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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

Personal Finance Gurus Fail With First Generation Savers

By Frugaling 3 Comments

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Does anybody know how to study?

The struggles of a first generation college student

Join me on a small aside — I promise it relates. An organization called the College Board is responsible for creating the Scholastic Reasoning Test (SAT). This exam is one of two major college entrance tests (the other is the ACT). Score high enough on the SAT, and you could attend almost any university. Likewise, entrance scores can often influence the level of aid given to entering freshmen students.

One variable can influence your SAT score, admission chances, aid opportunities, and much more; it’s called, first generation status. These college students are the first person in direct, immediate family to pursue a secondary education. Essentially, parents of first generation college students must not have attended college themselves. Born and raised in a family without ties to college can directly affect your success in higher levels of academia.

In nearly every category, with decades of data, they’ve found clear differences between first generation and non-first generation college students. College Board researchers have found that first generation college student are less likely to take preparatory courses for the standardized exam, take fewer advanced placement courses (AP) prior to college, and are less likely to take accelerated math courses. These are just a few of the hurdles for these disadvantaged students.

Family role models for academic success can be scarce. Study habits may not have been learned. Monetary support may be nonexistent. First generation students may struggle to connect with peers on campus. All of these factors raise the risk for dissatisfaction in school, higher dropout rates, and mental health concerns. Frankly, it pays to have family ties to education.

Similar status as a first generation saver

Maybe you’re wondering, “What does all this college student talk have to do with personal finance and money, Sam?”

I’m glad you asked.

Similar to college, first generation savers face serious tests — analogous problems exist. Lessons are passed down from generation to generation. Inheritances can be shared and kept within families. Strong principles and techniques for smartly minimizing individual tax responsibilities are taught. (Heck, how do you think Romney only paid about 14.1%?). First generation savers frequently have friends in comparable financial predicaments.

Starting, customizing, and following a monthly budget are learned. It helps if your parents teach you. Additionally, when you can see how they save and manage their money in action, a good cycle can be learned. The first generation saver doesn’t have the opportunity to learn from parents. As the first savers in a family, they’re bucking a pattern of money mismanagement — the waters can be murky, challenging, and lonely.

Jim Cramer Tulane University Photo
Photo: Jim Cramer at Tulane University (Credit: Tulane Public Relations)

Is willpower the key ingredient to saving?

Personal finance gurus stress individual power, will, and grit. They propagate unscientific expertise that suggests they have the tools to balance your budget, reduce debt, create emergency funds, and retire with a sizable nest egg. For the most part, their help and advice can really help. Unfortunately, their one-size-fits-all advice isn’t often tailored for first generation savers.

Willpower-based economic education is far too common. It’s the ill-conceived bumper sticker of American personal finance policy: one must have the will and energy to save — that’s all it takes. Otherwise, you’re a lazy failure because you cannot commit to these steps.

I’m afraid that does an injustice to more multicultural groups who don’t necessarily have the same role models and social support for financial success. Frankly, most personal finance advice is distilled and created for a certain population; one that has the means to believe in free will and individual power.

We need more diversity among financial gurus — socioeconomic statuses, races, genders, persons with disabilities, and more. Voices need to come to the table and share their individual experiences. While some advice and feedback may not fit, there’s hope in knowing that more people are out there sharing openly and acknowledging the team effort that’s necessary to come back from tens of thousands in debt.

Filed Under: Save Money Tagged With: Act, college, debt, education, Finances, first generation, Gurus, loans, Personal Finance, Romney, SAT, saver, Student Loans, taxes, university, Wealthy, Willpower

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