Archive for July, 2014


A Living Wage

I recently came across this page from MIT that details a living wage for different areas of the country.  My wife and I decided to see if we could actually live on the reported living wage for our area, Hampton VA.  According to MIT, the living wage for a family of 5 (2 adults, 3 kids) is $50,677.  Anything below that is technically below the poverty level.

The breakdown is as follows:

Monthly Expenses 2 Adults, 3 Children
Food $904
Child Care $0
Medical $449
Housing $1,277
Transportation $777
Other $236
Required Monthly Income After Taxes $3,643
Required annual income after taxes $43,716
Annual taxes $6,961
Required annual income before taxes $50,677

We already don’t pay anything for child care, as my wife is not employed outside the home.  I think that will most likely be the only category in which we are on budget.  My company has a medical plan, and our responsibility is $746.80 a month.  While that blows the medical out of the water (not counting prescriptions, copays, etc), I think we can actually make up some ground in the food category.  That comes out to about $225 a week for groceries, which should be doable.  We have been eating out quite often, and that pretty much ruins our attempts at budgeting.  From now on, eating out will be a thing of the past.  A living wage doesn’t mean restaurants, or even fast food.  Honestly, for us it won’t even mean $2.50 for a loaf of bread.  It will mean homemade bread, at under $0.30 a loaf.

Our mortgage comes out to about $900 a month, and then we pay another $200 a month in property taxes.  Insurance is another $70.90, so our housing runs $1171.  That leaves about $100 a month for repairs and maintenance.  Very tight, but we’re still there.

Transportation comes out to $108.75 for our car payment (one car is owned outright) and then insurance runs about $142.50 a month for two cars.  Gas for the Suburban is around $200 a month, and for the Chrysler it is maybe $50 a month.  So that makes a grand total of $501.25.  I will track fuel expenses more closely while running this experiment to see how realistic this is.  That leaves $275 a month for repairs and maintenance.  I must say, we will use every dime of this.  The Suburban just had its transmission rebuilt for $1900, and the Chrysler is starting to act up as well. 

So one thing I am confused about with this chart is that it doesn’t include utilities.  We have gas, electric, water, cell phone and internet.  We don’t have cable TV.  Gas, water & electric easily run $400 a month, but our home is very inefficient.  We’ll start watching those categories closely, and attempting to reduce these bills.  Normally I would say cell phone and internet are not necessities, however I need them for my job (I work from home), so they are necessities for us.  However, some of it is reimbursed by my company, and that which isn’t is at least tax-deductible as a business expense. (I am not a tax advisor, this is not tax advice.)

I have done a preliminary run-down on the numbers at the beginning of this project.  I hope to get us down as close to the living wage as possible.  Extra income will first go to pay off our remaining debts, and thereafter it will go to our savings.

So turns out that our starting point is $216 over budget, just as an initial pass through.  I will go through and categorize our other expenses (homeschool curriculum, pet care, clothing, etc) and fit that into this chart as time goes on.  I will also take a closer look at our food spending and see where it falls.  For now, I have used the MIT numbers when I did not have my own numbers.  I’m $216 over budget, not counting the repairs/maintenance to the cars and the house. 

Monthly Expenses 2 Adults, 3 Children Actual Difference
Food $904 $904 $0
Child Care $0 $0 $0
Medical $449 $747 $298
Housing $1,277 $1,171 ($206)
Transportation $777 $501 ($276)
Other $236 $236 $0
Utilities   $400 $400
Required monthly income after taxes $3,643 $3,959 $216
Required annual income after taxes $43,716 $47,508 $3,792
Annual taxes $6,961    
Required annual income before taxes $50,677    

We hope to use this experiment as a way not only to be a wise steward of the resources we have, but also to gain insight into the veracity of these living wage numbers that get thrown around in the media and elsewhere.