Author Topic: Accuracy of the MIT Living Wage Calculator in predicting a Mustachian Budget  (Read 5823 times)

terran

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I ran across the MIT Living Wage Calculator and was impressed by how spot on it is compared to our actual annual budget. I'm curious how it compares for other's on the forum?

Here are our stats:
City/region: Upstate NY (Monroe County)
Link: http://livingwage.mit.edu/counties/36055
Family composition: 2 Adults
Required annual income after taxes: $29,807
Actual Annual expenses/budget: $30,000
Cost of Living: I would consider this a LCOL area, but maybe not quite as low as some midwest areas.
Lifestyle/budget notes: Our annual budget includes sinking funds for a brand spanking new car every ten years, new Apple gadgets every 5 years, an annual international vacation ($5k), we go out to eat once or twice a month, host dinner parties every few months. I would say we're frugal, but by no means deprived, and we could spend less if we had to.

How do you compare to what the calculator says a living wage income level would be in your area?

hankscorpio84

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Great topic! I'll be interested to see the replies.  Here's mine:

City/region: Rural (but on road system), Alaska
Link: http://livingwage.mit.edu/counties/02261
Family composition: 1 Adult
Required annual income after taxes: $19,819
Actual Annual expenses/budget: $24,000
Cost of Living: This area is widely considered HCOL relative to more the more populated areas in AK (Anchorage & surrounding) due to high energy costs (electricity, heating oil, gas, property tax) and lack of housing options.  I think the MIT calc is low on housing, especially if you are paying utilities.  About right on food and transportation.
Lifestyle/budget notes: I just recently started budgeting so my actual expenses number is a projection.  I could probably live for the MIT number, but it would be a challenge.  The great thing about Alaska is you can supplement some of the expenses by cutting wood for heat, and fishing/hunting/berry picking for food.  The trouble is that most of those activities require big expenditures in housing (wood stove, chimney) or gear/equipment (chainsaw, truck or trailer, fishing poles or nets, etc.) to accomplish. 

lbonga1

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I went with Los Angeles since they didn't have Orange County.

City/Region: Los Angeles
Link: http://livingwage.mit.edu/metros/31100
Family composition: 2 adults, 2 kids
Required annual income after taxes: $59,400
Actual annual expenses/budget: ~$35000
Cost of living: High
Lifestyle/budget notes: Our annual budget does not include childcare because my FI cares for them while I'm working. I think the calculator's housing budget was a bit on the low side, but the food and transportation budgets were on the high side. We've been living minimally, but we do splurge on the occasional extras, like a video game for FI. We also have annual Disneyland passes, which is the entirety of our entertainment budget.

Sylly

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I went with Los Angeles since they didn't have Orange County.

Orange County

lbonga1

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I went with Los Angeles since they didn't have Orange County.

Orange County

That's strange, I had searched for Orange County and it said no results. Thanks!

Sylly

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SD County

Our housing is very high (by choice) for our household composition (2 adults), so I can't really compare total expenses. Our transportation is also most likely atypical (i.e., lower than average).

So, comparing the remaining categories, using our 2015 numbers:
Living Wage Calculator ActualComments
Food66125700This is with our eating out habit, whereas the calculator specifically states the budget is assuming all food prepared at home
4150This is what our extrapolated grocery budget, from actual grocery spending and assuming we eat out 12% of the time
Medical4817~3500A good chunk of that is regular chiropractic visits, which is definitely a luxury
Other necessities3971~1000-1500Rough estimate of clothes & personal care expenses, as I don't have exact numbers from DH's accounting side. Household supplies generally included in our Grocery category, so included in Food above.

Overall, I think the Food budget is generous, as we don't scrimp on our meals. Hard to compare Medical budget as we only have minimal health premiums, which would be the only major cost for relatively young and healthy individuals.
I think the Other Necessities category is also quite generous, given that it's supposed to account for "(1) Apparel and services, (2) Housekeeping supplies, (3) Personal care products and services, (4) Reading, and (5) Miscellaneous."

Given that they also assume no deductions, it's also hard to take their Tax estimates seriously.  Housing and Transportation seem fairly reasonable for minimum subsistence. However, I personally find the other categories to be a very generous estimates for what they claim they're calculating.

Quote
The living wage model is a ‘step up’ from poverty as measured by the poverty thresholds but it is a small ‘step up’, one that accounts for only the basic needs of a family. The living wage model does not allow for what many consider the basic necessities enjoyed by many Americans. It does not budget funds for pre-prepared meals or those eaten in restaurants. It does not include money for entertainment nor does it does not allocate leisure time for unpaid vacations or holidays. Lastly, it does not provide a financial means for planning for the future through savings and investment or for the purchase of capital assets (e.g. provisions for retirement or home purchases). The living wage is the minimum income standard that, if met, draws a very fine line between the financial independence of the working poor and the need to seek out public assistance or suffer consistent and severe housing and food insecurity. In light of this fact, the living wage is perhaps better defined as a minimum subsistence wage for persons living in the United States.


mcj

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District of Columbia
http://livingwage.mit.edu/counties/11001

I think that this calculator (and society in general) greatly overestimate what it really costs to live in a "high cost of living" area. I live in DC and the transportation estimates for 1 person are more than double the cost of either of the 2 top-tier monthly public transportation passes (unlimited bus and most metro, or unlimited metro) (not to mention that you can pay for metro costs with pretax benefits from your employer).  It is expensive to live in an "expensive city" if you rent an overpriced or too-big place, eat out and drink out constantly, and own a car in a city with great public transportation.  Yeah my rent is more than it would be in a rural locale, but I think being able to walk to the grocery store and being a bus/metro ride away from anything I could want evens out cost wise and wins (IMO) in quality of life.

Oh, and every single category is more than I spend, and I live extremely comfortably.
« Last Edit: April 17, 2016, 09:42:17 PM by mcj »

LadyMaWhiskers

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Hmmm...well this is interesting.

$61,096 required to support my family of one adult, one child in San Mateo County (south of San Francisco, north of Silicon Valley.

Interestingly, it quotes only $7500 more for another child. At that rate I'd have one! Odd that the medical care goes down by adding a child. Lowered bar for health caused by parental exhaustion?

Also odd that transportation goes up so much with a child or two. I promise, my kid goes where I go, and rides free.

Housing was pretty accurate at ~$2000/month; that'd cover a very, very  modest apartment, or taxes/utilities/maintenance on a paid for house

I pay much less for transportation, working from home. I checked my old county too (NY) and can't figure out one can spend $10k/year in transportation in NYC

Child care is a joke: $610/mo! Cheapest I've seen is $400/week. I think this is not county-specific in the model.




teen persuasion

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Hmmm...well this is interesting.


Interestingly, it quotes only $7500 more for another child. At that rate I'd have one! Odd that the medical care goes down by adding a child. Lowered bar for health caused by parental exhaustion?

Also odd that transportation goes up so much with a child or two. I promise, my kid goes where I go, and rides free.

Housing was pretty accurate at ~$2000/month; that'd cover a very, very  modest apartment, or taxes/utilities/maintenance on a paid for house

I pay much less for transportation, working from home. I checked my old county too (NY) and can't figure out one can spend $10k/year in transportation in NYC


http://livingwage.mit.edu/counties/36029

I agree that the per child expenses were odd - for my area, medical and housing and transportation all went up from 1 child to 2, but then dropped going from 2 to 3, roughly back to the 1 child numbers.  Only food costs increased at each child increase.  However the food costs were ridiculously generous at $200/week (for our current 2adults + 2 kids).  Even when I was feeding 7 of us (notably not even on the chart) I never got anywhere close to $200/week.  And I have built up an impressive stash of staples.

The taxes section was also baffling - at the suggested income level, with kids of the ages assumed in the study (young), income taxes would net out negative.  I'm guessing that property and school taxes get put in the housing category, not taxes category, if one owns rather than rents.  Housing was about correct for us, with the mortgage paid off: property taxes + school taxes + oil + insurance + other utilities.

Paul der Krake

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Very cool. Bookmarking to better evaluate the associated costs of moving.

Freakishingly accurate for my area too.
« Last Edit: April 18, 2016, 06:49:34 AM by Paul der Krake »