What does it cost to just live?

A blogger named John Pennington in San Francisco wrote a good post showing what it takes for average American families just to get by.

Let’s talk about costs for a family of four, two adults, two children, because that’s the most common family makeup in the US.

The first rule of thrifty living is to sweat the big stuff.  Forget bargain tooth paste.  If you are spending too much on the big ticket items—rent, car, food, etc.—no amount of counting pennies will help.  This is great advice, but worthless if market conditions where you live don’t allow you to save on big ticket items.

Take rent.  Average rent for a two-bedroom apartment in the US is $1,029 this year (2011).  That means your annual income must be about $41,000 at bare-bones minimum if you are not to spend more than 30% of it on rent. (The numbers are $2000+ and $80,000 here in San Francisco.)

Question:  If you have been unemployed for some time, how are you going to find a job that pays above $40,000?  In 2011, if you can find any work at all, it is likely to pay you $20,000 to $30,000.  That means that there will be no place in San Francisco and most other cities you can afford to rent.  This is why people commute rather long distances to work in cities; the rent is more affordable.  It’s also why there are usually two earners in such families, and why such families rarely save enough for retirement.

Here’s a pretty good target household budget from a noteworthy site:

Housing – 24 to 30 percent

Utilities – 10 percent (lights, gas, water, trash pick-up and sewer)

Groceries – 12 to 20 percent

Car Expenses – 15 percent (includes car payment, fuel and repairs)

Medical – 5 to 6 percent

Clothing – 4 to 8 percent

Debt – 10 to 12 percent (personal loans, old debt, credit cards)

Entertainment – 5 percent

Savings – up to 10 percent (as much as possible, but a little is better than none)

Charity – 2 -10 percent  (this is a personal decision)

And here’s the dollar figures for that budget, with a $41,000 income:

Housing  $820 to $1,025 per month

Utilities  $342

Groceries  $410 to $683

Car  $512

Medical  $171 to $205

Clothing  $137 to $273

Debt  $342 to $410

Entertainment $170

Savings up to $342 (10 percent)

Charity ?

Wow!  So the first thing we realize is that we can barely afford an average two-bedroom apartment. That’s on $41,000. On $20,000 to $30,000, we can’t afford a broom closet.

Our income is $25,000.  What the hell are we going to do?  Well, here are some possibilities: Share rent with others on a large apartment, or rent a 1BR; sell your car and use public transit; use neighborhood medical clinics; get clothing from Goodwill; you must get rid of credit card debt (which is a whole ’nother topic); minimize entertainment by going to free things;  forget savings.  Charity?—you are charity.

If two of you work, and do all of these things, you will get by somehow.  But what about education for your kids?  What if one of you becomes seriously ill, or injured?  What about income when you are old?

What if you can find no work?  There are five unemployed for each new job, so there’s only a 20 percent chance you will find work at all. In October 2011 there are 14 million unemployed persons, many more counting under-employed and the discouraged unemployed.  There are 49 million people living in poverty and 20 million people living on half the poverty level income.

Click on  What Does It Cost to Just Live? for the original post on Pennington’s Class War in America web log.

Click on Why the middle class isn’t making it for an earlier post of mine on this topic.

John Pennington gives a hypothetical budget for a struggling middle-class American family.  But there are many Americans much worse off.  That’s true by definition.  The word “middle” makes no sense without an “upper” and “lower.”

I have a friend who’s struggling to make a living through a patchwork of part-time and temporary jobs outside the field he was trained for.  He shops at Family Dollar stores because Wal-Mart is more upscale than he can afford.

Last Sunday I bought lunch for a member of my church, an older woman whose sole income is Social Security.  We were part of a group who went to an all-you-can-eat Indian buffet, which was something outside her experience.  Her typical supper is a can of soup.  She said she can’t afford to buy a $2.50 meal at a nearby senior citizen center more than once a week.

And there are people worse off than them.

Tags: Cost of living, Middle class, Middle Class Living Standard