posted: Jul. 17, 2013 @ 12:57a
McDonald's is putting together a module to help its employees budget better, which is getting pilloried all over the Internet for making unrealistic assumptions about minimum wage workers.
So the figures for heating and health insurance in the original Visa/McDonald’s sample budget are hard to defend. But overall, it offers a reasonable picture of how a typical person in the lower half of the income spectrum spends his money.
And the reality is that these low-income Americans have to make the kind of hard choices that critics are deriding as ridiculous. They have to make do with a used car, live in a modest apartment with a roommate, get by with basic cable and a low-end cellular plan, and travel and go out to eat infrequently.
Gawker calls the budget “just-shy-of-condescending,” but budgeting is an important skill that isn’t obvious to every young adult in America. Offering practical advice on how to live on a modest income is more constructive than ridiculing the choices required to do so.
I don't want this to be a political thread but you need to look at this from the extreme retirement people, who create a zero based budget starting from the hierarchy of needs and moving up. So you need food and would pick a thrifty food plan with what's on sale at the market that week, housing would be a room in someone's home, you would bike to work or take the bus, and your entertainment would be something free like walking or going to the library. Even in Los Angeles, you can find rooms, utilities included, for $600 or less - go to Craigslist and search under rooms for "utilities included". Food would cost you $150 a month, a bus pass would cost you $80 a month, laundry and miscellaneous expenses $20, and a prepaid phone might cost you $50 a month - for $900 a month in baseline costs, against a CA minimum full time wage ($8 an hour, 40 hours a week, minus taxes) of about $1100. Add an individual studio apartment, entertainment, etc. accordingly to fill out the amount and increase the comfort level. Health insurance is an issue, but starting in 2014 with the ACA someone making minimum wage will have free insurance at the "bronze" level.
The big issue is one time expenditures like clothing, security deposits, furniture, etc. and unexpected expenditures - which the minimum wage does not account for. A car would fall under this capital cost category. Many people run back to mommy and daddy for those things, but you would have to save over many months for the minimum subsistence wage to provide for this. If you didn't have someone to fund these one time expenditures you have to deal with the shady signature loan market, with accordingly high rates. But the point of a minimum wage is basically to allow one person to subsist and not starve or be without shelter.
Looking at this in CA, monthly expenses only, capital costs excluded:
Room - $600 (including utilities)
Food - $150 (thrifty food plan)
Health care - $50 (subsidized clinic now, Bronze health insurance + co pays post-2014)
Transportation - $75 (bus pass)
Incidentals - $25 (laundry, etc.)
Phone - $40 (Page Plus, needed for shifts at work)
In other parts of the country I have seen furnished all utilities included rooms for under $300. In those areas you probably will need a car which will cost you about $300 a month in gas, car payment, and insurance (liability only) so it is a wash.
I sometimes think about this should I get into a situation where I need to seriously conserve cash. While in my case my housing prices are higher due to PITI, I would consolidate my stuff and have someone stay in an extra room. What's the lowest you could spend a month and still survive?