Wealthy people think you could live on less.

thHere’s a piece of advice from the rich: You ought to be able to live comfortably on $25,000 to $50,000 per year.

This was one of the takeaways from the Country Financial Security Index, a survey of about 3,000 U.S. residents published a few months ago. More than half (55 percent) of the respondents consider themselves “middle-class,” even though some of them made incomes of as much as $200,000 a year.

Depending on where you live, $200k might not be enough to live on, at least comfortably. Which brings us to another result, something called the survey authors call the “comfort gap.” Nearly half of the respondents believe that $50,000 to $100,00 is enough to live comfortably. Yet only 34 percent consider the people who earn such incomes to be “financially well-off.”

Sure, they may have nice stuff. But actual security? Not gonna happen on that salary.

And here’s the part that concerns me: More than half of the respondents who described themselves as “wealthy” believe that an individual could live comfortably on $25,000 to $50,000 a year.

In some places that might be true: $50k in rural Mississippi is a lot different than $50k in New York City or San Francisco. But can you really rent or buy a place to live, pay for transportation, cover daily living expenses and save for retirement on as little as $25,000 a year?

I’m betting not – or at least, not without some serious help from family. Stuff like:

  • Getting help with landing your first job (it’s not what you know…) or having well-connected relatives network on your behalf (Mary Gates did quite a bit for her son Billy at the beginning).
  • Having a relative give you an old car or sell it to you cheaply (I personally have “sold” two cars for a buck each to family members).
  • Inheriting a house when your folks die, or being able to buy it from them on a handshake deal (no mortgage required!) from them when they downsize.

And suppose this individual wants to get married and/or start a family? Or has student or consumer debt? (Remember: Serious debt is not always about shopping. Impossible-to-pay medical bills are the No. 1 cause of bankruptcy in the United States.)

Are they for real?

I think there’s a serious disconnect here. The self-described rich people who truly believe that anyone can succeed on as little as $25,000 a year could be the same folks  who leave disparaging comments on personal finance blogs. Stuff like:

  • “I worked my way through college – I don’t know why today’s kids can’t do that.”
  • “We survived on one income so my wife could stay home with our children – young people nowadays just don’t want to make any sacrifices.”
  • “We always saved for a rainy day. We didn’t rely on credit cards when something went wrong.”

How nice for you. Now: When was that, exactly?

What did you pay back then for food, fuel and housing? How about auto, home and life insurance? Did the doctor let you pay in installments or demand payment at the time of service?

Was it necessary to have two cars because you and your partner lived 40 miles away from your jobs and there was no public transit? Could you and/or a relative fix that car yourselves?

If/when your wife went back to work, did a family member or nice neighbor lady get your kids off to school and watch them until you got home? Or did you have to pay through the nose for before- and after-school care?

Were your children faced with tons of extracurricular and/or sports options that you funded because you feared that otherwise their college portfolios would be lacking? And about college: You were able to work your way through because higher education was relatively affordable, whereas today’s diplomas come with average debt of $29,4000.

Rose-colored glasses

Maybe these rich people view their non-wealthy years as a time of heroic struggle. Perhaps for some those struggles were real. But how many others had a safety net (e.g., help from relatives) that kept them from any serious want?

And now? They have no clue. Do they know the average apartment rent in their town and how that compares to minimum wage?

When they point out “help wanted” signs as proof that there’s work for all, do they know how many are part-time and pay so little it wouldn’t cover the cost of child care?

Are they familiar with public transit, and did they ever have to take one bus to the child care center and another bus in the opposite direction to a job that starts at 8 a.m.? (Hint: In Anchorage, some bus lines run only once an hour.)

Have they forgotten (if they ever knew) what it’s like to be down to $2 until payday and buying generic mac ’n’ cheese instead of the fruits and vegetables they’d love to feed their kids?

To be clear: I am not saying that many of us couldn’t do with a refresher course on needs vs. wants. But it’s pretty shortsighted to assume that what was true 20 years ago – or even five – is still true today.

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  1. Donna, thanks for the reality check. I feel like we should all take a deep breath and stop criticizing each other. That said, we ALL need a refresher course on managing our expectations and controlling our consumption, if not for our financial future, then for the future of the planet.

  2. amanda

    I teach at an “elite” public university, and cover topics like inequality and poverty in some of my classes. It seems like every semester, several students bring up “welfare cadillacs” or discuss ways in which poor people over-spend and make bad buying choices- pop, snacks, and so on. The second year, I came up with a way of addressing this: I ask students to agree to spend no money on anything that they do not absolutely need for one week. No snacks, no drinks with friends, no recreational shopping, no tanning, no food that was not covered by their meal plan. No one has ever made it for an entire week!

    • Donna Freedman

      I bet! That’s a good empathy exercise.
      As you probably know, the new feeling now is that bad choices don’t often cause poverty — it’s poverty that causes bad choices, e.g., the inability to think way ahead because you’re so busy keeping the house of cards from toppling. After struggling all month, it’s hard to think along these lines: “Everything is paid for, just, and I have $10 left. If I put it in the bank I will eventually have an emergency fund.” Some people do. Others think, “Thank God we made it through the month — and here’s $10! I’m going to buy us all pizza for dinner!”
      Not that this is smart behavior. But it is profoundly human.

      • Yes– the book Scarcity by Mullainathan and Shafir summarizes the research on how scarcity affects our behavioral choices.

        I also have been teaching the above mentioned class at my school. The first day I have my (mostly white, mostly middle class) students read John Scalzi’s essay on Being Poor. http://whatever.scalzi.com/2005/09/03/being-poor/ This *is* what some of my husband’s extended family is living. They *do* life with choices they didn’t even realize they were making at age 14. And they’re not even as bad off as some because they’re smart and have some family who isn’t as badly off, though they also have family that’s doing even worse.

        I met one of the authors of Scarcity the other day and told him that his book helped me to stop being so much of a judgmental bitch.

        • Donna Freedman

          I agree on the Scalzi post and send that link out to people I meet who aren’t quite able to understand why “they” just don’t go get a job/move/go back to school/do anything else that those of us with invisible privilege think that everyone knows and everyone should be able to achieve.
          And sometimes, the decision you’re not even aware you’re making is simply being born into an impoverished family. Sigh.
          Thanks for being such dedicated commenters.

      • amanda

        Although there is increasing research on things like “decision exhaustion”- that is, the idea that having to juggle so many decisions about competing uses for inadequate resources- causes bad decisions, this research really hasn’t affected most policy makers, or altered the opinions of those who believe that poverty is caused by either bad decisions or unwillingness to do “enough” work to get out. When I do an exercise in which I give students a hypothetical life with one child and three part-time minimum wage jobs with shifting schedules and ask them to budget for
        an apartment, pay for child care, and buy necessities, they very often focus entirely on the “bad” decision to have a child rather than on other aspects of the exercise.

        • Donna Freedman

          Perhaps their worldview isn’t developed enough to encompass, say, the possibility that someone could be married/in a stable partnership and lose that partner to death or divorce. Or that someone who has a pretty decent job and a child could suddenly be laid off.
          Even if someone has a child who isn’t exactly prepared to care for it, the fact that the child exists means it must be fed and sheltered — and sometimes the jobs just aren’t there.
          Maybe you could try the exercise of making your students entry-level employees in a city with an expensive housing market. They and their partners would be earning $9 an hour but needing to pay $1,000 for rent. For bonus credit — and to forestall the “Well, why don’t they just move, then?” argument — have them research the cost of packing everything up and moving to a new city, assuming they could get jobs. But they’d need to have saved up for utility deposits and a month’s rent in advance plus another as security. See how that works for them.
          Thanks for reading, and for leaving a comment.

  3. Scooze

    OMG the “wealthy people” who think others can live on nothing is my best friend to a tee! She’s a highly specialized doctor who makes probably $300-400k a year, and when I told her several years ago that I had taken a (huge) salary cut down to $53,000 (she said “That’s a lot of money, no?” We live in Chicago.

    Well, to some people it might be a lot. It’s live-able, especially since I don’t have kids. But I had a lot of student debt and no savings when that happened. Yay me – I did manage to live okay and pay off my debt, but was that a lot? Um, no! I’m proud of what I accomplished, but it really irked me that she was so dismissive of my plight. In fairness, as she keeps pointing out, she sacrificed a lot to get where she is, including seven years of very expensive and grueling school. She had massive student debt when she started out, and yes I agree that she deserves her good fortune.

    The moral of my story is that I think some very wealthy people prefer not to think about how hard it is for the poor because they they want to feel like they won a fair game and shouldn’t feel guilty about being where they are.

    • I absolutely love the last paragraph.

      I don’t begrudge the wealthy who have earned it. But boy do I have a hard time listening to advise or opinions from people who have been given so much. I too have a close friend who doesn’t understand the concept of money. She was given a free college education from her grandparents, received multiple gifts from family (eh hem: 10k cash gift, a free trip to Cancun, etc), her fiance’s family paid for 100% of the repairs to their new home, and now I’m expected to shell out $1300 to be apart of her wedding. She’s a good friend and a kind person, but her lack of financial awareness astounds me!

      • I opted out of a wedding once for that reason. I was a poor college student living in my parent’s house and working as a nanny/cleaning houses. I was also trying to save for my own wedding, which was going to be cheap (CHEAP!) because we had no money.

        Yet my friend wanted me to travel for a 3-day bachelorette party, buy an expensive dress I would only wear once, and pay for professional hair/makeup. I didn’t add up how much it would cost, but I knew I would have to put it on a credit card.

        She forgave me for not being in her wedding. She’s divorced now too, so I don’t feel so bad about it anymore.

      • Donna Freedman

        Yep. It’s just not on their radar. For example, they sorta-kinda know that college can be expensive, but since they’ve never had to make student loan payments they really can’t understand the impact it has on the monthly budget (for years and years!). They also don’t understand the opportunity cost, i.e., the $500 (or whatever) per month you pay for student loans is money that can’t be put toward anything else (a car that doesn’t constantly break down, retirement, a down payment on a home of your own).
        Thanks for reading, and for leaving a comment.

    • Donna Freedman

      “They want to feel like they won a fair game” — ding ding ding ding! We have a winner! What was it that the late Ann Richards said about George W. Bush: “He was born on third base, but he thinks he hit a hoem run.”

  4. Well said! And what’s wrong with people?!?!?! Why don’t they try to live on that small of an income before they say something like that?
    Burns me up.

  5. Aunt Leesie

    I agree it’s time we all stop criticizing each other or (as my son would say) imposing our own views on everyone else. Which isn’t easy. I know. Both of my sons still live at home (they’re 26 and 21 respectively) while going to college and working nearly full time. The oldest should have his master’s degree in a year. When he finished his bachelor’s degree in journalism, he actively looked for an entry level job in his field for 9 months before going back for an MBA. Jobs just weren’t out there. College is expensive. Although they’ve been able to cover most of their tuition via working, they’ve also needed some help to keep from having to take out student loans. Since parking is about $250 per trimester and gasoline is nearing $5 per gallon here, they utilize public transportation… which is limited in our area. You do what you can. I’d say we’re doing okay.

  6. Linda G

    Anyone who thinks kids can work their way through college and be done in four years anymore is delusional.

    • Lisa O

      Agree! An education takes a lot of money and students need help from family to be able to achieve it! We need to stop telling kids that student loans are okay. They should not come out with more than the first year of earnings in the field they choose. If you allow it as a parent you are setting your child up for failure or default.

      • Donna Freedman

        This +++++++++++ …..

      • “allow”??? My 19-year-old grandson did it on his own. My daughter and his father did not want him to go to the school he went to when he could have lived at home without the expenses of living in a dorm and meal plan. It was not a matter of allowing him to take out a loan. As far as the school was concerned, they had no say in the matter. He did receive a scholarship but was $12K short of what he needed.

        • Lisa O

          How did he come up with the $12K? If the parents co-signed his loan then they “allowed” it. I look at the point that I co-signed both my children’s loan so to me I allowed them to go into that debt because without my signature backing the loan they couldn’t have gone. I also sat down and talked to them every semester about their debt and their debt payment when the graduate!

    • It might not be done in four years any more, but to say people can not work their way through college is absurd.

      Most young people ARE working their way through.

      • Donna Freedman

        I don’t know about “most,” but I know that some are. My niece, for example, worked her way through and it took more than six years.

    • Whenever this comes up, there are a couple of things that I wish people would remember:

      1. State governments used to pay for public university expenses, so tuition was kept low because they figured it was an investment in the future of the state. Nowadays, it’s not uncommon for a state to pay as little as 15% of the tab for public higher ed, because it’s just considered an expense. So, more of the burden has been shifted to students.

      2. If minimum wage had kept track with inflation, it would be over $20/hour now.

      So all those folks who worked their way through college in the 60s and 70s were making (the equivalent of) a whole lot more, and required to pay (the equivalent of) a much smaller price tag.

      3. The vast majority of students DO WORK: they work in the summer, they work at night, they work on weekends. What they don’t do is make much money. The student wage at my school is $10.50 to $12.50 per hour, and that’s considered pretty good money.

      At $12.50/hr, a student can earn the $8,000 of in-state tuition and fees (for Fall/Spring – this assumes no summer classes) in just 640 hours (assuming no taxes are taken out) … that’s about 18 hours/week of work. 18 hours is a lot of hours for a student to be working, folks.

      The basic estimate is 3 hours of out of class studying for every credit: so 15 credits = 60 hours of studying and class time per week. (FYI, that 15 credit number is based on the number of credits needed to get the average degree divided by 8 semesters: 120/8 = 15. My major requires 135 credits to graduate, which isn’t uncommon. The official federal guide for full-time is 12 credit hours/semester.)

      Plus, a lot of students want to live inside and eat.

      Then, there’s the cost of books, which is too exhausting to even think about right now, so – at least in my major – I just estimate about $800/semester. I can often beat that by putting time into finding used copies, though.

      That’s not to denigrate the accomplishments of earlier generations. It’s just that their reality is not reality any more.

      • Donna Freedman

        “Their reality is not reality any more.”
        Pretty much. I find myself guilty of this. When my nephews were going on a trip with their mom I wanted to give them each a dollar to spend — and then I realized that a buck wouldn’t even buy them a candy bar. Wow, I’m old.
        Thanks for reading, and for leaving a comment.

      • And regarding your number 1… California state schools are taking more and more out of state students who will pay the higher fees. Making it harder for students in California to get into their own state’s schools.

  7. Lisa O

    I think wealth is all in the mind. I have worked full time since I was 19 years old…I made as little as $14K a year and now I am at $50K. Not buckets of money but I take pride in everything I have done and have 🙂 I married my high school sweetheart had 2 children and on my 30th birthday found out he had gambled $45K, had an affair and owed money to family members and credit cards. I got my divorce and never looked back. I have always worked to support my kids but I was blessed with a Mother that helped with day care after school and any sick days. I feel that I was grounded and devoted to our family and making a good life for all of us. We didn’t have everything but we had enough! I am happy to say today, I am happily remarried, a beautiful home, one child getting married with her masters degree in accounting and one child working and going to college and getting his degree for computers.

    Money means nothing ….. family, health and love is wealth!

    • Donna Freedman

      In the abstract, money means nothing….But not having money can make the immediate rather uncomfortable. As in, “My kid’s toes are cramping inside her shoes but I have no money to buy new ones.”
      Another example: One working-poor family I used to know was renting a two-bedroom apartment and had an adult cousin sharing a bedroom with their daughter. The cousin abruptly moved out toward the end of the month, which meant the rest of the family was up a stump when it came to paying the next month’s rent. They had no emergency fund, no one from whom to borrow and nothing to sell. Their only “option” was to borrow from a payday loan place.
      They had love and health. But anyone who hasn’t got an extra penny to bless him also has anxiety, fear and sometimes a loan that could take months (or years!) to pay off.
      I don’t say this to pick on you. Remember, I was so broke I did our laundry (including cloth diapers) by hand on a scrub-board for more than a year. I had a baby whom I loved dearly and I had my health. But as Holly noted, I was one step away from disaster. Money isn’t everything, but even a small amount sure can make a big difference.
      Thanks for sharing your story — it’s a good example of how what looks like the end of the world might actually be just another (difficult) chapter of life.

      • Lisa O

        Point Taken ~ No Money Is Hard.

        • The motivational speaker and TV host Les Brown once said, “Money isn’t everything, but I’d put it right up there with oxygen.”

      • Aunt Leesie

        Both of my sons work 30+ hours per week while attending college at Cal Poly, and each earns $12.00-$12.50 per hour. Undergrad tuition runs about $3k per trimester for 3 classes. Post grad runs about $5k per trimester for 2 classes. Neither of those figures includes books or transportation (let alone lodging…but both sons live at home). Parking alone is just over $250 per trimester. Gasoline runs nearly $5 per gallon here. It’s 14 miles from our home to Cal Poly. Thus, the $40 per month for bus is preferable, particularly since they both work around school hours. When I get calls from the college to “donate” to their programs, I always mention that my family is already paying at least $8k per trimester (or $24k per year, not including summer courses) to the college.

  8. There have been several articles lately stating that it is physically impossible for a student to work a minimum wage job to pay for a year of school. They were quite eye-opening for me and I work at a university. I just wasn’t aware of how things had changed.

    Quote from one article:

    “In 1978, a UW-Madison student paying his or her own way, without any help, had to earn $2,362. It could be done at minimum wage by working full-time through the summer and about 10 hours a week through the academic year, or a total 891 hours.

    Today, a full-time UW-Madison student going it alone couldn’t physically work enough hours at minimum wage to earn $18,402 for tuition, fees, room and board. It would take 2,538 hours, or about 50 hours per week for 50 weeks.”

    quote source: http://www.jsonline.com/news/education/working-your-way-through-college-doesnt-add-up-for-todays-students-b9922857z1-209807931.html

    • djmj3284

      did you remember to subtract out the full pell grant from both 1978 and now. I know it doesn’t make it even, but who makes minimum wage? Even McD’s pays better than minimum.

  9. We save a large percentage of our income but live on about 50-60K per year. This is easy for us, mostly because we live in a really cheap part of the U.S. where housing and everything else is relatively affordable. BUT, if we really earned 50-60K, we would probably struggle, and I say this because we would be saving anything. Sure we can live on that amount, but we would only be one sickness or layoff from disaster. I think it’s easy to forget what the comfort of having a high savings rate affords people in terms of peace of mind. Someone who earns 50-60K but needs to spend it all to live doesn’t have that peace of mind and comfort.

    I also hate it when people say you can work through school! Maybe if you go to community college or go to school part-time so you can work, but not everyone wants to attend college for 8 years so they can pay as they go. Not everyone CAN go to college for 8 years for a variety of reasons including other responsibilities such as children or the need to work full-time.

  10. (to continue my previous comment): One thing that I thing should be instituted is that better information about loan consequences should be given to every student who is applying for student loans. It should be straightforward and contain information including “If you borrow XX amount, it will take $DDD per month for YY years to pay this off.” You major is MM and the average starting salary is $SSS. Therefore your student loan payments will be %PP of your take home income.

    I don’t think the students get this information in a clear cut matter. I see students taking out huge loans and driving nice cars, living in fancy apartments without roommates, having the most recent computers and phones and beautiful clothes. They are borrowing WAY too much money and will suffer the consequences later in life.

    Just my humble opinion from the trenches…

    • Aunt Leesie

      Cathy, I actually did that with each of our sons during their senior years of high school, when the local high school had mandatory “seminars” about college financial aid… which translated into student loans. When son #1 was starting college, the average student loan debt for a graduate was $20k, so we sat down with calculator and paper, as well as rental info, etc. He quickly realized how tough it might be. When son #2 started at the same college, the tuition had nearly doubled per trimester. He’ll need 5 yrs. (including 2-3 yrs. of summer classes) to get his bachelor’s, which should be 2 yrs. from now. Son #1 pays $5k per trimester for the MBA program, just for tuition, although he’s qualified for some scholarship money this year.

    • Cathy, I so agree with you! Two of our girls thought they knew it all, did Party 101, always took the max in student loans, dropped classes to get a refund, etc. Now they have their tax returns garnished, etc.. They STILL think their attitude is ok, and we are all wrong about repayment. The boys are having the right mind set – one is repaying based on his income, the other didn’t take out any loans (lived at home and commuted), got a good job and just bought his first home (a foreclosure). So, as parents and guides, we are batting 50%.

  11. Opportunity cost is the key here: I lived next door to a family of five who lived in a two-bedroom, 920 sq.ft. townhouse for years, in order to send their three sons to private school. I admired them, because they chose what they felt was most important, and gave up many comforts to achieve it. Some evenings I observed the husband sitting up on the roof of his unit, looking around calmly, not repairing anything, and I knew: he needed a break from that crowded unit. The boys were all so well behaved! Both parents sacrificed a great deal, for what they thought was best for their boys. They gave up the comfortable larger house, the cars, the electronic gadgets, to educate their sons.

    When I went to grad school, I had to take out a student loan, and later paid it off gradually, despite a low-paying job. That, too, involved opportunity cost, but it was more important to get out of debt. Back then, my loan amount seemed huge (~7K) but that is nothing to what students are being charged now (that was back in 1985). I recall a friend telling me that at Univ. of Chicago (in 1984!) university employees referred to us students as “TPUs” — tuition-paying units. Pretty dehumanizing, and coming from an arts and sciences institution. Whenever I get requests for donations from former schools, I laugh and toss it in the recycle bin: I gave at the office, in the classroom, and when I do donate (yearly) to education, it’s to a scholarship fund, not to any school. When schools finally put students and education first, then I’ll consider donating to them, but not until then.

    • Donna Freedman

      This, this and this. I, too, give directly to the scholarship funds of the two schools I attended. I don’t want my money going into the general fund lest it wind up helping paint a new stadium, or something.

  12. We make $200,000 and I would most definitely consider myself to be middle class. However it sounds like you would lump me in with “the rich.” For you to tell me that I am not middle class means that you probably don’t understand exactly just how much we are required to pay in state and federal income taxes, nor do you fully understand how expensive it is to live and raise a family in a place like Southern California or New York City. It is very frustrating to have multiple new taxes passed aimed at “the rich” and then to have the cutoff for rich be $200,000. Imagine getting a raise this year and knowing that half of it will be going to taxes, and that there is a massive group of people that are thrilled about it. The disdain is palpable. I was born in Southern California, and we aren’t leaving our family. But this was a very expensive choice for us to make. My husband is self employed so he must pay both the employer and employee portion of his social security tax, which results in another $7,000 of taxes paid per year. And of course Federal taxes and SS aren’t deductible for State income tax in California, and California now has a 10% bracket which isn’t too hard to reach. Our sales tax is nearing 10% in many counties. Our property taxes are very high which would be expected since the homes are so expensive. In addition, the cost of a medical insurance plan in California can be up to twice the amount of other states. (in part due to California being one of the most litigious states in the union) And of course we put as much as we can into our retirement accounts as we aren’t counting on anyone to take care of us when retire. And finally, because of our perceived “high” combined income level, we don’t receive any tax credits for our children and our children will not be eligible for any type of grants or low interest student loans to help pay for college. Thus we have been saving much of our disposable income to prepare for this large expense while many families with lower income levels can basically count on a free ride at our state schools. I actually have friends who chose not to work when their kids reached Jr. High and High school age for this reason. Their children will qualify for grants and scholarships because only their husbands income is considered. These women could have worked the past 5 to 10 years and saved money for college…and you would have then thought them rich as well, but why bother. We also give away 10% of our GROSS income each year, which is another $20,000 we don’t have that you think we might. Don’t get me wrong. I know it would be extremely difficult to live anywhere on $25,000/year and I know we are very fortunate. This is why I often give cash to a few single mothers that I know from work who struggle to make ends meet. However, at the end of the day, for you to say that I am not middle class and to lump us in with the “rich” is very misleading and only continues to perpetuate misunderstanding and friction between people of varying income levels. And I also must add that in addition to working very hard, we did make a series of good choices from a very young age through today that increased our odds of being successful. It wasn’t all just luck.

    • Donna Freedman

      I’m afraid you misunderstood what I wrote. Early on I made this statement: “Depending on where you live, $200k might not be enough to live on, at least comfortably.” In other words, a $200k income could be considered middle class (even though it sounds counterintuitive to people trying to make it on $40k).
      The rest of the article focused on the survey respondents who specifically self-identified as “wealthy.” At no time did I say that you (or others earning $200k) should be lumped in with the rich.
      A couple more quick points:
      My daughter couldn’t get college aid back in 1996 because my now-ex and I made too much money. We were print journalists — not exactly a highly paid profession.
      I paid 9.9% sales tax in Seattle.
      Finally: Your “very expensive choice” to stay in your birthplace and near family is understandable — yet it’s also something I hear turned on its head in regard to people in economically depressed areas. “Why don’t you just move, then? Why don’t you go to where there’s a better chance of getting a job?” Often, the desire to be near family (and the corollary support network) is a big reason.

  13. The working class family is doomed. A lower-middle income family does not qualify for any government help, college tuition assistance, tax breaks, rental assistance, child care assistance, etc. Even if your job provides health benefits (usually at a cost of 10% of your annual salary), you cannot afford to use them anyway because of high deductibles, so you suffer in silence. Kids work through middle and high school, and still cannot afford college. And if the kids saved every dime for school, the universities insist that half the money goes to tuition, and dings any financial aid they might have gotten. So in essence, the kids who do not work are better off than the ones who do.

  14. LTucker

    I must say to Julie that my sister just said she thought “normal people ” made $200k a year as a family. We were taking about how in our family we couldn’t do some things because no one made that much.
    I told her I thought only 1% made that much. But I was wrong:
    I read this in a post from a blog I read from 1/1/14.

    The message was from a family friend, a married father of four whose annual household income is close to $200,000, and in the top 5 percent of households in the U.S. according to the New York Times.

    My husband and I were self-employed for 33 years, so I know most self-employed people can write off expenses, thus reducing their income.

  15. Shelia Hudnall


    I just wanted to tell you I clicked and shared this post on my Facebook page seconds ago. This issue has come down my newsfeed repeatedly there and I think your post will be will resound with many there. In a positive way, I must add.

    I commented on a friend’s post a few days ago about how things were for me when I got my first job out of high school. On minimum wage in 1970 I was able to get an apartment by myself in a decent area, as well as clothe myself like any fashion-hungry young girl would want, and I didn’t live on ramen (not known at the time anyway)or macaroni & cheese. Could any young person do that today? I don’t think so. The minimum wage doesn’t do that anymore. And yet so many think it perfectly adequate. Thank you for this post. I want the world to see it.

  16. This article is offensive to me. My family has survived and thrived off even less than 25k. We had to make sacrifices, but yes it can be done-and we’re happy!

    • Donna Freedman

      Nowhere did I say that people who live on less can’t be happy. You are taking offense where none exists.
      I, too, survived and thrived on less than $25k — a lot less. But it was, and is, an unsustainable lifestyle. The cost of living continues to rise (at times quite sharply) and without sufficient income you cannot protect yourself from the impact. Even a small change — a five-hour cut in working hours, a bad back that prohibits gardening for food – and you’re in big trouble.
      Plenty of people “manage” on what they currently have, but they’re on the razor’s edge. They either don’t know it or prefer to block such knowledge by thinking stuff like “We’re poor but happy.” And indeed they may be. I was, as a 21-year-old single mom. But I could think only of putting out that day’s fires.
      Folks who are just about keeping their heads above water are unprepared for emergencies, but also for the simple costs of kids growing older (new shoes more often, school fees) or the need to replace a vehicle or find a new place to live because the rent just went up another $50.

  17. Cathy in NJ

    When I went to college, I worked part time but mostly my Mom paid for the tuition and books. I went to a State College and lived at home. I left school with no loans, no debts and a degree in Mathematics. My Master’s was paid for by my employer, the US Navy, at the rate of three classes a year over the timeframe of many years.
    My daughter is going to college in a few years and I very much want her to go to a commutable college and live at home. Living at home costs less than living away and it is easier to study in a quiet house than a choatic dorm room. Many people tell me it is a great experience to live away at college. I am sure it is fabu but I don’t want to pay for “live away” I want to pay for academics. There are also some degrees, where hiring companies do not pay a living wage, that I will not pay for. After 4 or 5 years she has to graduate with a degree where she can make a decent (NJ cost of living) salary. I am still not sure how I am going to do it because I make too much to get any assistance.

    • Donna Freedman

      It’s up to your daughter to find the money, although you can offer as much support as is feasible. Start looking now, to get an idea of what’s out there and how the game is played.
      Here’s an article from LearnVest that’s got some specific detail, written by a young woman who emigrated here with her family at age 8 and knew she would have to pay her own way through school (big family, working-class parents). She got her bachelor’s degree with only $4,500 in student loans:
      The information may help your daughter organize her own search. If necessary, remind her that some hard work now will keep her from having to come back and live in her old bedroom while she struggles to find enough work to repay the loans she took out in order to have “the college experience.”
      I’d also suggest checking out “Confessions of a Scholarship Winner,” written by a young woman whose seriously dedicated search led to $500,000 (that is not a typo) worth of college money. If your library doesn’t have it, ask for an inter-library loan; if that’s not possible, look for a used copy on Amazon:
      Oh, and stick to your guns about limiting her time in school. More and more students are graduating in five years rather than four, but some can do it in three. One of DF’s friends was paying his daughter’s way through school and at one point got fed up with her switching majors and slacking. He told her that he would pay only through the end of the next year — after that, she was on her own. Guess what? She stopped goofing off and graduated.

  18. Insurance Gal

    I love this! Thank you, Donna, for the reminder about how things “could be” and used to be, and for some, (like me) not so long ago.

    Out of curiosity, I did a bit of research. (I’m avoiding work on this beautiful Friday afternoon, LOL!)

    $8/hour min wage in my state x 40/hours week x 52 weeks = $16,640
    divided by 12 months = $1,386 a month.

    I searched online apartments for rent and, although in an undesirable part of town, found one for $500/mo.

    My budget would be:
    $1,386 income
    -$208 approx for taxes (15%)
    -$500 rent
    -$100 utilities (no cable, library for internet)
    -$250 food
    -$50 fuel (assuming I found a job here in town and could avoid the 30 mile commute)
    -$58 cell phone (I wouldn’t have a land line)
    -$56 for auto and renters insurance

    That leaves me $164 a month for essentials and whatever else I’m forgetting (subtract another $50 or so if I wanted to start an EF and/or savings account). I have chronic asthma so I would hope and pray I qualified for free health care and prescriptions, and I would use our Women’s Wellness program again.

    Time to get back to work, eh? 😉

    • Donna Freedman

      I think $500 for an apartment is pretty amazing. The average rental in Anchorage is $1,000.
      And again, these costs (especially fuel and food) keep jumping while salaries tend to lie nice and still. For example, hearings are taking place right now in Anchorage because Enstar, the natural gas utility, announced a 48% price increase this year. Loads and loads of people heat with natural gas, and they’re getting really scared right now.
      Nice to hear from you — that is, assuming it’s the same Insurance Gal from my MSN Money days???

      • Insurance Gal

        It sure is me! I had the pleasure of being interviewed by you for one of your columns many years ago after DH and my BK.

        Yes, it is an amazing apartment price, but not sure if it is accurate since it is online-you never know around here if things are updated or not. LOL! Oh, and if we add my $75/mo school loan payment to my budget above, it would leave $39 for clothing, and a tiny bit of sanity spending.

        So sorry to hear about the Enstar price increase!! Hopefully communities have risen up and are being heard-or at least listened to. 😉

        Thanks for all you do, Donna.

  19. What if they think that because they ARE living on $25,000 to $50,000 a year?

    Once you’re financially independent, the house is paid off, the car is paid off, and you’ve learned to live within your means, it costs a great deal less than we all expect to support oneself in adequate comfort.

    I’m living on about $28,000. In January, I pulled $26,000 out of savings to support myself in 2014. It’s now almost the end of July, and so about $13,000 should be left, right? Nope: $25,000 is left.

    I earn $14,400 at adjunct teaching and just under $14,000 from Social Security. Contrary to my expectations, and despite large unplanned emergency expenses EVERY MONTH this year, the only thing that has depleted the 2014 living fund has been the cost of Medigap, Medicare Part D, homeowner’s, and car insurance. Without those dings, I’d have more in the bank today than I started with in January.

    The trick, I guess, is to hit that break-even point where your costs equal or are less than the allowable draw-down from savings (4% in my case).

    a) It costs nowhere near as much to live as you think it will; and
    b) Money happens.

    • Donna Freedman

      Perhaps that’s where the disconnect lies. But again, it’s evidence of naivete or outright cluelessness: How is a person supposed to get to that sweet spot on $25k to $50k per year?
      I live on considerably less than $50k now that I’ve decided to power down a bit. But my needs are relatively few, whereas someone who’s just starting out and/or has kids is going to be hurtin’ for certain. What does $25k a year shake down to after taxes and anything else you need to pay into, such as health care? Brrrr.

      • My taxes are negligible: $28,000, half of which is bizarrely taxed Social Security income, generates a $3,000 refund every spring.

        The point is, they (or I) may be clueless, but given that they’re among, say, the top 3% of earners, chances are they have relatively little debt and so in their perception the actual cost of day-to-day living should run less than 50 grand, especially if the kiddies go to public schools.

        What most right-wingers who think the poor are self-indulgent spendthrifts fail to grasp is the effect of proportionality. For example, the cost of child care is proportionately higher for a couple that earns $47,800 (the median household income in AZ, last I looked) than for one that earns $100,000. Ditto the cost of rent and car payments.

        • Donna Freedman

          I was agreeing with you. They think “We don’t spend that much,” and assume everyone else is blowing the budget.
          Perception is reality. What they’re not perceiving is how to GET to that blessed place: a paid-for house and car, etc. Hard to make it there on $25k.
          Thanks for reading, and for leaving a comment.

  20. Thank you.

    And there’s a HUGE difference living on 25K/year with a paid off house and car and money in the bank for emergencies and 25K/year being all that you have. Having that cushion allows savings and peace of mind that allows you to take advantage of things (buying in bulk, not wasting time and willpower freaking out about how to make ends meet, etc.) that you can’t without that cushion.

    • Donna Freedman

      Just as there is with having a car given to you, a house sold to you on a handshake, etc. Heck, one young couple I know is getting free childcare from a relative. Absolutely free. That’s a savings of a couple of grand a month, at the very least — and they seem to me to be pretty lackadaisical about this incredible gift. They seem not to understand what their payback of student loans would be without this giant budgetary boost.
      An old friend provided child care for her grandchild and once I heard the woman’s daughter griping about something her mom had not done. When I said I thought she was very lucky her mom wanted to do this because it saved her a ton, the young woman bristled: “I pay her! I pay her $40 a week!” (This was around 2004.)
      “Yes, but you’re still saving a ton,” I said. “I was paying $45 a week for a day care center back in 1981. You’re getting a major friends-and-family discount.”
      She just grumbled some more. Either she was too young to appreciate fully what this meant for her finances, or she was just mad because the world wasn’t doing enough for her in general.

      • When I was in college, I lived on 1K/year. How? Well, my tuition AND textbooks AND room AND board were paid for. I could have lived on $0/year if I never went out to restaurants or shows or the mall. $1K pays for a lot of incidentals when everything else you need is paid for.

  21. Ro in San Diego

    As usual I can relate to this article. I lived in a NYC housing project with my parents while attending a vocational college. I wasn’t savvy enough to know I could have gotten a grant for on-campus housing. I worked part time for most of my 2 year stint but it was hard! I made $2.75 per hour working at a department store. I think I worked 20-30 hours a week with a full course load. I remember being exhausted all the time. Semester break meant I worked full time. Since my parents had no experience with college and I had no mentors I probably struggled more than necessary. Fast forward 40 years – early hardships have made me appreciate the life my husband and I have made for ourselves. I’m frugal to a fault and looking forward to a secure retirement. No one has ever given me a car, nor a deed to a house. Government grants and a few private scholarships eventually helped me finance my remaining 2 years of college.

  22. I’m wishing hard I could just 100% agree with you on this one…but truth be told, we lived on less than $21,000 yearly for at least a dozen years while our girlies were in school, and just after they graduated. You are right in that you do have to make sacrifices — nearly all our clothes (underwear excepted) came from the thrift shop. Ditto for household furniture and nearly all of our gifts. (We live in a rich county, and they’re careless…I found a lot of brand new gifts still in their boxes.
    I had a garden, worked for some of our meat (traded office chores for a pig, for example), and was very, very careful what we purchased. We had insurance — but a really high deductible. (And yes, fortunately, we didn’t have anything serious happen to us during that period.)
    I dunno, Donna — $25,000-50,000 may not be a fortune, but in many parts of the country, you can still live on it. (And a candy bar is 68-78 cents, noticed both in Maine, where I’m visiting, and Colorado, which is thought to be high-priced.) You’re going to have to make very careful choices, though.

    • Donna Freedman

      I don’t doubt that you can live on it in some places. In fact, I said so in the piece. But it’s tough and in some cases impossible to get ahead on it.
      You will have trouble affording a home/condo, a reliable vehicle and the chance to set aside money for retirement. Without those things, you’ll be particularly hard-hit when things like rent, food, fuel and utilities go up. Even a minor problem can knock you off the playing board.
      To quote a line from “Cinderella Liberty,” by Darryl Ponicsan, the situation will “nicely postpone starving.” But that’s no way to live.

  23. I just had to comment about one thing – I bought my first house when I was making $25,000 per year. It may not be possible in every market, but it’s certainly doable. I live in Central NY and I bought my house 7 years ago. The housing market in my area is still very affordable so people at that income level could still qualify for a mortgage. It’s not going to buy you a 4 bedroom, 2 1/2 bath house, but I was able to buy a 3 bedroom, 1 bath home in a very good school district.

  24. I agree with the safety net part that makes people say those things, but I am one of those people who left at 19, worked 2 full-time jobs while going to university, graduated with $60,000 in debt and took a job where I diligently worked and paid it off in 18 months.

    My case, is unusual. I don’t think it can really be replicated by anyone, so I acknowledge and account for that, but sometimes when I hear people whine and moan about making $50,000 and not being able to “make it” I wonder if they have their priorities in order, meaning realizing that a TV is a luxury not a necessity, and a $100 cellphone plan is not required.

    OR that you don’t need to buy a house, you can rent instead, and rent a smaller abode instead. I find a lot of people who are in debt and saying they can’t make ends meet (especially in Canada) are carrying huge debts because of the home they HAD TO HAVE to avoid paying rent and “throwing their money away”.

    Still, I can’t imagine having to live on $25,000 a year GROSS. That’s barely enough to cover basic expenses. Even $40,000 is a stretch but I can’t imagine doing it with a family to support, let alone having to cover daycare and so on.

    Good food for thought.

    • Donna Freedman

      Learning to distinguish wants from needs is one of the biggest arrows in my frugal quiver. I write about the subject all the time. Not everyone is willing to do this unless forced — but if they’re lucky, it becomes an object lesson rather than a brutal punishment. That is, once you learn to spend in a more intentional way you might find you don’t need to ratchet it back up once times are better.
      As far as living on $25k…You might just get by, but you won’t get ahead. In fact, you might slip backwards, year by year.
      Thanks for reading, and for leaving a comment.

  25. ArianaAuburn

    About f_ing time someone brought this up. What a lot of well-to-do people forget is the element of human adaptation: what was new or comfortable becomes the new normal. Once people get used to the new normal, they start to forget what was actually like to struggle (or even block out the most horrid parts). That ability helped people recover and cope with traumatic events.

    One caveat the well-to-do forget: the financial system is designed to coddle the well-to-do while over-charging those with limited income/funds. If you are considered exceptionally well-to-do, you can even get things and services for free.


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