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We own our home. It is a large home about 4900 sq ft footprint, that I built. Along with our land [150 acres of dense forest with riverfrontage], we have spent around $125k on this home. We do not have a mortgage. Our annual property taxes are around $857. So I would replace your rent/mortgage amount with $72/month.
Your groceries are high. I do our weekly grocery shopping. I normally run between $25 and $50 a week.
You said: $250 : utilities+internet/phone Whereas I would lump Netflix in with that and drop it down to $150/month. But that kind of eliminates the 'entertainment' expense. We live in a rural area, we have cycled through the American Legion post, the VFW, the Blue Lodge, Scottish Rite, and our Grange. Each of these offers a couple nights out every month and you socialize with others.
Your 'daily necessities' and 'bigger purchases' are grouped together for us into my weekly shopping errands. Lets say $100/month for those expenses.
For healthcare you said $500 to assume a typical employer-provided meh insurance plan with $3,000 / person annual deductible.
I am a US servicemember-retired. My Dw has had multiple heart attacks, a hysterectomy, and other procedures. I have cancer and I am currently going through radiation treatments. We pay $12 co-pay for each surgery and $9 co-pay for every 3-month drug refill.
I get $1600/month in my military pension, my Dw gets $250/month in her pension from the federal agency she retired from. So we gross around $1850/month, which is not enough to be taxed, yet too much to qualify for food stamps.
Our budget gives us about $500/month savings which we invest. We recently bought an apartment complex that we are remodeling. Because that is the kind of thing us rich people do.
Tricare copays have changed. 20/primary, 30/specialist, there is no surgery copay.
We've gotten distracted and let the thread become something different than the OP asked originally, and I'm sorry to have contributed to that. The question is: is $50k poor? That's to difficult to state unequivocally. It's not a luxurious living anywhere in the country to be sure, but there are too many variables to consider in determining whether or not that income qualifies as poverty.
When I was younger, my spouse and I lived on ~$50k/year with a mortgage that could be replicated there today. Was it an extravagant lifestyle? Well, no, not even in the very affordable community where I lived at the time, but it was comfortable. Now that I'm older, I've accumulated assets and benefits that would make that income go a lot further, however my healthcare costs have skyrocketed, even with much better insurance. I think that's the financial sword of Damocles hanging over most all of us, especially those in the middle class. Without reliable and sufficient health care insurance, a benefit that's becoming rarer and rarer as the gig economy takes root, it's a short hop from being comfortable to disaster.
Last edited by randomparent; 09-12-2018 at 06:38 AM..
Tricare copays have changed. 20/primary, 30/specialist, there is no surgery copay.
Tricare Prime in this region has a regional underwriter called Martins Point.
It seems the co-pays change all the time.
'surgery' was not the right term, sorry.
In 2014 when we discovered my prostate cancer. There was a biopsy, then a bone scan and an MRI, followed by the Davinci surgery. All of these procedures were over a 2 week period of time, and the co-pay for all of it was $32.
Now my radiation treatments are 5 days a week and I have one co-pay per week of $12.
Crazy expensive? Wow so you must not eat out haha. $5 is dirt cheap for a meal. Go to ANY grocery store and a tiny portion of fruit is $4-5. That’s not even a meal, it’s a snack you finish off in two days. That’s eating healthy. Protein bars are $1.50-2 or so. Any meal out is $10-20 per person and that’s not much, nice restaurants are a lot more. As you said it doesn’t really make any difference to many people.
I don’t know what you eat but if I am eating chicken breasts let’s say with vegetables - even if you cook them at home - it’s about $2-2.50 per chicken breast and there’s no chance in hell I’d be full on less than 2 of those plus vegetables and even that’s a meh meal. If you’re a really small person, maybe, but if you’re eating healthy even $20/day is a reasonable cost for food and drinks whether that’s coffee you make at home or an energy drink or whatever. I get my energy drinks at 99 cents and only have maybe 5 a week so doesn’t add much cost. Coffee is similarly cheap if not cheaper because I make it myself.
I’d say my GF could eat no problem on $5/meal but I can’t say we pinch pennies. I can tell you that even bulk meal prep at senior living communities is like $3.25/meal and those people eat NOTHING! I could easily eat 3 of their meals.
Well, I was under the impression we were comparing $5 to what you can make cooking at home. Obviously its very much on the cheap end for dining out. We do that frequently (and probably spend more than we should).
Regardless, you somewhat missed the point. I'm just saying your calorie intake is clearly exceptionally high, even for a man. Two full chicken breasts + sides as a minimum for a meal to even be considered "filling" is extremely unusual for folks who are not hardcore athletes or morbidly obese. I'm not judging or saying you fall into either of those two categories, but I think its important to recognize your situation is very atypical and you may just have exceptionally high calorie needs for whatever reason. Most men and women require significantly less than that. I'm pretty much dead on "average" size for a man, run/lift a few days a week, eat healthy, and spend under $10/day without making any substantive effort to "save" on food. Your calorie intake is high. Your food costs are accordingly much higher than most people's need to be. As long as you can afford it, not a big deal at all. However, the purpose here was to understand and develop a "food budget." I think it is important to keep in mind you are a bit of an outlier relative to the general population and certain expenses you have are not necessarily applicable to most people.
I think that's the financial sword of Damocles hanging over most all of us, especially those in the middle class. Without reliable and sufficient health care insurance, a benefit that's becoming rarer and rarer as the gig economy takes root, it's a short hop from being comfortable to disaster.
Yes, I absolutely agree with you on this.
As I've been saying for a while, we can do something about this, but the reforms look different than what people think. Dan Buettner and his Blue Zones plan is an example of what can lead us out of not only high health care costs, but also in preventing the chronic diseases that are driving those high costs:
I would not consider the couple the OP outlined to be poor. My reasoning is that their needs are met without assistance and they have money left over. That was always considered a middle class lifestyle even if they are on the low end.
They would not have the same choices as those with higher incomes but they would still be able to make some choices. The scenario says they are a middle-aged couple which means there is a possibility they are close to paying off any mortgage they might have taken out years earlier, freeing up a lot of their money. They would likely keep their cars a very long time. Hopefully this fictitious couple used some of their extra money to invest from a young age and have a match from employers.
In a different thread I stated that a $50k/year income makes a household poor. No matter where they live in the US. That caused vocal disagreement so I hope those of you who seriously think about personal finance can assess my statement.
Let us consider a not very healthy middle aged couple with that income (don't even worry about kids) in a low tax state.
After their low taxes, they will be left with $3,500 / month. Let's draw a bare bones budget against it.
$1,000 : Rent/Mortgage (and that is seriously low balling it in places where there are actual jobs).
$400 : groceries (weekly trip at $100)
$250 : utilities+internet/phone
$100: daily necessaties (hygenic supplies, storage supplies etc)
$100: bigger purchases (clothes, furniture, home improvement, assume one $300 shopping trip every 3 months)
$100 - entertainment (movie + cheap dinner twice a month)
$500 : healthcare (assume a typical employer-provided meh insurance plan with $3,000 / person annual deductible)
$150 - auto insurance for 2 cars (cheap places have no transit)
$200 - car loan payment (assume the other car is paid off)
$200 - gas (assume 30mpg economy and both jobs at 15 miles from home)
...so that is $3,000 to simply stay afloat, which leaves us with $500 disposable income / month.
I did not include "luxuries" like dental work, home repairs (e.g. AC dies) or occasional out of town trips. And most importantly, I did not include kid expenses as most people have kids. Once that is taken into account, it should be obvious that those left over $500/month are just not going very far.
In summary, 50k/year enables a household to barely make ends meet even in the cheapest places in the US. That, I think, is the definition of "poor".
Anyone here can find holes in the math above?
I think you are a bit off on your taxes. With no kids they'd likely be left with ~ $3.7k/month and with kids they would likely not pay anything in federal taxes, just FICA.
This seems like a more reasonable budget to me:
$1,000: Rent/Mortgage
$350: Groceries (we average this with a toddler and an infant)
$250: utilities + internet/phones
$100: daily necessities
$100: bigger purchases
$100: entertainment
$500: healthcare, I'll give you this, but we have healthcare for 4 and only pay $300, but let's assume ours is good, which I don't think is accurate.
$100: auto insurance, we pay around $80 and have a 2013 truck and a 2015 SUV.
$200: car loan payment
$200: gas
So that puts you at $2.9k, which saves you another $100 and in taxes you get another $200. That leaves you with $800 left over each month, or about $10k/yr. I wouldn't exactly call that poor, but it's not exactly wealthy.
Before we had kids we spent about $50k/yr and we didn't feel poor. If you back out our daycare payments this year we will end up with other expenses (including mortgage) of about $45k/yr and I wouldn't say we feel poor at all.
Quote:
Originally Posted by candalf
Cool, I see some disagreement here as well.
But can anyone take a stab at the detailed budget I provided and provide a smaller one?
Here's our average through the first 8 months of the year:
Mortgage: $1,075
Utilities: $230
Phone/Cable/Internet: $80
Groceries: $325
Eating Out: $82.50
Car Related (Gas, Insuarance, Oil Changes): $230
Healthcare: $300
Kid related: $70
Entertainment: $275
Other (Vet visits, dog food, spending money for two adults, gym memberships, presents/gifts for others, etc.): $430
Daycare: $1,200
Total/month: $4,297.5
Total without daycare/month: $$3,006.50
Last edited by mizzourah2006; 09-12-2018 at 11:59 AM..
You are right, there are middle-priced cities, such as Denver or Minniapolis, that also have a significant tech scene. And yes, even with the drop in salaries, the standard of living would go up. At first.
However, the kinds of jobs that are available in those middle priced cities are downstream from those in places like San Francisco, Seattle or Boston. By that I mean that the duties will be much more cookie cutter and more rigidly defined. You would be basically using what was developed in the true innovation hubs to meet some standard business goals.
The first problem with that is that it is boring and maybe even soul sucking. But more importantly, these are often dead end jobs in the long run. They will come up with new ways of doing things in places like San Francisco or Seattle and one day your company in Minneapolis will adopt those as more efficient and you will be let go. For that reason, I only think it is smart for a tech person to move if they are at the sunset of their career.
So it all boils down to opportunity. There is way more of it in expensive coastal cities.
I agree that there is always more opportunity in big cities. My knowledge of the tech industry is about 50 yards wide and an inch deep.
If you really are trying to get on with the next Facebook or Amazon, then you're probably correct about Seattle or the Bay Area.
And you could be right about not being able to find the type of work you really want to be doing outside of there.
But the idea that outside of there, there is no meaningful work or career advancement is a lie that people who are gung-ho about being the next market disruptor for Frozen Yogurt delivery or the "Amazon (Facebook, Linkedin, whatever) of (concierge services, car sales, whatever)", basically the "x of y" tell themselves.
There's nothing wrong with any of that, just be honest with yourself about why you're doing what you're doing, and make the sacrifices needed.
I think that for many jobs, it's very difficult to make that leap. I have a close friend that was a mechanical engineer with a very well known, well regarded, old, inovative company, that was relocated from a more affordable Midwest city to San Fran, he took a $15K raise but it was mostly eaten up in rent, and his QOL went down as he went from living in a modest apartment in a great area, to a modest studio in a farther flung location.
I would not consider the couple the OP outlined to be poor. My reasoning is that their needs are met without assistance and they have money left over. That was always considered a middle class lifestyle even if they are on the low end.
They would not have the same choices as those with higher incomes but they would still be able to make some choices. The scenario says they are a middle-aged couple which means there is a possibility they are close to paying off any mortgage they might have taken out years earlier, freeing up a lot of their money. They would likely keep their cars a very long time. Hopefully this fictitious couple used some of their extra money to invest from a young age and have a match from employers.
I am one half of this fictitious couple, and you can add 2 young children to the scenario. You are so right on this! We do have about a year left on 2 3 yr auto loans originally totalling $30k for both, but my prior vehicle was only $11.6k, and I drove it for 17 years. The mortgage payment for our 1700sf home in a nice, safe neighborhood with very good schools is $810, and the balance is now < $50k. My half of this fictitious couple did indeed invest from a very young age ;-) which is one reason why this income level doesn't seem too poor, though we definitely feel squeezed with the various kids activities and medical bills for my other half. I mean, you can't really be poor if your net worth is in the ~ $400k range, right? I use a few grand in RMD's to pay the car payments, while my DH invests more than the equivalent in a 401k and Roth.
I wouldn't choose to live on this amount for a family of 4 under normal circumstances, but we had the means to make it work on one income for a few years while I attended to overwhelming family obligations. (It feels so much more secure when you have a significant backup stash.) I don't even feel very frugal, though I've always been somewhat so, just by nature. We don't keep a budget, just try to minimize expenses/maximize utility. We don't eat out like we used to pre-kids. It's cheaper, but that's not the main reason. It's so much healthier and the kids make eating out a pain in the rear-end. We don't go out for entertainment like we used to pre-kids, for similar reasons. We do a few, free things around town (special events at library, free concerts/festivals) but mostly they just wear us out. Our entertainment budget is mostly for their entertainment, aka, keeping them busy so they don't become too obnoxious from boredom. Right now, that's rec soccer, which is fairly cheap and quite time-consuming with the various practices/games.
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