Posted by Tim Stobbs on March 10, 2008
This post is the first of series this week looking at the working poor. This idea of this series isn’t to lay blame at anyone, but rather provide ideas on what you can do if you are in this situation. It’s an unfortunate fact that many people spend most of their lives in low income and often feel like they can’t get any where. Hopefully we can provide a little direction.
I’ll have to put a note of thanks to JD over at Get Rich Slowly for bringing Nickel and Dimed by Barbara Ehrenreich to my attention. It was actually a fairly enjoyable read and brought back memories of a interesting part of my life (I’m getting ahead of myself, I’ll do a post on this later this week).
The premise of Nickel and Dimed is fairly simple. Can the author working at low paying jobs make enough money in one month in a city to pay for next month’s rent with only $1200 in start up money and a old car? The general idea is to see how the working poor live in America and what they have to put up with.
Of course this is a simulated test and reflects one person’s limited exposure to working low paying jobs in just three US cities. Her overall score card at the end looked like this:
- City #1: Earned $1039 (after tax), spent $517 on food, gas, phone, laundry and utilities. Leaving $522 to pay for her $500 in rent. So she made it just barely when she picked up a second job.
- City#2: Earned about $1200 (after tax) which worked to cover rent. Yet in the local area, it was the off season. So come summer she points out she would have needed to move on to another living arrangement, but might have been able to save enough for an apartment down payment between her two jobs.
- City#3: Earned $1120(after tax) which didn’t cut it. Yet here she didn’t get a second job and made various other mistakes.
Yet despite the successes she writes the conclusion like she failed in all three. Why? Because she felt that she was only one step from being in major trouble if anything went wrong (which is true since she often had no local supports).
So this book is a bit of a mixed bag in the end. I enjoyed the fact she took the time to do this experiment and bring to light the lives of many people who simple goal day to day is to just exist. Working low paying jobs isn’t fun. The work is often hard and people often don’t get what is involved with those jobs. I generally agree with my wife who thinks everyone should have to do at least three months in a service industry type job. Why? So you remember the other person you are talking to when you are upset over something is human. The problem may not be their fault and perhaps they really can’t help you fix it, so don’t take it out on them.
On the other hand, I felt Barbara wrote this book with a negative viewpoint going in, so of course her ‘results’ show what she wants them to. I’m not trying to marginalize people at the bottom of the pay scales, but it is a matter of having more of a goal that what she started out with.
This book actually brought up a story of someone I know personally. The lady in question has been working low end jobs her entire life and the sad fact she will likely stay there. Why? Because in the end she doesn’t want to improve her life. Change requires effort and she doesn’t want to do that. Also in most people’s I think there is a certain inertia that develops after a number of years. People fall into routines and don’t want to make the effort to change so despite being in a bad situation we don’t want to do the work to get out it. We rather suffer with what we know than try for something better and potentially end up suffering more rather than look at the potential upsides to it all.
So this book to me asks the question: what can we do about it? Frankly I don’t like the answer the author provides. She basically blames ‘the system’ and suggests large scale changes which ignore the fact that in the end you can do system changes, but people need to want to improve otherwise nothing happens.
So instead let’s provide a little more practical feedback. First off Barbara Ehrenreich is correct being working poor often means your one step away from a debt that you will likely never pay off on a credit card. So three items are key in the beginning: 1) Being frugal is required. 2) An emergency fund of some kind. 3) Leverage your local supports.
- Being frugal is required. Let’s face it when your middle class it is easy to waste money and not notice it as much. Yet at the bottom of the pay scale every dime counts, so anything you can save on goes a long way. So cut back on everything for one week and find out what you bare minimum spending is (remember to include your weekly rent and utilities). Write down that number. Now examine your spending afterwards and ask: can I get by without this, can I get it cheaper, can I borrow from someone? Try to come up with ways to cut costs.
- Building an Emergency Fund. This step is a little brutal, but it is effective. Remember that bare minimum spending number for a week from step one. Try to live like that for a month. The reason for this is two fold: a) it drives down your spending enough for you to build a mini emergency fund in one month b) provide you with a monthly bare minimum spending number that’s more realistic than weekly trial. Now that monthly bare minimum spending amount is your goal for your emergency fund. That way your emergency fund will cover your basic expenses for one month when things go wrong. You will hate living that way, but in an emergency you know how far you can cut back.
- Leverage your local supports. Now to make step two more bearable I suggest you also do step three at the same time. Leverage your local supports. Get invites to other people’s houses for supper by offering to help out with anything: yard work, babysitting, or cleaning. Give help to others to receive it back. When you need a hand, ASK someone for some help. There is nothing wrong with asking, we all need help once in a while. Also get to know your local free entertainment scene and get to know your local library: be rich in experience even if your wallet is empty.
Obviously this isn’t a extensive list, but rather a start. A means of starting to break to pay cheque to pay cheque cycle. I can’t suggest something that will work for everyone, but rather I’m suggesting a blue print. If you got a better idea, please share.