Ground rules

For the purpose of this exercise, I’m going to pretend I’m single (sorry, sweetie!) and in good health. For my location, I randomly chose Hartford, CT. Minimum wage in Connecticut is currently $7.65 an hour. Forty hours a week at $7.65 an hour works out to $306 a week, or roughly $1224 a month. So do you think it’s possible to put a roof over your head, feed yourself, buy clothing and find transport for a little over a grand a month? Let’s find out.

Housing

Finding housing is a challenge. I’ll be honest, I pay more in rent per month than what minimum wage pays each month. So I was surprised when I found a studio apartment for $395, which includes heat. When you’re living in New England, heat included with your rent is a huge deal. But that still leaves electric ($50), phone ($30), and water ($20). So with housing out of the way, how much does that leave us for the rest of the month?

$1,224 (Income)
$495 - (Housing)
$729

Food

Figuring out what you should spend on food when money is tight is tough. Right off the bat, eating out is out of the question. But what do you spend on groceries? One the one hand, you can eat beans and rice every night, or you can try and spice up your meals with vegetables and meat. Ground beef and chicken is still cheap, and large bags of frozen vegetables go a long way. I would make a conservative estimate that groceries for absolute bare necessities would run about $30 a week, or about $120 a month.

$729 (Remainder)
$120 - (Food)
$609

Clothing

I’ll be realistic here. Most people earning minimum wage probably don’t go on shopping sprees every month. But that doesn’t stop people from wearing through shoes, pants, shirts, sweaters, and jackets. I’m going to set aside an extremely conservative $25 a month to spend on clothing in a consignment shop.

$609 (Remainder)
$50 - (Clothing)
$559

Transportation

Transportation is tricky. If you live in a large enough metro area, you can probably get by without a car and simply rely on the bus or subway to get around. But if you live in a more rural area (such as our example Hartford, CT), you’re going to need a car. I would hesitate to take on a car payment at this level of income, but the reality is that if you are earning around $14,000 a year, you probably don’t have any savings to purchase a car outright. Most likely, you’ll drive a high mileage car that you’re paying around $100 a month in loan payments. Tack on insurance ($20 a month), and gas ($200 a month), and you’re looking at $320 a month for transportation.

$559(Remainder)
$320 - (Transportation)
$239

Miscellaneous

Now that we have the four core requirements to surviving on your own, what about miscellaneous expenses? Little nickel and dime expenses add up, and they add up quick. It doesn’t take much to spend your $239 remainder every month on non-budgeted expenses. What happens if your car breaks down? Or if you need to see a doctor? Even buying supplies for your home can wipe out your finances. And forget about spending cash on entertainment, the money just isn’t there for that.

Living on minimum wage is living below the line of poverty. While raising the minimum wage would theoretically improve the quality of life for many, it’s a double edged sword. If you raise the minimum amount employers can pay employees, stores and companies will have to raise the prices of their goods and services to compensate. So effectively, an increase in minimum wage would erase workers wages through greater expenses.

Minimum wage doesn’t work, but how do we fix it?

My wife and I are currently in a two bedroom apartment, and we don’t have much expenses in terms of upkeep for our home. While bulk stores are great, we only buy 12 gallon drums of laundry detergent and pallets of toilet paper every other month instead of every month. Sure, the prices are fantastic, considering you’re buying a month or two worth of supplies at once, but we have to take the storage space into account. When you’re in a two bedroom apartment, you don’t have much room for keeping unused toilet paper lying around.

Of course, our situation isn’t one of a normal family. If we had a four bedroom house stocked with pets and children, I could easily see ourselves shopping regularly at a bulk store like Costco. These stores have fantastic deals on meat and produce. And the pet food in large quantities really helps when you have a bunch of hungry kids, or dogs, to feed.

While these stores have great prices, they lack in selection. So, you’re basically limited to three brands of toilet paper as opposed to the ten brands you might find at your chain grocery store. This may not be a big deal for most people, but brand selection can be a deal breaker for some families.

And Costco has an executive membership plan where, for $100.00 a year, you get 2% back for your purchases, with a cap at $500.00. So, if you spend at least $5,000.00 a year at Costco, you’ll get your membership dues back. That’s only two 60″ TVs.

Basically, what it comes down to is your own personal living situation. Large families can easily take advantage of the deals offered at Costco. But for single people or couples with smaller living spaces, it may not make a financial sense. But for me, it’s a no-brainer. It may not make financial sense for us to pay our yearly dues, but when I see those rows of TVs and beer cases stacked as far as the eye can see, I know it’s totally worth it and that my money is well spent.

And yet, even with all this bad news, talking heads are begging for you to remain calm, and to continue funding your 401(K)s and IRAs. But should you? The sharks are circling, and there’s a good chance you might get eaten alive. Is it safe for you to go back and test the waters?

Sell

If you look at it logically, it’s financial suicide to even consider investing the bulk of your savings in stocks right now. The market is volitile, and all signs seem to point to a deepening recession. Unemployment is up, corporate earnings are down, and consumer sentiment is dropping like a rock. Online savings accounts, such as ING Direct and Emigrant Direct offer guaranteed returns of around 3%. While a far cry from the 5-6% people were earning on their savings even a year a go, that 3% is in the bag. If you take that money into a money market fund of mutual fund, there is no telling what your rate of return might be.

Buy

But, on the other hand, right now might be the buying opportunity of a lifetime. Depending on the stocks or funds you’re eyeballing, prices are at levels you might not see ever again. What does this mean? Essentially, you have the potential to make a stupid amount of money if you play your cards right. What you’re seeing in the stock market is panic selling. People are liquidating their 401(K)s in desperation. And when people are desperate, it pays to be greedy.

With those points in mind, what am I doing in this market? I sold all my stocks and equivilents back in January, and everything is all in savings or stable funds. Sure, the interest rates I’m getting are pitiful. But you know what? My money is safe. Which is a lot more than what some people can say in this economy. Essentially, I’m hanging out on the sidelines. With the erratic up and down swings of the current stock market, I’m not going to touch it with a ten foot pole. The potential to make money is there, but the possibility to lose money is as great as ever.

Forever stamps were introduced last year, and are intended to protect consumers from postage rate increases. Granted, a penny a stamp rate hike isn’t going to send most households into a financial meltdown, but the costs add up. A lot of utility companies still aren’t set up to accept online payments, which means each one gets a stamp once a month. Throw in a few birthday cards and a letter to grandma, and you’re looking at almost a dime in extra costs to add to your budget.

A forever stamp is exactly what it claims to be, a stamp that lasts forever. When you buy a forever stamp, you don’t have to worry about those annoying penny stamps you have to add on to your postage each time the USPS announces a rate hike. If anything, I make sure I get them for the convenience, because unless I specifically go to the post office, nobody ever carries penny stamps. So then I have to add two stamps to a letter just because I can’t find a penny stamp anywhere, and then I’m out two stamps when I could have used one forever stamp.

So while I’m not suggesting you go out and buy hundreds of dollars worth of stamps to hedge against out-of-control inflationary costs, forever stamps are something to consider. The idea is simple, and its execution is flawless. One stamp for any first-class letter price. So long, penny stamp. You won’t be missed.

Confused about the candidates and the issues? Visit Vote411.org for a complete breakdown, including information on your local campaigns. But, judging from this post’s image, I think you can figure out who has my vote. Typically, I try not to discuss politics, since I tend to get carried away. But today is just too important to ignore. So get out there and wear your “I voted” sticker with pride.