Living on the poverty line

Every once in a while, a group or charity will call out the government and complain that it is impossible to live on minimum wages or that people at the poverty line can never expect to improve their lives.  Is this really true?  I would argue not.  Let’s take a look at some real numbers.

Say you’re an average British Columbian with a high school diploma.  You don’t want to take out a student loan and go for post-secondary education – whatever the reason.  You get a job at or near the minimum wage.  Generally, to be considered in poverty or low-income you make less than $20,000 per year.  Assuming 40 hours per week and 52 weeks of work a year, suppose you end up making around $18,000 a year after taxes, including all tax rebates and credits (ie. that might not be what you pay cheque says, but it is the amount you receive over when you consider federal benefits and refunds in addition to pay). What does $18,000 a year get you?


Photo Creidt: Original photo by Tom Blackwell via Wikipedia (http://en.wikipedia.org/wiki/File:Old_car,_pump,_Mogollon_NM.jpg)

Divide it up

Well, yearly income is kind of hard to analyze.  Let’s break it into monthly chunks.  $18,000 a year is $1500 a month.  This is what you have to pay all your expenses.  Can you do it?  Let’s make a budget!


Housing: $650

First you need a place to live.  Rents in Vancouver can get catastrophically high.  But you’re not making much money – it would be best to err on the lower end.  You can easily find a shared accommodation for around $650 a month, all-inclusive.  This is what Brian paid back when he had roommates and it’s also the amount that I charged my roommate when I shared an apartment.  SFU, a local university, also advertises this price range to foreign exchange students.  Seems reasonable to me!  This covers your rent and shared hydro, TV and internet.

After housing and bills, you have $850 left per month.


Household: ZERO

You’re out on your own so you need to furnish your digs!  This should cost you a big fat ZERO when you are just starting out.  How so?  Well, Craigslist is a great option.  Just browsing through their free section, I can see free mattresses, beds, desks, side tables, and couches.  Give it a few hours and you can probably find dishes, pots and pans as well.  You can also ask your friends and family for their extras.  When I first moved out, my parents gave me all of their spare kitchen supplies, for example.


Food: $100

Being thrifty, you opt for the $100/month grocery budget.  It’s tough at first, but after a month or two, you will have slowly purchased enough condiments and spices that you can easily make delicious meals at home.  When I first started out with my food budget, I didn’t have a full kitchen.  I didn’t have mayonnaise or relish.  My spice cabinet had oregano and dill but no parsley.  But each month, I had a bit of money left over and used it to stock my kitchen.  With patience, you will have a kitchen as well stocked as you could possibly need.


Transportation: $81

You need a way to get to your job!  If you were smart (and lucky), you found a place to live that’s also close to work.  I’ve done this before.  Until recently, I did not have to take any sort of transit to get to work.  When I worked in retail, all of the stores I worked at were within a ten minute walk of my apartment.  My first job out of university was a fifteen minute walk away.  But suppose that you did need a bus pass.  A one-zone pass costs you $81 in Vancouver and can be used an unlimited number of times during a given month.  (I’m going to assume that you were not silly enough to live in one city and work in a different one – you can’t afford it!)


Communication: $69

Because I like round numbers (have you been keeping track of the count?) and because people generally need to stay in contact with each other, I will guess that you’ll need a cell phone of some sort.  A free phone with a standard plan, perhaps even including data or texting will be around $50 plus taxes.  Say $69  😉  You can probably keep it cheaper if you opt for a “dumb” phone but hey, let’s be generous.


Clothing, Shoes, Grooming: $50

Hopefully you are taking care of the clothes you have by stitching up small tears and washing clothing items properly, but eventually things will need to be replaced.  Budgeting $50/month for clothes, shoes and grooming lets you buy a shirt or a pair of pants, get a hair cut, or a cheaper pair of shoes.  If you shopped at the thrift store, you could get several shirts or pants. And if you needed to save up for a new jacket, you could spend less of your $50/month allocation and save the remainder for a larger future purchase.


Emergency: $50

You never know what might happen, so it’s good to be prepared.  Let’s allocate $50/month to an emergency fund sequestered away in an interest bearing savings account.  This doesn’t seem like much, but $50 can cover a surprise bill or collection.  Over time, $50 a month will add up to a healthy emergency fund.


Flex Savings: $50

Life’s not all work.  You want to be able to buy the occasional gift or take a small trip.  Sometimes, you need savings for things like dentist appointments or insurance.  Allocate $50 a month to a savings account that is intended to be spent on irregular, but recurring items, like medical appointments, travel and gifts.  How does this break down?  Well, $50 a month equals $600 a year.  You could spend $150 for a visit to the dentist, $300 for birthday and Christmas gifts, and put in $150 for your share of a road trip and shared hotel room with friends.  Do not use it for simply for date nights or beer money!  Incidentially, if you are looking for a good bank to work with, go with USAA.  They have great customer service and above market interest rates.

Laundry and other sundries: $50

Some things you just can’t avoid.  You need to do laundry, pay for dish washing soap, and buy all the good stuff that keeps a household clean and running.  Budget $50 a month for this.  That’s enough to get coins for the laundry machine and lots of cleaning supplies and knick knacks.  Dish soap, baking soda, shampoo… all of these things can be purchased for $2 each or less if you wait until they are on sale.  If you were keen, you would also stock up on free samples.


Spending: $100

Finally, you need to allocate spending money each month that you can spend on whatever the hell you want.  I firmly believe that a budget without a no-strings-attached spending allocation is doomed to fail.  Give yourself $100 a month to buy coffees, snacks, to go to a movie, dinner… whatever you want.  Just take the money out in cash, maybe twice a month, and when you run out… that’s it!

After all that, you have $300 left per month from our original $1500.  There are lots of options for this extra money.  I would put that into a general purpose savings account until you figured out how best to spend it for you.  A great idea would be to start a retirement savings account and fund it with $50 a month or so.  Or maybe you want to save up to buy new furniture or perhaps there is a larger trip that you want to go on. Perhaps you just think that $100 is too little per month to spend on food – part of this leftover money could be used to bump that up or to get a jump-start on stocking your kitchen.  You could get a cat.  The point is, we covered all of our needs and we STILL have money left over to work with.

What happens after one year?  Well, our intrepid average Joe has $600 in his emergency fund.  His kitchen started empty but has slowly been stocked.  His freezer is full of meats he grabbed on sale and his spice cabinet is full of options.  He has a bunch of free furniture and second-hand dishes.  But at the same time, he’s managed to buy a few new items of clothing and come up with money to buy birthday gifts throughout the year.  He went to the dentist and paid in cash.  Most importantly, he’s also worked at his job for a whole year and is due a raise and possibly even benefits.

Now, you might argue that raises are not guaranteed – and it’s true, they are not.  However, from my experience, every shitty retail job that I’ve worked at has given me a raise after a year. And if it were the case that you did not get a raise after one year – leverage the experience that you’ve gained to find a higher paying job elsewhere!  Many of my co-workers in retail moved into lead or supervisory positions after just one year, earning $10-12 an hour.  For me, way back when, I started in retail at $8.75, got a small 3 month probationary increase, and was up at $9.50 per hour after the first year.  Time to make a new budget!

I think that it is perfectly realistic to be making minimum wage and not only surviving, but also saving, while living in a city like Vancouver.  Clearly, if you lived in a cheaper locale, you housing costs would drop quite a bit!  In fact, the budget that I outlined above is basically my budget, give or take some small details – the major difference is that I divert all the additional money that I make into savings.  The amount I spend on my needs is just about the same.  The point is, so many of these people who complain about wages as a number fail to look deeper and break down the actual costs.  Once you do, it’s clear that not only is a minimum wage existence do-able, it still allows you to save, spend, and live life quite reasonably.

Posted in: Money, Philosophy

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