I just want to jump in here really quick. So, while it’s true that this may be significantly higher than the state minimum wage, it’s also worth remembering that if you have a bachelor’s degree, you’re carrying student loan debt (which has a tenuous relationship with cost of living in a given area), but the add also doesn’t state exactly what those benefits mean. For example, my job has full medical, health, dental, and vision benefits. But it’s a cafeteria plan, which means that I pay for those benefits as a deduction out of my check (a $300 deduction just for my medical, and no, an HSA plan wouldn’t work because I’m on long term medication).
So let’s chew the math a bit. I’ll use my own state of Virginia as an example. We have an $8 minimum wage (if I remember correctly), so the comparison should stand up. So that’s $12 * 40 hours a week comes out to $480 a week. 52 weeks in a year gives you a yearly salary of $24,960. Divide that by twelve to get the monthly pre-tax and you’re at $2,080 a month (actually, I knew it’d be about that from the get go because I’m in car sales, and we have to do this math quite often for credit applications). So, two grand a month doesn’t sound too bad. Now, let’s start the deductions.
First, taxes. So, for my own estimates when I’m calculating my commission pay, I assume that about %22 of my gross income disappears into income tax, Medicare, social security, etc. So that leaves us with $1,830.
Now for rent. I live with three other people in a three bedroom apartment, in a very not good area of town (let’s just say I got to see three police raids last week, and there’s an incident that makes the news at least once a week on my street). I pay about $550 a month for rent and utilities. So that brings us down to about $1,280.
Almost forgot. Cell phone bill. I’m going to assume you not working a job like mine where you must be “plugged in” every waking moment of the day (sales sucks sometimes), so let’s say you get away with a MetroPCS style $80/mo plan. We’re now at $1,200.
Okay, student loan time. I got out pretty easy because I went to a state school, so I only pay about $200/mo. On my student loans. Let’s assume that our hypothetical 20-something is the same. We’re down to $1,000.
Okay, next up. We have to get to work. Now, we’re not living in a high density city here (otherwise Cost of Living would be a lot higher) so, more than likely pukc transit near you is either non-existent, or not reliable enough to be worth mentioning (seriously, moving from Boston to here was like walking into the dark ages of public transport). So you need a car. Let’s assume you paid cash for you vehicle, or were gifted it. You still need insurance. Assuming an optimistic number of $90 a month (could realistically be as high as $200 if you’re unlucky enough to be a below 25 year old male). Also, we need to think about maintenance. The average number I’ve seen is that a vehicle over five years old typically costs about $100/mo on average to maintain, and another $30 or so a month in personal property tax. So, we’re down to 780.
Alright. Next up, we’re going to take your health insurance out. Now, you’re probably on a cafeteria plan like I am. Let’s assume your plan isn’t as expensive as mine, so it tops out at around $200 a month. That leaves us with $580. I’m going to assume that 401k, vision, dental, and life insurance are all “luxuries.”
I’m also going to assume that our hypothetical 20-something never eats out, and spends about $2/meal on food. Three meals a day times 365, divided by 12 means you’re spending about $182 on food, leaving us with $398 remaining.
So yes, it’s doable. If you take best case scenario assumptions, and nothing goes wrong. You have an unexpected bill? Your car breaks down and you need to get it fixed? Also, what’s most concerning for me is that you’re really not putting anything back into the market, not on big ticket items. The cheapest new car I can sell is going to run about $200 a month with top tier credit. Oh, and by the way, you’re not going to get that rate because you’re probably a first time buyer. If I can even get you financed it’s going to be a 14% (or higher) interest rate because you’ve never bought a car before. People aren’t going to spend money on luxury goods while they have such a tight budget. They’re going to be more focused on trying to build up enough of a reserve so that when something goes wrong they aren’t completely screwed.
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