Puh-leeze. Not going to let you skate by on semantics. Required. And since you haven’t saved for your retirement for 40 years, much less 40 days, I’m pretty sure I’m correct on this one. It’s an experiential thing, Max.
“Just 31 percent of millennials are contributing to a retirement account, a new survey from Earnest, Amino and Ipsos finds.” ~CNBC, 2017
I would be either among the last of the millenials, or the first of Gen Z. My point though, ask a random person under 40 if they are saving for retirement, I expect the answer to be no.
~Max
I will say my niece and her husband, who are both 30, are nearly debt-free (after paying out over $100K in student loan debt her husband brought to the marriage). They own their home (mostly - still over-paying on the mortgage), and have retirement savings. And two kids. She’s been using YNAB (You Need A Budget) since she was in college.
StG
Interesting concept, interesting thread.
@Max_S, are we assuming you already have savings when embarking on this living wage challenge? You’re going to need the first and last month’s rent, plus a deposit on that apartment. That’d come to about $2,000. That hand-crank washer will set you back another $160.
Also, as someone who doesn’t own a car and walks everywhere, before assuming you can walk to and from a worksite 15 miles away, you need to check to ensure the entire route is safely walkable. This is a country built for motorists, not pedestrians.
What about gifts? Would you simply announce to all friends, family, and coworkers that you’re no longer buying gifts?
Sure, most people don’t start saving until it’s too late. They’re idiots.
Not saving for retirement when you’re 25 is giving the finger to Old Max, who won’t be able to walk 15 miles to work. And you’ll BE working, no matter how infirm you are, because you won’t have a choice: your bare bones lifestyle won’t allow you to cut back on expenses. Plus if you start now, you can stash less money per month than you’d have to do if you wait.
Yes, but will you be able to live there?
I’m sure most 25 year-olds don’t save for retirement. I’m sure most 25 year olds don’t save at all. It wouldn’t surprise me if half of all Americans had no savings at all. But that has nothing to do with what a living wage should include - leaving saving out of the calculation makes no more sense than leaving out dental expenses because lots of people go years without seeing a dentist.
BTW although most 25 year olds may not save for retirement, some certainly do - in fact almost every 30ish person I know has been putting away something for retirement at least since they were 25. Mainly because their parents said " Sign up for that deferred compensation plan - even if you can only put in $10 a paycheck for now"
You have a good point there. I’m convinced.
If I can’t scrounge ~$3K upfront, I would need a personal loan. I don’t know the prevailing rates (wild guess of around 15% APR since I don’t have much of a credit history) or term length. Assuming $3k principal over 5 years with 15% APR, I would budget ~$75/mo or $900/yr.
Most people have debt, college debt if nothing else. So I think this is a fair addition. We’ll call it debt payments/savings.
Baked goods are both cheap and make for good gifts. YMMV.
~Max
You can start building good credit before you move out of the parents’ home. In fact, it’s easier to do before you’re on you’re own rather than after.
Step 1: get a store credit card of some sort. Preferably, a store you make purchases from every month.
Step 2: put a few items on the card every month. This doesn’t have to be a lot and to start you’re better off keeping it small.
Step 3: pay off the entire balance every month (that’s another reason to keep it small) so you don’t pay any interest.
Step 4: do this for a year or two.
As an example: I work at a big box store (no, not Walmart, a different one). Almost anyone can get one of their cards. Put some groceries on it, maybe $20, maybe $50. Or maybe purchase some gas for your vehicle. Whatever. Pay it off completely at the end of the month.
This establishes that you can handle money responsibly. Of course, it only works if you keep up with payments. But it does work.
Starting to rent with a good credit history will save you money. It makes landlords more willing to rent to you in the first place. It might be the different for needing to put down a deposit when you open a utility account or not having to put down a deposit.
I recently read of an interesting thought experiment that might be helpful here in terms of figuring out the absolute minimum you’d be willing to live on.
Imagine that, through some unlikely set of circumstances, you have been summoned to the home of an eccentric billionaire, along with four other people whose financial position is in all relevant respects identical to your own.
You are all asked to write down a dollar amount on a piece of paper. The person who writes down the LOWEST amount will receive that amount, after taxes and adjusted for inflation, every year for the rest of their life. The catch is that you have to live ENTIRELY on this money; if you are ever caught accepting any other income from any source whatsoever, the deal is off. So what’s the lowest amount you feel you would be willing to accept those conditions for?
I would refuse, such an arrangement would mean I can never support a family. Which is a thing I would like to do at some point. Also, I would have major compunctions about not earning a living.
~Max
That’s the magic of the hypothetical! You can just assume that the other four people also want to have families at some point and will pick numbers high enough to support that goal. And of course, if you get tired of living on that income, you can always just break the deal and go get a real job.
The moral issue I can’t help you with…
Yeah, I think if I spent my entire adult life not working for a living I would face an existential crisis and sink into a terrible depression.
(also I haven’t run the numbers for family life and don’t know how big of a family future-me might want.)
~Max
If faced with that offer, I would use the time in which I am getting a work-free income to gain skills or possibly create a digital property which I can start monetizing with the flip of a switch once I’m ready. No need to not work ‘all your life’.
If it is established that nobody wants to take advantage of the offer for life as envisioned, and we’re all thinking just a couple years or less, I’d probably go with something around $23k. That’s a bit more than the living wage estimate in this topic because if I’m not going to work every day that means more time at home, which means slightly more $$$ in expenses.
If some guy/gal wants to go without air conditioning, so be it. It is possible to live that way, and undercut me by a grand or so.
~Max
A quick note from Wikipedia on a definition of a living wage, as opposed to Max’s investigation which seems closer to a subsistence wage:
living wage is defined as the minimum income necessary for a worker to meet their basic needs This is not the same as a subsistence wage, which refers to a biological minimum. Needs are defined to include food, housing, and other essential needs such as clothing. The goal of a living wage is to allow a worker to afford a basic but decent standard of living through employment without government subsidies.
My numbers are way over subsistence, IMO.
As noted above air conditioning is not necessary for subsistence (even in Florida). Neither is decent housing, as opposed to the much cheaper tent.
ETA: I believe the Federal poverty level for an individual is around $12k 13k but I haven’t looked into what all goes into that.
~Max
Not sure what you’re trying for here; the lowest wage you’d consider taking? Surely you have a right to a decent standard of living.
Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.
— Adam Smith, Wealth of Nations , I .viii.36[15]
No, I consider the $21,060 to be a decent standard of living. (ETA: For me, where I live, not any person in any situation.) That’s post-tax, mind you. Pre-tax my most recent living wage estimate (as of post #29) is $12.20 per hour, which makes for $25,376 per annum.
It would be slightly more - $900/yr post tax - if I didn’t think I could afford the upfront costs of moving to a new apartment.
~Max
I thought of that angle, too, but it will be tricky. You’ll have to gain those skills in some way that involves paying little or no tuition. (I decided student loans count as outside income)
OTOH, if you think you could write the Great American Novel if you just had a few years to work on it, then yeah, go for the lowball bid.
No can do - I’m an artist, I create, and I enjoy the occasional compensation for that creation. Taking that deal means denying myself one of the things I enjoy most.