly normal through much of history and still are in many cultures, and seem to be making a comeback in the U.S.

Particularly if you’re single, there are a lot of socially and financially smart reasons to live with your parents or other family members. Even if you’re chipping in to maintain the household, this is usually cheaper than maintaining your own place. The dark temptation is to view these savings as disposable income rather than a chance to build a nest egg.

Certainly it’s fine to have a little play money. However, it’s wise to recognize that life is unpredictable. For a number of reasons, you could find yourself suddenly needing to move out and maintain your own living space. To a degree, age and current savings play a huge factor in your budgeting. If you are retired and working a minimum wage job mainly for the physical and mental exercise, but able to draw social security and have a sizable retirement account, then sure go ahead and use your new income for trips and gifts.

However if you are a young person who isn’t independently wealthy or a middle-aged person with minimal savings, then you need to keep your potential and not just current circumstances in mind.

Let’s say, out of your $1000/mo income after tax, you currently contribute $200 towards household expenses and your relatives are happy with that. That leaves you $800 for other things. It’s really easy to spend $800 a month if you don’t feel a pressing need to save. But have you bought into a lifestyle that you couldn’t maintain if you suddenly needed to move out?

Doing a quick search in my area (just outside of Nashville), the cheapest studio apartments are listed at $580 (and they fill up quick), and one-bedroom apartments are starting at $720. That’s a pretty significant chunk of $1000. If you take on a $425 car payment, then you may be living in your car if something happens to your current situation.

In previous posts, we’ve recommended you set your Emergency Fund Savings goal to cover 6-months of independent living rather than reflect your current expenses for 6-months. We’re also recommending you practice setting your budget to reflect independent living, particularly if you are hoping to get your own place.

This post got a little long, so we’ll continue with an example in the next entry.
Living on Minimum Wage

Hola 2017

            So part of the reason I went dark after the last post is that I started a new job in April.  It’s still part time, but steady and a better hourly rate.  I’m making close to full time minimum wage.  It’s also back in childcare, so I’ve been putting in a lot of extra off the clock hours because one of my long term goals is developing a new curriculum/educational system.  (To be clear that’s not my boss asking me to do extra, that’s me doing extra for personal objectives.)
            The other thing keeping me busy was editing my first anthology.  There were almost fifty contributors, and that was a little intimidating.  Anthologies are rarely best sellers, but I think we produced a beautiful book.  Doing a giveaway soon, so I’ll give you more details when that happens.
            Most of my budget this year has been focused on savings.  I turned 35 this year and decided that I really needed to get more serious about my retirement account.
            This past week I’ve been making a lot of lists.  I’m not a big fan of New Years Resolutions, but I do like establishing goals for the year.  So I’ve been drafting shopping lists, to-do lists, buckets list, business checklists, etc.  I spent a large chunk of Christmas break sorting and organizing, and there’s an intimidating amount left to go through, a lot of it filing that I’ve been putting off.

            My friend’s father passed away last month, so my sister and I had a conversation about how we would need to adapt if one or both of our parents passed away.  Hopefully, it’s not something we will need to implement anytime soon.  But it was worth discussing.  We also were able to reflect that even though we occasionally get on each other’s nerves, living with the parents allows us to maintain a middle to upper-middle-class lifestyle even though our individual incomes would put us on the edge or just above poverty level if we were maintaining separate households.

            And I have been contemplating getting my own place.  However this would mainly be a mixture of book research and a sort of reality show/vlog.  I can’t say it would be an ideal financial move for me on a personal level, and we would have to make new arrangements for getting my nephew to school.  But in many ways, this year is starting to look like a good time to do it.
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