lower income Archives

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.

American College Students: In Debt, Distracted, And Doomed

By Frugaling 9 Comments

Being a teacher and instructor in college is more challenging than ever. Nervous eyes take glances at iPhones, quickly minimize Facebook apps, and craft rapid text messages. Students are unbridled in their distraction. They look uncomfortable sitting still.

As a college instructor for about 4 years, I’ve become increasingly aware of fellow educators expressing frustration over “lazy” students that multitask. Some educators ban smartphones and iPads during classes. Others call out students that text in class, and ridicule them in front of peers — aiming towards social conformity.

Unfortunately, technology is serving as a scapegoat for something worse. Teachers want to limit these technological forms of distraction to heighten learning for everyone, but this classroom management strategy misses a fundamental problem. Today’s students aredistracted, but their attention problem results from atmospheric student loan debt and poverty.

The American Dream and business of higher education

Built in to our ailing economy and concrete erections is a fundamental dream: hope for a better life. It’s why many emigrate here.

While achieving that success is attained through various methods, college still serves as the number one predictor of middle class life. High school graduates make a median salary of $651. By attaining a bachelor’s degree or higher, individuals make a median salary of $1,108.

For decades, the message has universally been towards greater higher educational attainment. Generations of students, employees, employers have followed this rule — requiring college educations and encouraging people to get at least a bachelor’s degree. Now, about 32% of Americans have college degrees.

Guidance counselors ask high school and college-aged students to envision anything they want to accomplish. Fundamentally, they ask, “What do you desire?” and “What would you like to do if money were no object?”

But money is an object, and we are controlled by its properties — through empowerment or restriction. These questions of freedom tease students with a reality that doesn’t exist.

Student loans restrict, constrict, and destroy choice

Many will graduate with nauseating student loan debt. Heck, there’s $1.2 trillion right now! For class of 2013 college graduates, the average student loan debt was nearly $30,000. With that amount of debt and interest rates that vary from 3.86% to 7.21%, today’s graduates don’t have the freedom that’s espoused and propagated by higher education and mainstream media.

The problem gets compounded as “student tuition now outweighs state funding at public colleges.” Now, state taxes and revenue sources are contributing to even less of the total cost for students. This all flies in the face of socialistic policies in many European countries that have highly progressive, free (tax-supported) higher education.

Americans place the burden on students as young as 17 to make educated decisions that could affect the rest of their lives. Faltering in payments and failing to swiftly pay off the debt can lead to forbearance, default, skyrocketing interest rates on credit cards, and more. Credit scores and future livelihood are at risk.

Educating the desperate, sleep-deprived, and in debt

The interest is already ticking for many before graduation. Students can feel eager to get a job, get paid, and pay off debt. But even before they graduate, they must ask themselves some serious questions:

Should I work during college?
Should I take more than a normal credit load each semester to finish faster?
Should I skip study abroad opportunities that cost more and may extend my time?

Previous generations had the incredible luxury of minuscule tuition rates. Between 1978 and 2013, college tuition and fees grew by an overwhelming 1,225%. Simply put, college cannot be paid for with summer jobs and temporary work.

To the financially disenfranchised, student loans fill the gap for access. But there are still students that work during college. I had two jobs while also a full-time student, and there are many like me.

Then, there are students with disabilities, children, and veterans of foreign wars (to name a few). They are challenged to keep paying utilities, attain an education, and somehow keep a roof over their children’s heads. Again, student loans often serve as a mediator to accessing education — a temporary source of funding to attain a better income and vocational future. But real dreams can subtly disappear from view as financial aid bills take precedent.

Student loans magically appear, as do depressed dreams

Like many of my readers, I’ve worked hard to turn around my financial future. When I was in debt, I felt horrible. I spent money without concern and bought things I couldn’t afford. My debt was the illusion of success.

When I finally stopped to breathe in May 2013, I realized I had dug a hole nearly $40,000 deep. I was embarrassed with what I had done, and who I’d become. I wondered what I could do to reverse this dangerous course. Trust me when I say this is a common problem for many students.

Financial aid usually was deposited into negative balances at universities and then extra amounts were distributed to the individual student’s bank account. Suddenly, bank accounts were flush with thousands of dollars — budgets seemed irrelevant.

Everyone from the in debt to the creditors to general public confuses these loan instruments for real cash. Yes, you can spend student loans however you see fit, but the consequences are punishing. Every dollar is taxed by the current loan interest rate, and is a dollar in the wrong direction: towards poverty.

The problem of poverty in college-age students

Unlike the clarion calls that suggest America is number one, we seem to have created a master plan for educational failure. Research suggests that “poverty, itself, hurts our ability to make decisions about school, finances, and life, imposing a mental burden similar to losing 13 IQ points.”

By saddling our future graduates with nearly $30,000 in average student loan debt and a future of near poverty for many, we are hurting their ability to learn in the process. Lower-income and impoverished populations constantly report lower amounts of sleep, vocational uncertainty, higher stress, and show evidence of hindered decision-making capabilities.

These are the students of today. They are trying to succeed in a cultural landscape that begged them to get educated, punished them for getting that college degree with years of debt payments, and then limited their employment options.

As the dreams fade due to financial concerns, anxiety and distractedness likely increase. The dream of “What’s your purpose?” can quickly be replaced with “Who will hire me?”

We want bright, capable graduates, but we “victim blame” them instead

America is eager to have the best workforce in the world. We are a nation that aims to be a beacon of hope and role model to developing states. And yet, we are breeding and cultivating some of the most in debt, distracted, and impoverished students.

It’s not in the interest of this country, the world, and future progeny to continue this wicked cycle of educational attainment and poverty. It’s not in the interest of creating a bright, educated populace to have them cowering in poverty for doing so. It’s not in the interest of America to impair decision making in finances and education in the process.

As teachers express frustration for their distracted students, they need to fundamentally understand the complex, systemic interplay of student loan debt. This financial instrument is inherently complex and can psychologically impair the most capable students. They might not be able to pay attention because they’re burdened by a future of poverty, student loan debt, and restricted opportunities.

Something needs to change. This system isn’t sustainable. Fortunately, a small light of hope might be on the horizon.

Post by The White House.

President Barack Obama recently announced a massive initiative to empower those from diverse financial backgrounds to receive a “free” education. His plan includes funding community college educations for those working part-time and maintaining certain educational requirements. Over the coming months this will be hotly contested and debated. But this is the first step, in what needs to be many, for those in need of an education that’s truly accessible and affordable.

Students cannot continue to shoulder most of the burden. There are powerful inequalities in income and wealth — educational opportunities shouldn’t be one of them. If we can muster the courage and wherewithal to increase taxes towards education, we may see what America is truly made of.

The New Rich: How $250k A Year Became Middle Class

By Frugaling 28 Comments

Mansion The New Rich Middle Class War — *Photo: jorge lascar/flickr*

Frugality is a necessity for some, and a choice for others. There are many opportunities to spend carelessly – the Starbucks around the corner, that new gym membership, or going out to eat all the time. It takes serious effort to save money and spend less.

It’s far harder to find ways to lower your bills and balance a budget. At some point the desire to be frugal can fade when wealth, affluence, and income increases. How much money would you need to make per year to relax or throw away your budget, and say goodbye to the frugal life? Would you?

Rich Kids of Instagram The New Rich — *Photo: Rich Kids of Instagram*

A dictionary definition of being rich

For many, becoming wealthy entails a certain level of privilege, posh, and the ability to spend wherever you want – without much care or a budget. Riches generally come from a combination of income and savings. Without any savings and a hearty salary, you’re likely vulnerable to economic turmoil. Without an income a moderate savings, you could be in trouble, too.

Here’s Dictionary.com’s definition of bring rich:

having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy (Dictionary.com)

Pondering whether you’re rich? You may want to ask these questions:

How much liquidity is in your checking accounts?
How much is invested?
How much do you make per year (and what tax bracket does that put you in)?
What kind of liabilities do you have (e.g., loans, debt, future payments)?
Have you ever compromised your lifestyle due to economic turmoil?

The New Rich and middle class

Only 2.9% of earners make more than $250,000 a year (CNBC). On a nationwide and worldwide scale, many consider this to be wealthy. But some people within this income level hesitate to call themselves rich – identifying more in the upper middle class.

A recent article by Associated Press (AP) writer Hope Yen interviewed some of those people:

“I definitely don’t see myself as rich,” says Lott, who is saving to purchase a downtown luxury condominium. That will be the case, he says, “the day I don’t have to go to work every single day.”

…Sponder says she doesn’t consider her income of $250,000 as upper class, noting that she is paying college tuition for her three children. “Between rent, schooling and everything — it comes in and goes out.” (AP)

Kibera Slum Wikipedia The New Rich — *Photo: Kibera Slum/Wikipedia*

The new rich still get to decide which elite private schools to send their children, live in high cost of living areas, and have more job security. On an international scale, these riches are incomprehensible to abject poverty.

Compare this to Kibera, Nairobi, where you’ll find residents without running water, electricity, proper sewage, or waste disposal. Here’s a little information about the conditions:

The slum is contaminated with human and animal feces, due to the open sewage system and the frequent use of “flying toilets” (defecation inside plastic bags that is thrown elsewhere). (Wikipedia)

Nobody should have to live like this. Unfortunately, as the world economy has largely recovered from the disastrous housing bubble and mortgage crisis, many lower and middle income families have missed out on income gains. It’s no longer a dream to have more than you need – it’s an expectation. People in lower and middle class incomes don’t think they have it – they probably don’t – and those in the top percentages for earners seem to be denying their wealthy status.

The $250k a year tax bracket and government intervention

President Barack Obama Tax Reform The New Rich $250k — *Photo: muhammed/flickr*

There’s a complicated interplay between this income status and the federal government. Those filing individually at the $200k or married at the $250k levels have their marginal tax rates increased significantly. A marginal rate suggests that you get taxed at the traditional rate up until the income limit ($250k in this example).

In recent years, President Obama focused on the $250k income line and greater for increased taxes. Part of the proposal for tax reform included breaking down income brackets and increasing the marginal rates for those in the highest levels.

Regardless of where tax reform goes from here, there has been a target on the back of the $200k/$250k level. This campaign to define the wealthiest class and tax them more has bred a hearty argument on a variety of news sites.

A long-running article on Debate.org asks, “Is a couple making $250,000 a year considered rich anymore considering how fast costs are rising?” Many people have commented to say “no” – that $250k is not rich:

Try supporting a family of 5 on $250,000/year in the SF bay area. The cost of living here is so high and I’ve got 3 kids. It does not seem fair to tax me the same as someone making $250,000 per year in, say, South Carolina where housing is less than 1/5th the cost. The potential tax should be more thoughtful and consider local cost of living.

People that make $250,000 already pay close to half of their income in taxes. Federal, State, Local, Social Security, Medical…leaves you with $125,000. Family of 5 automatically puts you in a “no financial aid” status for your kids in college.

However – people earning $250k/year are most likely in a high cost of living area – so expect $3k/month housing expenses, $2k/month other expenses (food, transport, etc.)

CNBC, the financial/market show known for rampant support of free-market economic principles, says:

For folks like the Joneses who live in high-tax, high-cost areas, who save for retirement and college, pay for child care to enable two incomes, and pay higher prices for housing in top school districts, $250,000 does not a rich family make. (CNBC)

Overwhelmingly, the comments suggest that this income level is on the precipice of riches. Many feel vulnerable, as if they could lose this status. While they can live healthy lives, they are taxed heavily, the target of much tax reform, and generally live in high cost of living areas. Then, there are the government subsidies, kickbacks, and write-offs that the $250k level cannot easily attain. These cost savings that lower income classes can receive effectively make living even more expensive. The government proposes that people at this level don’t need as much help paying for college and saving.

As lower and middle income classes have seen social support and welfare programs devastated by government bureaucracy and cutbacks, the $250k group has actually become more vulnerable – in a sort of middle-ground that gets the least support, protection, and understanding. They’re economically unprotected, and this leads to a fear of losing this income level.

Finding frugality and a healthy budget, despite vast wealth

When I first started writing this article, I wanted to make it clear that this income tax bracket is very rich. Honestly, they have an incredible privilege of choice that is granted to very few. But with the collapse of social welfare, support, and market troubles, this bracket is in an economic no-mans-land – you either go up or get out. A family with a combined income around $250,000 a year may not feel rich. When the international economic world is studied, they are the richest of the rich. The average salary here in the States is still around $50,000. But in America, there is a well-warranted fear about the future status for those earning this much.

This is why frugality spans vast demographics. Most everyone can find reasons to save for tomorrow. When you are trying to earn and invest, but feel vulnerable to economic shifts, finding a budget and healthy spending habits can save you. Somewhere along the way we were duped into thinking that everyone needs more stuff, and that success is measured by how much we’ve amassed before our inevitable demise. We can’t buy ourselves out of death (yet), but we can provide help, support, and hope to those truly in need.

Have you ever wondered how much you need to make/amass to stop working, consider yourself rich, and/or feel financially secure?

Further reading: Too Poor To Protest: How Income Inequality…

My Low-Income Lifestyle

Let’s start with my monthly salary