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My Low-Income Lifestyle

By Frugaling 57 Comments

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My Low-Income Lifestyle. My monthly budget is tight. There's little room for error with my low-income lifestyle. Here are the pros and cons of my financial situation.

Let’s start with my monthly salary

“I’d like to live as a poor man with lots of money.” —Pablo Picasso

I get paid $1545 after taxes on the 1st of every month. That’s my salary for working at the university, and being a graduate teaching assistant. Over 12 months that comes out to about $18,540.

For a single person, that places me about $7,000 above the federal poverty line of $11,490. You’d think I live a pretty comfortable, financially solvent life. And for the most part, I do.

I’m not in poverty. I never go hungry for long. I’m afforded incredible learning and writing opportunities. I can pay for shelter without any concerns. I’m lucky not to have any dependents or pets. I’m not on the brink of losing this consistency of life.

A tight monthly budget, but positive

Here’s what my monthly budget looks like:

Paycheck: $1,545 per month

Rent: -$550 (Housing in Iowa City is surprisingly expensive. This price bundles Internet/Cable, as well).
Utilities: -$50 (Varies month-to-month, but on average…).
Student fees/tuition: -$346 ($1251 per semester (x2), and then summer tuition (not covered) at $1650 for 3 credits — all divided by 12).
Food: -$400 (working to lower this, but in the past…)
Gas: -$5 (I don’t drive, but occasionally I give friends money to carpool with them)
Total costs: $1,351 per month

Partial budget: $194 per month

Notice that within this budget, entertainment, travel, and car expenses are not present. It’s difficult to approximate how much I spend on entertainment (going out to movies, playing pool, or bowling), but I’d say it averages about $10-20 per month.

Because I sold my car, I no longer have registration, titling, gas, insurance, maintenance, or car loan payments. Although, flights still happen and those cost about $300-400 round-trip. I fly about once or twice a year nowadays. Conservatively, that’s about $600 per year, or $50 per month. Subtracting these costs, and the following is my total budget:

Total budget: $124 per month.

If I stay within this budget and repeat it monthly, I can save about $1,488 per year. But that’s only if there are no other fees, expenses, or emergencies. For instance, my computer is hugely important to my business, job, and schooling; if that were to fail, I’d be in deep trouble. A single incident could wipe away my savings for a year.

Macro Money Photo
Photo: Kevin Dooley/flickr

Settling into the low-income lifestyle

While I might not be in poverty, I lead a low-income lifestyle with little room for error. Now that I’m no longer in massive student loan debt, my monthly budgets are real and accurate — not manipulated artificially by financial aid. When I run out of money, it’s gone — there’s no reserve ready. If something happens, emergency funding may be found using title loans or other secured lending options.

As I paid off my student loans and stopped withdrawing additional credit, I developed and settled into a low-income lifestyle. It’s one without exotic vacations, weekend getaways, cars, fancy dinners out, and the latest gadgets.

Now, I hold onto things longer, avoid purchases, and cook at home whenever possible. But it took me a while to adjust down — to slow down, really. I’ve said this before, but debt fostered an illusion of success that I felt compelled to uphold and continue. I wanted to show people that I could “afford” to treat, spend, and enjoy. Unfortunately, it was all a mirage. I was swimming in debt and stress.

Reflecting on the pros and cons

Pros

1. No more debt (or very little)

I no longer take out student loans to cushion my budget. Every month I do have revolving credit from regular purchases, but my balance is paid in full each statement period.

2. Support from family and friends, community

People check in with me more than ever about how I’m doing with my financial goals. Additionally, friends have increasingly begun to ask questions about how they, too, can save.

3. Greater exercise

Now that I sold my car, I take buses, walk, and/or ride my bike. Altogether, I’m getting way more exercise over owning and driving a car.

4. Empathy for lower-income and impoverished populations

Living closer to poverty and working with the homeless population has been an interesting combination. While I have great educational privilege, I do not have any income to show for these “achievements.” For now, this lack of money has helped me try to empathize with those less fortunate than I.

5. Reduced environmental impact

Despite America’s capitalistic ideals, we are doing the planet great harm with our consumption. Without any money or vehicle, I’ve drastically reduced my environmental contribution to greenhouse gases.

6. Eat healthier

To stay within my food budgets — and reduce them even further — I’ve been making more food at home and avoiding fast food alternatives.

7. Provides motivation for stories, articles

Living this low-income lifestyle provides great fodder for stories and reflection. Simply put, I learn every day from it. Comfort can sometimes make us complacent and inure us from others’ struggles. Stripping away income has provided deep insight into income problems in America.

8. Increased appreciation for what I do have

For everything I must sacrifice with my tight budget, there’s far more that I have, which I’m deeply grateful for. From health of friends, family, and myself to comfortable shelter, I am privileged.

Cons

1. Restricted travel

I used to travel all over the country. I loved seeing new places, eating different foods, and meeting new people. Instead, I’m mostly here in Iowa City. Traveling is too expensive — other than to see family a couple times per year.

2. Less time with family

I’ve added hours at work to receive more income. Between that additional time and aforementioned restricted travel, I don’t get to see my family as much as I’d like.

3. Awkward date conversations

While I’ve grown to embrace my low-income lifestyle, I can’t afford to go out with people too frequently. When I go out on dates, I’ve noticed that gender norms about who treats still seem to hold strong — the man is expected to step up.

4. Susceptible to emergencies/unexpected costs

If my computer stopped functioning or I had an injury, I may lose the budget surplus. This precarious balance threatens all my financial goals.

5. Psychological toll and nervousness

Being at this level of income takes a psychological toll. I’m working a large number of hours each week for relatively little pay. That’s stressful.

6. Society doesn’t seem to understand

Graduate students made great progress over the last few decades to have their educations paid for through assistantships and fellowships. But skyrocketing tuition has held back graduate funding. State and federal funding has consistently been in jeopardy.

7. Guilt when overspending

When I do spend money outside of the budgeted amounts, I feel tremendous worry and guilt. This emotional reaction sometimes stems the tide of purchases, but also makes me wish for days of financial security.

8. Tiring, test of willpower

Last, but certainly not least, it can be tiring. Following this strict of a budget takes an immense amount of willpower. Unfortunately, willpower is deeply tied to energy levels. With less energy, willpower tends to decline, as well.

Filed Under: Save Money Tagged With: Budget, debt, Downgrade, emergency fund, family, Fees, guilt, Lifestyle, low-income, lower income, spending, Student Loans, Tuition, Willpower

How Much Could A Lifestyle Downgrade Save You?

By Frugaling 9 Comments

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Flip Phone Old Lifestyle Downgrade
Photo: RobotSkirts/Flickr

Before I flipped out and got all frugal on everyone, I was taking out as many student loans as the good ol’ US of A would lend me. At times, I was engaging in some questionable personal finance practices – balance transfers (aka, robbing Peter to pay Paul). I felt pretty helpless, but people around me kept saying encouraging remarks, as the bulk of my loans were for school.

Unfortunately, the investment and loan damage that’s incurred to graduate from university programs varies tremendously. Some programs are a wonderful investment of time and money – they’ll most certainly add up to a great job, benefits, and an easy retirement. Others are a bit more vague. Something just doesn’t sit right when people say one kind of debt is better than others.

In an effort to reduce as many extra costs as I can, I’ve frequently thought about a lifestyle downgrade. What is it, you may ask? Essentially, it’s about getting rid of as many of necessarily technological advances as you can and pocketing the difference in money to pay off debt. With around $30,000 in debt left to pay off, I recognize that every little bit can help. Moreover, the bulk of this $30,000 currently gets taxed at an abysmal, life-suffocating 6.8 percent, courtesy of the federal government. It’s easy to imagine selling some unnecessary creature comforts and design elements to close this gap.

There Are Assets At Your Fingertips

Man Typing On Keyboard Assets Lifestyle Downgrade
Photo: Kacper Pempel/Reuters

Many articles about personal finance stress removing your daily coffee at Starbucks or packing a lunch. These tips will certainly lead to better budgeting when you’re seriously starved for cash, but there’s more that can be done. Usually, it takes no more than a simple glance at the device you’re using to read this article. Are you using the latest technology? Is that an iPhone 5 in your pocket, or are you just happy to see me?

Personally, I have a number of assets that are slowly depreciating – losing their resale value every day I own them. About a year ago I bought a white iPhone 5 and a couple years before that, I purchased a Macbook Air. The iPhone 5 was purchased on contract and cost the traditional $199 upfront, but these devices are worth WAY more than that on eBay. The Macbook Air was purchased for over $1,000. Unfortunately, the computer has depreciated quite a bit over time. But how much could I sell these items to restructure my life, spending habits, and pay off the burgeoning amount of student loan debt I have?

Choose Your Medium Wisely

When it comes to selling used goods there are three major options: eBay, Craigslist, or your local pawn store. Pawning your old accessories can be the worst option. Because there is a middleman to the transaction between buyer and seller, you’ll likely lose a lot of value. To their credit, a pawn store needs to make a profit, too – there are margins to any business. For the purposes of making the most you can off of your tech and accessories, let’s rule this out.

Next, we should consider Craigslist. In case you’ve been living under a rock for about a decade (and you will be soon by selling off all these newer technologies), Craigslist is the ultimate local classifieds and it’s completely free to buy and sell online. This method will net you the largest profit as there won’t be any commissions skimmed in the process (unlike with pawn stores and eBay). The one risk is that you’re dealing face-to-face with other people, and they may not necessarily be interested in dealing fairly once you meet in person. Similarly, you’ll likely have to spend more time responding to personal emails and arranging meetings to finally sell the item.

The last (but not least) option is eBay. The auction site has become a behemoth in the tech world. It’s by far the easiest and most populated area for buying and selling goods. As a buyer, it can be a wonderful way to find used goods at deep discounts, but as a seller, eBay is a little less friendly. For starters, eBay takes a cut every time you make a sale. Then, like the mafia, they have created one payment process that they own: PayPal. You’ll suffer another payment cut there, too. eBay ranks somewhere in between a pawn store and Craigslist for the money you’ll make, but it’s a safe platform and guarantees a sale within a certain, set period of time.

Reap Your Rewards And Pay Off Debt

Chromebook Lifestyle Downgrade
Acer C720 Chromebook

In the end, the goal is to sell off the unnecessarily advanced, profit off the difference of a lifestyle downgrade, and pay off some debt. If I were to sell my Macbook Air and iPhone 5, I’d probably net about $1,000 off the entire transaction. By selling these goods, I could buy a cheap, affordable computer and buy an older, used smartphone.

Using the same methods outlined before, I would recommend looking on Craigslist and eBay for used laptops and smartphones. The Galaxy Nexus – once the hottest phone on the market – now is a bargain at $60 used, off contract. That would take my net profit down to around $960. As a graduate student and heavy researcher, I would absolutely still need a computer for day-to-day work. The most affordable computers on the market are Chromebooks. I could easily buy a used Chromebook for around $125. After buying both downgraded accessories, I would net about $835 for loan debt.

With all lifestyle downgrades there will be sacrifices. Google Chromebooks are not fully-featured laptops and there are a number of restrictions you’ll bump up against. Older model smartphones may have worsening battery life and poor reception at times.

The question then becomes, is the sacrifice and debt payment worth your inconvenience and potential discomfort?

Filed Under: Minimalism, Save Money Tagged With: chromebooks, Craigslist, credit, debt, Downgrade, eBay, Galaxy Nexus, Google, laptops, Minimalism, school, smartphones, Student Loans

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