A Minimum Wage Scenario
In the U.S., the federal minimum wage is currently $7.25 an hour, although some states have different minimum wages. So Over Debt got to thinking about a client of hers who was excited to be making $7.50 an hour, and wondered how people survive on minimum wage. (Go check out her post, both it and the comments are interesting.)
My response was that it’s doable if you don’t live “normally” — meaning you don’t have a car payment, a student loan, a fancy cell phone, credit card debt, etc. — and if you live in a low cost of living area or have roommates.
Figuring out take home pay
If we estimate $7.25 an hour at 40 hours a week, for 50 weeks a year (assuming there are some days you’re not scheduled or can’t work, since you don’t get paid for the days you don’t work when you’re making minimum wage), that’s $14,500 a year gross. According to this take home pay calculator, that brings the total down to $13,390.75 per year after social security if you’re filing as married with one dependent.
That’d give an average take home pay of $1115.90 per month — which is a little misleading, since the months would not be exactly even but let’s go with that number for this purpose.
Budgeting for a minimum wage scenario
If our family of 3 had to live on that amount, here’s what our monthly budget would look like for our current living situation:
Mortgage $225 (because we’re lucky and could pay only our ridiculously low minimum payments on our significantly paid-down mortgage if we absolutely had to)
Self-escrow $162.55 (for annual taxes and insurance)
Groceries $170 (we would not be eating anything expensive or particularly tasty)
Car insurance $120 (guessing here on what the reduced rate would be)
Car license fees $28
Doctor visits $12.50
Dental visits $31.25
Gifts, clothing, or a couple of very cheap meals out, $20
To do this, we’d have to cut out:
My medication, since I don’t actually need it to live — “just” to concentrate!
Our expensive cell phones
Buying anything we wanted to eat in grocery stores
Almost all eating out
My son having a driver’s license (because it would make our insurance rates completely unaffordable)
Driving my son’s truck
Driving my car most places (my husband’s gets the best gas mileage)
College tuition & books (my son would have to switch to community college and get a grant for his first two years, borrow his books from the library or a friend, and work on getting both a job & additional grants for the next two years)
Half of our dental checkups (and we’d be in trouble if we actually needed work)
Expensive procedures for our pets or us if we got sick, unless we could find some way to get them covered
Of course, if this scenario turned into a long term thing, we’d actually have to sell the cars that would bring the most money — which would live us with just my two seater. We’d probably also start renting out a room in our house, because that would help immensely.
What sad (good?) is, there are actually still a lot of luxuries on our list: DSL, Netflix, insuring multiple cars, pets, at least one of us getting a haircut monthly, etc.