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My Low-Income Lifestyle

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.

Mark Cuban’s Horrific Student Loan Debt “Solution”

By Frugaling 15 Comments

The stock market’s been horrific. Volatility has been at record levels. Stocks are at 6, 7, and 8-month lows. The losses prompted me to stay glued to CNBC. Every morning this week, I woke one hour earlier and listened — rapt to the dancing futures and opening moments. Then, I’d be off to work, school, etc.

But this article isn’t about stock market woes. Instead, I want to focus on a CNBC guest and favorite, Mark Cuban. Cuban is an entrepreneur and billionaire (about $2.6 billion). He’s an owner of the Dallas Mavericks and serially invests in startups, businesses, and other money-making ventures. This week, he decided to speak out against the rising tide of student loan debt — something we can all agree is crushing our future economic potential.

At first, I welled with excitement and thought, “Finally, someone is going to start critiquing our financial destruction via student loans and provide sensible solutions to the $1.2 trillion debt.” Cuban exclaimed that we couldn’t continue this and that we were hurting the entire economy with this burden. But after complaining about the problem at length, he provided no solutions.

The CNBC anchors recognized this and asked him to elaborate on his answer. And that’s when I nearly soiled my pants. His big fix to this growing problem was to — ugh, it’s hard to write this — cap the federal governments tuition aid to students. More specifically, he proffered that students shouldn’t receive any more than $10,000 each year in aid.

The billionaire entrepreneur, successful businessman, and all-around sports guy said that a cap like this would force schools to reduce tuition and fees. This is when I began screaming at the TV with a rebuttal, desperate to be heard by the conservative messengers on CNBC. That didn’t work, so I took to my keyboard to muddle a rebuttal.

Unfortunately, there’s a growing movement among “experts,” pundits, and pretenders that solving the student loan crisis is as simple as cutting funding opportunities. Cut the funding and institutions will be forced to lower their costs. Economically speaking, they’re partially right. When you reduce the funding opportunities, this manipulates the “free market” for education.

With the “Cuban Plan,” the idealistic message is: cut aid funding and watch the tuition/fees crumble. With a $10,000 cap on tuition, Cuban expects institutions to follow in line. But that’s not what will happen. The reality is that the market for private loans and corporate, profit-hungry, debt-ballooning machines will take its place. Suddenly a controlled market of lenders by the federal government will be swamped and stalked by private lenders — only out to massage another percentage point (or more) out of desperate students who are eager to get educated and attempt to better themselves.

Many will be priced out of an education. The bloated budgets of higher education institutions won’t be able to simply adapt. Universities have been spending astronomical amounts on recreational centers, educational facilities, and residence halls (aka: dorms). While frivolous, the tuition and student fees are established. If they were to be reduced or cut due to federal aid money, schools may default on hefty loans to pay for these extravagances.

Cuban’s idea is a lose-lose. Schools will default, close, and/or fire massive amounts of educators. Students will be stuck with private loans to pay the gap, or be forced to relinquish their dreams of a higher education (and the future earnings potential). The only winner will be Cuban and his cronies — the 1 percent.

See, the rich will benefit because it’ll be another federal program that’s axed. And anything federal, governmental, or communally good is inherently bad among rapacious 1 percenters. Moreover, private funders such as Chase, Wells Fargo, and Bank of America will be able to roll up their sleeves, sell some toxic loans, and collect for decades. Those holding stock in those companies could escalate their wealth — all off the backs of low income and desperate students.

What we need is government reform. What we need is debt forgiveness. What we need is a growing mass of people that believe in future generations and their education. What we need is a long view — not the myopic, shortsighted one that Cuban propagated.

He’s right about one thing: there’s a crisis brewing and we need to change our relationship with student loan debt immediately. Tuition and fees need to be cut. For-profit universities should be unable to receive federal funding whatsoever. Taxation to support higher education of public institutions needs to increase dramatically. Be it from estate taxes or net worth taxes or capital gains taxes, somebody’s got to pay for it. And we can’t keep giving the bill to future generations.

These are the people that will take care of you when you are aging. These are the people that will discover the cure to cancers. These are the people that will reduce climate change. These are the people that will pioneer ever greater technologies.

It’s time to support them and ourselves.

Living In A Van To Becoming A Pornstar: Crazy Ways Students Pay Tuition

By Frugaling 13 Comments

Photo: MIT is a land-grant university. — **Photo: An iconic building in the heart of MIT**

Part of the fortunate few

That first day of college is burned into my memory. Mom dropped me off, and I can still feel that vague discomfort in realizing I was independent. Perhaps more accurately, I felt alone. Instead of seeing my brother every day, it was my new college roommate — a heavy metal aficionado. Despite his taste for incomprehensible music, we actually got along (I think).

Both of us had the privilege of parents who saved and paid for our college educations. My undergraduate years were financed through various investments in stocks, bonds, and mutual funds. Another way many parents save is through 529 College Savings Plans, which provide tax benefits for a child’s college education. Unfortunately, future college students don’t always have it this easy.

Suffering from rising tuition, fees, and state tax cuts

Americans are in trouble. There’s a confluence of events that’s acting as a perfect storm for adolescents: people save less than ever, tuition costs are on the rise, and state tax revenues for public education are severely constrained.

About 75% of households only have enough in savings to pay their bills for 6 months. A Huffington Post reporter interviewed one person who said,

A single mother of four living in Bangalore, Maine, Norton says she often writes checks for bills without enough money in her bank account to pay them, hoping the check won’t clear until her next paycheck arrives. Between rent, child care and other necessities, Norton says her expenses cost more than she earns, leaving her without a cushion to fall back on in case of emergencies.

Tuition fees are increasing at far greater rates than inflation. Effectively, this is stunting parents’ and future college students’ purchasing power, and leading to nauseating levels of student loan debt. The New York Times found that,

At public four-year colleges, the inflation-adjusted average annual increase has been somewhat higher, thanks mostly to state budget cuts: 2.3 percent (which translates into almost 5 percent a year in nominal terms). At public two-year colleges, also known as community colleges, costs have fallen relative to inflation, at an annual rate of 0.3 percent over the last 20 years.

A caution: these increased tuition rates do not account for greater student loan debt and the possibility of being charged upward of 6.8% active interest to be paid off after graduation. If you account for this, real tuition costs are skyrocketing. This is the burden of students, parents, and our greater society.

The estimated total cost of attendance at Duke University.

The tuition is too high

At a private institution such as Duke University, you’ll be staring at a whopping bill for about $61,404 a year. Just for some perspective, the World Bank suggests that the average per capita income in the United States is $51,749. For four years at Duke, you’ll be staring at about five years of income — in debt.

Maybe you’re wondering why I chose one of the most expensive schools in the country as an example. My simple answer is twofold: 1) Duke University is highly prestigious and well-regarded by both employers and future students; 2) Two of the craziest stories come from this institution.

You won’t believe what college students are doing to make ends meet. For some, desperate times call for desperate measures. The following are 3 real-life examples of students saving and paying for atmospheric tuition costs.

Ken Ilgunas: Walden on Wheels

Ken Ilgunas had finished paying off undergrad loans when he decided to return to Duke for a graduate degree. Before starting the program, he was determined to avoid more students. In his New York Times article, Ken says,

I HAD been accepted into Duke’s graduate liberal studies program, but I couldn’t afford it. I had just paid off my $32,000 undergraduate debt, I was nearly broke, and the prospect of taking out loans was unthinkable. Going back into debt made about as much sense as running out of a burning building just to run into another.

His solution was to buy an older Ford Econoline van for $1,500 and live out of it for the duration of his schooling. Using the library for Internet, rec center for showers, and a camping stove to cook food, Ken successfully went to graduate school without accepting defeat and taking out loans.

Ken utilized his writing skills to pen a beautiful book called, Walden on Wheels. The book focuses on minimalism, living debt free, and his journey at Duke. With national attention, a New York Times article, over 300 (mostly) positive reviews for his book, and even a visit to Letterman, Mr. Ilgunas is an inspiration for vandwellers worldwide. More importantly, he did something truly extreme to avoid student loans and pay for his tuition. It worked.

Belle Knox: Full-time student, part-time pornstar

Belle Knox (her chosen pornstar name) is an 18-year-old student at Duke University, who is studying women’s studies and eventually wants to go to law school. Many of her peers pick up side jobs to pay for some odds and ends amidst piling student loans. Belle decided to take up a different line of work and searched Google for, “How to become a pornstar.”

She’s headline news everywhere. Rolling Stone calls her the “top new adult-film” actress and a “studious college freshman.” Dr. Drew featured her on his show and said he’d be, “chompin’ down on cyanide capsule right now [if I was your father].”

When Belle talks about her pornography experiences she says,

I can say definitively that I have never felt more empowered or happy doing anything else. In a world where women are so often robbed of their choice, I am completely in control of my sexuality.

From there, Belle found a talent agency and started flying across the country — mostly LA — to film scenes on the holidays and school breaks. Each scene filmed equates to about $1,000. After about 61 scenes a year, she can completely pay for her exorbitant tuition demands. She’ll avoid the fearful debt this way.

Steve Stanzak: Finding affordable housing in the library

When you’re staring at around $55-60,000 a year in total costs, you’re bound to get creative. When Steve Stanzak of New York University struggled to find affordable housing in New York City (imagine that!), he decided to go rogue and live in the library basement for 8 months.

USAToday interviewed him and they found that,

…He began spending six hours a night in the sub-basement of Bobst Library at the beginning of the academic year after he was unable to pay a $1,000 housing deposit.

He slept on four library chairs and carried vital belongings — a laptop computer, books, clothes — in his backpack. He kept other items, like toiletries and clothing, in storage lockers.

Here’s the crazy part: they caught him because he used an online journal to catalogue his journey. Imagine if they never caught him?! How long could he have managed — putting four chairs together in the place of a bed?

In a strange twist of fate, Steve was rewarded for his library dwelling when NYU offered him a free dorm room. Success!

What’s reasonable when tuition costs are unbearable?

When I searched Google for “ways to pay for college,” I got some fishy results (i.e., Forbes, Fiscal Times, and Huffington Post). Frankly, none of the articles actually help people pay for college. Most just regurgitate old information about getting financial aid (aka, student loans). The worst is the Huffington Post article, which suggests paying for college with “cash” (they must be getting creative to rank higher in searches). I would imagine most people understand that cash is a monetary tool for paying bills. Not sure who’s benefitting from that horrible advice!

I remember feeling hopeless to do anything about my student loans prior to starting Frugaling. The debt piled higher and higher — without escape or end. When I finally faced this reality, I suddenly saw a way out.

It’s easy to get desperate when you see interest-bearing accounts metastasize with ever-daunting sums. Ken Ilgunas, Belle Knox, and Steve Stanzak are three people that used this extreme fear of student loans to prevent them from falling prey to them. Question their legality, morality, and safety as much as you want, the three of them found a way to make their educational dreams a reality.

Significant student loan debt is a scary place, and it seems like these three reacted in powerful ways to stem their deficits. But it makes me wonder, is it even worth it at some point? When is a graduate degree, while in a Ford van worth it? When is it worth becoming a sex worker (aka, pornstar)?

Their stories are hard to hear though. These are the most motivated, enterprising, and smart people in our country and they’re struggling to get a top-notch education. It makes me wonder if we are making it too difficult for people to attain this level of education – preventing new leaders from finding success in our society.

This is just the start, too. As tax revenues continue to fall for public education and social inequality rises, stories like this will only increase. The United States seems to be leaving our future generation in the dust. You can’t pay for a college education with a couple simple part-time jobs over the summer. Those days are long gone.

How can you lead when you’re swimming in debt and held back from the freedom to become more than just a number to a lender?

My Low-Income Lifestyle

Let’s start with my monthly salary