I just want to jump in here really quick. So, while itâs true that this may be significantly higher than the state minimum wage, itâs also worth remembering that if you have a bachelorâs degree, youâre carrying student loan debt (which has a tenuous relationship with cost of living in a given area), but the add also doesnât state exactly what those benefits mean. For example, my job has full medical, health, dental, and vision benefits. But itâs 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 wouldnât work because Iâm on long term medication).
So letâs chew the math a bit. Iâll 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 thatâs $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 youâre at $2,080 a month (actually, I knew itâd be about that from the get go because Iâm in car sales, and we have to do this math quite often for credit applications). So, two grand a month doesnât sound too bad. Now, letâs start the deductions.
First, taxes. So, for my own estimates when Iâm 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 (letâs just say I got to see three police raids last week, and thereâs 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. Iâm going to assume you not working a job like mine where you must be âplugged inâ every waking moment of the day (sales sucks sometimes), so letâs say you get away with a MetroPCS style $80/mo plan. Weâre 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. Letâs assume that our hypothetical 20-something is the same. Weâre down to $1,000.
Okay, next up. We have to get to work. Now, weâre 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. Letâs 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 youâre unlucky enough to be a below 25 year old male). Also, we need to think about maintenance. The average number Iâve 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, weâre down to 780.
Alright. Next up, weâre going to take your health insurance out. Now, youâre probably on a cafeteria plan like I am. Letâs assume your plan isnât as expensive as mine, so it tops out at around $200 a month. That leaves us with $580. Iâm going to assume that 401k, vision, dental, and life insurance are all âluxuries.â
Iâm 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 youâre spending about $182 on food, leaving us with $398 remaining.
So yes, itâs 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, whatâs most concerning for me is that youâre 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, youâre not going to get that rate because youâre probably a first time buyer. If I can even get you financed itâs going to be a 14% (or higher) interest rate because youâve never bought a car before. People arenât going to spend money on luxury goods while they have such a tight budget. Theyâre going to be more focused on trying to build up enough of a reserve so that when something goes wrong they arenât completely screwed.
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