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?

No One is Going to Save You

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I have some bad news for you. If you’re waiting on someone to show up at your door ala Publisher’s Clearinghouse and hand you a big cardboard check that will solve all of your financial problems it’s not going to happen.  No one is going to save you from your financial woes.  No one is going to suddenly decide that you, and you alone, are worth pulling from the depths of your financial hole, pay all your bills and set you up for life.  No one but you.

In truth, I’m writing this post as much for me as I am for you.  I need to hear that message occasionally, just as you do.  It’s nice to daydream about winning the lottery, or some sweepstakes and having some of your problems solved.  It really is.  But, if you, like me, find yourself lingering in those daydreams a little too much, too often, you need to hear those words.

You and you alone can be the savior of your finances.

Savior of your Finances

You (and I) are the best prepared, and the most willing (without fees), to take on the ratted nest of bills and accounts that we call our finances.  You (and I) are the most able to figure out how to sort out where our money is coming from and where it has gone.  You (and I) are the only ones that can drum up the willpower to make the changes necessary to begin telling our money where to go that it will be most helpful to our finances. No one else is going to do it for you.

No one but you.

If you (and I) don’t do it, do you know what happens?  Nothing but the same.  Your paycheck comes in (maybe on time, maybe not), your paycheck goes out.  At the end of the month, maybe we ask “where did it all go?”.  And if we do nothing about it, we’ll never really know.  We’ll just continue the pattern; wondering why we aren’t paid more, and wondering why what we are paid never seems to be enough.

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You can make a difference in your finances though.

Uniquely.  No one but you.

You can budget your money and tell it where it belongs.  You can know where your money is going, and control how it works for you.  If you actively manage your money, it can no longer control you.  Create a budget, track your income and spending, then take back your financial life.

Put your finances in order; be free.  Be debt free.  Be free to spend as you choose.  Be free to earn as you choose.

What are you doing today to break old financial habits and take control of your money?

California Drought; Food Prices On the Rise

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I’m not sure if you caught this or not.  I suppose if you live in California you might have heard quite a bit about it.  If you live far from California, like I do, you maybe haven’t heard much about it at all.  But, apparently, California is in the midst of one of the worst droughts on record.  The California drought is so bad that the governor of California has declared a drought emergency.  During what is traditionally California’s wet season…  Take a look at the U.S. Drought Monitor.

If you live in another state, you might ask yourself why the dryness of California should concern you.  Well, take a look at these numbers compiled from the 2007 Census of Agriculture.  California is the primary provider of a lot of the produce (fresh, frozen, and canned) that you buy.  They produce 99% of the Artichokes,  90% of the Avocados,  83% of Grapes,  79% of Lemons,  76% of Tomatoes, 73% of Lettuce, 65% of Nuts, 59% of Strawberries, and 59% of Spinach.  And that’s just a sampling from that list.  They also grow 100% of the Pomegranates.  With no water to irrigate all those crops, some farmers are resorting to bulldozing (literally) their crops and leaving fields fallow.

California DroughtWhat will happen if 10-50% of the production in California is lost?  All those produce items that they contribute so much to are going to get really expensive.  This article on CNBC is reporting that prices are expected to rise by 1.25-1.75% across the board.  And it’s not even clear if that increase takes into account the drought in California.  Even at an average of 1.5% increase, that’s a pretty significant hit to the wallet.  Imagine if it gets closer to 5%!  What if it gets worse?

The truth is, it’s not just the food cost that might be on the rise.  Power could be affected too.  Low water levels due to the drought could me a pretty significant drop in power generation at hydro-electric dams.  And those power generation shortages could mean power shortages, brownouts, and will most certainly mean an increase in the cost of electricity to users.

While the cost of power might stay somewhat localized, the cost of food is going to be universal across the country.  As the cost of produce increases, more and more people will buy less of it, and switch to eating more affordable food sources.  Except, there might not be any more affordable sources.  If cattle producers can’t water their pastures, there’s less grass for the cows to eat.  And if there’s less grass to eat, they might have to start supplementing with grains.  Which will increase the demand on grains, and raise the price of grain as well.  The price of meat and dairy is likely to rise significantly too.

We’ll see, of course, just how bad it gets as the summer season progresses.  Many of us will be desperately finding ways to stretch what produce we can buy, and create extra room in our budget for extra food costs.  It’s not going to collapse the economy, I don’t think.  At least not yet.  But it is very likely that it’s going to create a very tight summer in many budgets.