Let’s talk about costs for a family of four, two adults, two children, because that’s the most common family makeup in the US.
The first rule of thrifty living is to sweat the big stuff. Forget bargain tooth paste. If you are spending too much on the big ticket items—rent, car, food, etc.—no amount of counting pennies will help. This is great advice, but worthless if market conditions where you live don’t allow you to save on big ticket items.
Take rent. Average rent for a 2BR apartment in the US is $1,029 this year (2011). That means your annual income must be about $41,000 at bare-bones minimum if you are not to spend more than 30% of it on rent. (The numbers are $2000+ and $80,000 here in SF.)
Question: If you have been unemployed for some time, how are you going to find a job that pays above $40,000? In 2011, if you can find any work at all, it is likely to pay you $20,000-$30,000. That means that there will be no place in San Francisco and most other cities you can afford to rent. This is why people commute rather long distances to work in cities; the rent is more affordable. It’s also why there are usually two earners in such families, and why such families rarely save enough for retirement.
Here’s a pretty good target household budget from a noteworthy site [Leave Debt Behind]:
- Housing- 24-30%
- Utilities- 10% (lights, gas, water, trash pick-up and sewer)
- Groceries- 12-20%
- Car Expenses- 15% (includes car payment, fuel and repairs)
- Medical- 5-6%
- Clothing 4-8%
- Debt- 10-12% (personal loans, old debt, credit cards)
- Entertainment- 5%
- Savings- up to 10% (as much as possible, but a little is better than none)
- Charity- 2-10% (this is a personal decision)
And here’s the dollar figures for that budget, with a $41,000 income:
- Housing $820-$1,025 per month
- Utilities $342
- Groceries $410-$683
- Car $512
- Medical $171-$205
- Clothing $137-$273
- Debt $342-$410
- Entertainment $170
- Savings up to $342 (10%)
- Charity ?
Wow! So the first thing we realize is that we can barely afford an average 2 BR apartment. That’s on $41K. On $20K-$30K we can’t afford a broom closet.
Our income is $25,000. What the hell are we going to do? Well, here are some possibilities: Share rent with others on a large apartment, or rent a 1BR; sell your car and use public transit; use neighborhood medical clinics; get clothing from Goodwill; you must get rid of credit card debt (which is a whole ’nother topic); minimize entertainment by going to free things; forget savings. Charity?—you are charity.
If two of you work, and do all of these things, you will get by somehow. But what about education for your kids? What if one of you becomes seriously ill, or injured? What about income when you are old?
What if you can find no work? There are five unemployed for each new job, so there’s only a 20% chance you will find work at all. In October 2011 there are 14-million unemployed persons, many more counting under-employed and the discouraged unemployed. There are 49 million people living in poverty and 20 million people living on half the poverty level income.
Against all this, Tea Party people, conservative Republicans, rich politicians, and even “The 53%” are telling you that your problems are your own fault.
Stunning, isn’t it?