Beating Broke

Personal Finance from the Broke Perspective

Is the Living Wage Realistic?

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I recently found an interesting calculator (Via Lifehacker, via MIT), called the Living Wage Calculator.  The smart folks over at MIT put it together to”provide a minimum estimate of the cost of living for low wage families.” Normally, when I see one of these calculators, I try it once, scoff lightly, then move on to something far more useful with my day.  This calculator is a bit different from some other ones I’ve seen in that it actually gets pretty localized.  Others tend to use a generalization like “urban” or “suburban” and leave it at that.  The fault there is that the living wage in an urban setting like Los Angeles is going to be very different from a living wage in the urban setting of a city like Fargo.

The MIT living wage calculator gets localized down to the county you live in, and then goes a bit further and can go right down to the city that you live in in some cases.  I gave it a run based on my county, and then based on my city.  Not surprisingly, I got the same number in both cases.  The city I live in is both the county seat, and the largest city in the county.  I suppose it’s possible that the numbers could vary a bit at the two levels, but I don’t think it would be too much in any case.

A Living Wage: Example locations.

Living WageTo compare how the results fare based on your actual location, I ran it for a few different locales.  First, using the example above, for Los Angeles city.  In all cases, I used the 2 adult, 3 children number.  For Los Angeles, the calculator returned an hourly wage of $27.97 which translates to just a hair under $58,200.  (using $/hr * 2080)  For Fargo, the calculator returned an hourly wage of $20.56 which translates to about $42,800 a year.  To be honest, I was a little surprised by the small difference between the two.  Not that almost $16,000 is a small amount, but considering the difference in the size of the two cities, I really expected the living wage to much more significantly different.

For a second example, I compared Fargo against the city that I live in.  The numbers for Fargo are above.  For my city, the calculator returned an hourly wage of $19.20 which translates to about $40,000.  This difference was a bit more expected.  The two cities are only a couple of hours away, and their economic differences are pretty minimal.  I also got curious and looked up what it would spit out for a living wage for New York City (Queens County).  There, it estimates the living wage at $26.12 an hour, or about $54,300 a year.

I found it somewhat interesting to dig into how they were calculating the living wage.  They’ve estimated some of the expenses for an average family of a certain number of adults and possible children.  Based on our own expenses, I think it’s safe to say that some of them are a little low.  They’ve also assumed that any 2 adult family with children is a one-income family with no childcare expenses.  In fact, I’m not so sure that they aren’t saying that a 2 adult household with no children would be a one-income family.

Given all of that, it was a bit reassuring to know that our family makes more than what they’re assuming is a living wage for our area.  However, that’s with two incomes.    Which also means that we’re spending plenty of extra on child care.  If I use their numbers for expenses for 2 children and childcare, then add it to their 2 adult, 2 children number the resulting number is not that far from what we’re really making.  There’s still a bit left over above that amount, but it’s a bit of a reality check too.  Time to find some ways to increase income!

A Living Wage: Is it Realistic?

All the playing around brings a question to mind.  Is the living wage realistic?  It’s important, I think, to realize that the living wage is meant as an indicator of the amount of income that is necessary to assure that a family can pay for the bare necessities of “living”. Keeping that in mine, it might be realistic.  But, one of the key things I don’t see in the expenses categories is a line for any sort of debt servicing.  Which means they’re assuming that you’re renting a house or apartment, and that you don’t have any other debts.  And we all know how realistic that assumption is.  Or not.  I think, for this to be truly realistic, it’s got to assume that the family will be dual-income.  It’s also got to assume that at least one of the two adults will have some student loan debt.  More likely, both.  And it’s got to assume that there’s going to be some other debts that will need servicing.  Then it might border on a true living wage.  Otherwise, it’s just another way of saying poverty line.

Go and give the calculator a spin.  How close to the number are you?  Are you so far from it that it’s scoff worthy?  Or is it time for you to find a way to increase your income too? Do you think that the living wage is realistic?

Bitcoin: Boom or Bust?

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Unless you’ve been living under a rock, you’ve heard the term Bitcoin being talked about a lot.  A whole lot.  And, depending on who you listen to, it’s being called an impending disaster or the next greatest thing to hit the world of commerce.

What is Bitcoin?

Bitcoin is a private payment system that allows for the transfer of “bitcoins” between people through a private system of digital wallets and transactions.  It’s probably simpler to just call it a digital currency.

Currency?  Yep.  Think of it like the mighty Dollar (I’ll remove my tongue from my cheek later.)  The Dollar is the currency of the USA.  We use it every day, either by earning it in exchange for work, or by spending it in exchange for goods and services.  You can do all the same things with the Bitcoin currency.  Of course, there’s one huge difference.

What gives Bitcoin it’s Value?

With the US Dollar, the value is backed by the US government.  In essence, you and I guarantee the value of the Dollar.  It’s a bit more complicated than that, of course.  We live in a world economy, so there are other countries involved, and other country’s economies that help determine the value of the Dollar.

Bitcoin Boom or BustWhere does Bitcoin get it’s value then?  Scarcity.  It also has some inherent properties that many find alluring.  It’s not tied to a country, so it’s relatively unaffected, in theory, by any one country’s economic problems.  It’s not really regulated in any way, so there aren’t any pesky rules about how much you can transfer, or any specific reporting requirements if you transfer over a certain amount.

Of course, many of those properties also make the burgeoning currency attractive to a seedier population.  If you can make transactions that aren’t traceable by traditional methods, it’s far easier to perform certain transactions (think drugs, prostitution, illegal arms) without having law enforcement breathing down your neck.  Without any real reporting requirements, it could be a pretty handy tool for money laundering.

Bitcoin Boom?

The recent popularity of the digital currency has caused quite a few articles lauding it’s future and how it could be the currency of the future.  It’s not hard to see the appeal.  The value fluctuates enough to make some mild speculation profitable if you hit the bumps right.  The currency, should it continue to be used, with it’s scarcity, could continue to rise in value.  People are even making dedicated computers set aside to “mine” bitcoins and are alluding it to it being similar to a new gold rush.  It’s entirely possible that Bitcoin will arise as a stable currency that’s accepted worldwide as payment for goods and services.

Bitcoin Bust?

The fall of Mt. Gox, one of the leading Bitcoin exchanges (like a Bitcoin bank), after a hacking event where Mt. Gox lost a reported $400 Million worth of Bitcoins along with a couple of smaller exchanges losing 5 and 6 figure amounts to similar events has caused a bit of a destabilization of the currency.  The value dropped to nearly a third of what it was before those events, and caused a panic.  The lack of regulation, and security concerns could be the downfall of the fledgling currency.  At least one country as banned the currency, and several are looking at ways to regulate it’s use.  Should more bannings and further regulatory actions take place, many of the reasons that people are flocking to the currency now will be reduced, or removed entirely.

Bitcoin or Bitcon?

My fingers have been leaving the i out of Bitcoin the whole time I’ve been typing this article, so I can’t help but ask the question.  Bitcoin has no real value.  There isn’t anything giving it value other than fervor and scarcity.  In fact, I have a hard time calling it anything other than a collectable akin to the Beanie Babies rush in the late 90’s.  At least if you jumped on the Beanie Baby rush, you might still have a few plastic pellet filled animals to hold.  If the floor falls out from under Bitcoin, all you’re likely to have to show for it is a bruised pride and some extra software on your computer to remove.

The best case, as I see it, is that some regulation gets involved in the mix, and Bitcoin becomes something similar to Paypal, but using Bitcoins instead of your local currency.  For that to happen, the currency has to stabilize in value, or have a set value.  I don’t think there are any current plans for 1 Bitcoin to have a set value, and so long as the security issues remain and people keep jumping back into it, I don’t see the value stabilizing either.

One thing that could potentially save Bitcoin would be if several world currencies destabilized over a short period of time.  That combined with a large amount of people taking money from those currencies and dumping it into a more secure Bitcoin could act as a float to drastically improve the perceived adoption of the currency worldwide.  Of course, the problem there is that if several world currencies destabilize, we might have bigger issues on our hands.

What do you think of Bitcoin?  Is it a viable alternative to localized currency?  Will it see increasing adoption and become a legitimate currency?  Is it doomed to fail?  Does it have any value for speculative investing?

5 Quick Ways to Start Prepping. You’re Already Doing at Least Two of These.

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In my recent post about the state of the American economy, I told you that you didn’t need to immediately go out and become a prepper.  And you don’t.  But, much like anything else, it helps to be prepared.  You don’t have to have a bunker under your backyard, a whole armory in the bedroom closet, or enough food to feed your whole neighborhood for years.  You can, however, start making sure that you and your family have a good start in preparing for any disaster.  Here’s 5 quick ways to start prepping.  And you’re already doing at least two of these!

Stockpiling

You don’t have to have enough stockpiled to keep your family fed for months or years.  But, if there’s anything that this winter has taught much of the U.S., it’s that it’s very possible that you could find yourself stuck in one place for several days.

What should you stockpile?  Well, food is a good start.  Canned and dry goods mostly.  Beans, rice, canned vegetables (straight from the garden if you DIY), flours, grains, vacuum packed foods, and canned meats all are good staples that can go straight into your pantry and provide backup food sources should you be unable to reach a grocery store.  (also, if grocery stores cease to exist… but let’s not go all extreme just yet.)

Stockpile other goods too.  Toilet paper, pet food, matches, fire starters, medical supplies, and even ammunition if you have that armory in your closet.  Any essential that you use regularly that won’t spoil is fair game for stockpiling in case of emergency.

5 Quick ways to start prepping

Reducing Debt

If the economy crashes, do you know what the worst thing to still have is going to be?  Well, if you haven’t guessed it, that thing is debt.  If you think your hands are tied by debt now, just wait until the economy is in the dumps, you lose your job, and inflation kills your buying power.  Debt is your enemy, no matter the state of the economy.  Start with a detailed spending log where you list what you spend every day.  Knowing what you spend, and when you usually spend it, create a simple budget.  Stick to the budget, and pay down debt by whatever means necessary.  Get rid of it.  Even if the economy booms, you’ll still be better off.

Become More Sustainable

Sustainability isn’t just for hippies.  Being eco-friendly maybe attributed to the earth loving, free love, woodstock-ing people of previous generations, but today, it’s an excellent way to be healthier, and save money on costs.  There are lots of things you can do to become more sustainable.

The easiest way to start making a difference in your bottom line is to replace high energy consuming items with low energy consuming items.  LED or Incandescent light bulbs are a relatively cheap start, and last for years.  High efficiency appliances like on-demand hot water heaters are more expensive, but can save a lot on energy over the long run.  Try air drying your clothes too.  It takes a little longer, but make it a habit, and your energy savings will grow a lot.

Growing your own vegetables, installing rain barrels, and composting are also great ways to decrease your footprint, while saving yourself money.  You can replace that produce at the grocery store with home-grown veggies, use the water in your rain-barrel instead of the electrically pumped water from a well, or the municipal water, and you can save on what you put into the dump while providing nutrient rich compost for your garden.

Learn New DIY Skills

If the economy completely fails, there’s a good chance that your access to many of the services and products that you have access to now will be severely limited, or severely cost prohibitive.  Not only will learning new DIY skills (like growing vegetables, canning food, repairing items, building items (like a deck), and the list goes on) save you money by allowing you to not pay for someone else to do it, but you’ll also gain a barter-able service that you can trade for services you can’t do.

There are plenty of ways to learn new skills too.  You can just try it and see what happens, although, in my experience, doing so increases the chances that the project you’re working on will take longer or fail entirely.  If you look, you can probably find a local class that can teach you some of the skills.  Videos on YouTube and instructions on the internet (easily found through a search) are also great ways to learn something new.

Make Your Plans

We all know that we should have a plan so that everyone knows what to do should they wake up in the middle of the night to a house that’s on fire.  We give our children a plan should they get separated from us in a crowded place.  We create budgets to plan how we will spend our money, and pay down our debt.  Having a plan for an economic collapse and the conditions that could arise should it crash doesn’t cost us anything.  A little time, and some thought.  That’s it.  Do you have family that you’d “bug out” to?  Are there people in town that you’d want to help?  Are there people in town that would help you?  How will you get wherever you’re going?  Even if that’s just home?

Having a plan, and executing it if you have to is very likely to be the difference between uninterrupted life, and something far more unpleasant.

How many of these things are you already doing?  Which are you going to try out?

Original image credit:Robert Benner Sr., on Flickr.