"Living Wage Calculator"

[purplish]

Saw this the other day, if you click on the the state you're from on the right you can see what is considered a living wage.  According to this, a livable wage in my area is $28,516.  Interesting, considering years back I lived off $22k-$23k a year just fine, with an apartment, car, with an extra $200 a month of savings on top of it!  Apparently I was living in poverty, who knew.  Now, as a disclaimer, I very much DO support paying a livable wage, and reducing poverty.  But this goes a bit too far I think.

http://livingwage.mit.edu/

[Emilyngh]

Interesting.   It says that the living wage for my area for two adults and one child is just over $42,000 before taxes.   Subtracting what they estimate for taxes, it's about $37,000.   This sounds about right to me.

The reality is that we live on a little less than this ($30k a year including healthcare, but not taxes), but a decent chuck of our ability to do so is from having made/spent more than this per year in the past and using it to get ahead via 2 paid off cars, lots of time to cook and garden, etc.   While we have a great life and plenty of money, my gut instinct is that it would probably not be easy for someone without our advantages to live on much less.   So, for a deeper comparison I looked at the category breakdowns:

food: they list $6,742.   This is $560ish a month.   I'd say that this is a little high (we spend more like $500).  But, we never eat out, have a garden, have two people home most of most days with plenty of time to cook, etc.   And while it's easy for me to say that someone else should be able to "live" on less than this, I don't think that their listed amount is an outrageous estimate.

medical: $6,700.   We spend $6000 a year on insurance premiums alone, so this seems about right.

housing: $8,600.   We spend more than this and live in an average house that we put 20% down on.   So, this seems a little on the low side to me, but *maybe* one could get the most basic apartment for this?   It's certainly not generous.

transportation: $10,160.   Whaaat the fuck?   How in the world do they have this so high?   Even higher than housing?   Yeah.   We spend $1200 a year on gas and $600 a year on car insurance for our 2 cars.   Our cars are paid off, but this still seems very high to me.   This could pay for a new car each and every year....insane.

other: $4,677.   Considering that this would include all clothing, household items, activities/educational expenses for the child, etc, this does not seem high to me.

So, overall I'd say that their food estimate is a little high, but their housing maybe a little low, so these two pretty much cancel each other out.   Everything else seems pretty on-target, except for the $10k a year estimated for transportation.   This part seems INSANE to me!!!!   Pretty much this alone represents the $7k difference between what they list and what we spend.   

However, if one had a child with medical issues, or something else serious that they didn't include (eg., student loan debt), I think that pretty basic expenses could pretty easily get to $37k for a family of 3 in my area.   So, I'd say, as far as estimated for a living wage goes, this seems pretty close.

[minority_finance_mo]

Yeah, this lists childcare costs for three kids as $30K in my area. I really don't understand how that's a "living wage" requirement to spend $30K on your kids. Those are some spoiled kids... Think of all the Nintendo games I could have bought with $3,000 - let alone $30,000!

[AJ]

Yeah, this lists childcare costs for three kids as $30K in my area. I really don't understand how that's a "living wage" requirement to spend $30K on your kids. Those are some spoiled kids... Think of all the Nintendo games I could have bought with $3,000 - let alone $30,000!

It means childcare like daycare, like the cost to store your kids while you're working. It does not include Nintendo games. That's why 2 working adults + 2 kids costs so much more than 2 adults (one working) + 2 kids. For my area it was about $6k per kid, which is about right for low-cost childcare around here.

From the explanation:

Child Care.
6 The child care component is constructed from 2013 state-level estimates published
by the National Association of Child Care Resource and Referral Agencies. We assume that
low-income families will select the lowest cost child care option available; therefore we used the
lowest cost option (family child care or child care center). In instances where only one type of
child care cost for a specific age group was available, that child care cost was used. In the
instance that neither child care type for a specific age group had an estimate (only occurs for
school age care), we calculated the average percent difference between infant and school age
care cost (for the cheapest care available) for all states with data by region. We then multiplied
the appropriate average percent difference in infant care and school age care for the region in
which the state is located by the cost to provide the cheapest type of infant care available the
state to obtain an estimate for the cost of child care for the missing age group. Values were
inflated to 2014 dollars using the Consumer Price Index inflation multiplier from the Bureau of
Labor Statistics.7

[civil]

This is really interesting. Mine says 59k after taxes, for 2 adults / 2 children. Here, I think this is only possible for military, due to cheaper child care and medical - our household includes one AD military and one dependent, and we spend about 45k/yr. For non-military, my best guess would be 69k after taxes (assuming one kid in daycare, one in afterschool care). The costs of child care, housing, and medical care are way underestimated, while transportation is overestimated.

This is going to sound really complainypants. Don't worry, there is a solution: MOVE. Which is one of my top goals when SO's tour is up.

Food: 8707. about what we spend, but we live well. I think a family could do about 6k at a non-commissary store.
Child care: 13345. This is a joke. Try 1600/kid/mo., or around 31200/yr with sibling discount. 25200 if only one needs daycare and one needs after-school care. This is why most of my neighbors have a parent who does not work. However, it's cheap for military - a few hundred a month IF (big if) you can get off the wait lists.
Medical: 5924. also a joke. we spent about 3000 last year for just the one of us not covered by free Tricare (and that person has no chronic conditions!)
Housing: 15024 or 1252/mo. not sure where you find this housing, because a 1-bedroom is 1400/mo here. For four people, say two bedrooms (we're talking minimum living wage, not comfortable; assume kids are the same gender), how about 1600/mo or 19200/yr. not including utilities
Transportation: 11359. this is absurd unless one takes Metro/cabs everywhere. with 2 cars, try maybe 3600.
Other: 5459. sure, this is about what we spent last year on cable/insurance/electric/water/school.
Required income after taxes: 59818
Required income before taxes: 68504. Not sure how to match these numbers with reality. I made 75k AGI last year and paid 21k in fed/state/local/SS/Medicare taxes. But I'm not the one claiming the kids - maybe that changes it?

While I think the costs are underestimated here for a family of 4, I don't think the solution is necessarily to pay everyone enough to take home 69k. I have seen people here deal with the costs by not having children, delaying having children, moving out of state, marrying military, living with lots of extended family together, or having one parent quit work.

[civil]

Mine said I need about $25,500after taxes) for a single childless person. This is in a HCOL area. Sounds about right but they are assuming living on approx. $13K/year for housing expenses - something that would be hard to do here unless you have a very low cost housing situation like roommates or a studio apt since average one bedroom apt is $1400/month or so.

Same here. It says 22k after taxes, $847/mo on housing, which I think is good if you have roommates (reasonable room rents are $750-1000). You might even get by on less, because the single person transportation and food estimates leave some wiggle room.

[forummm]

For me, these numbers ($36k pre-tax for 2 adults) sound pretty reasonable for someone living very frugally. It's close to what we actually would require as an income to spend the way we do, when you amortize vehicles, etc. We have worked hard to have unusually low expenses. I bought our house as a very cheap foreclosure. You can't find any deal like that now. We also have health insurance highly subsidized by employment. It would be a challenge for a couple to live on that budget here.

[Jessa]

I think some of the issue for my area is that the county is very wide and diverse.

I looked at it from my current perspective (2 adults in a fairly rural town) and the overall is reasonable, food's a little high (6,297), housing a little low (7,291), transporation way high (7,002). Which is odd because we actually have very low housing costs compared to most people I know.

My old apartment (1 adult in a pretty developed suburb) is in the same county, which makes housing RIDICULOUSLY low. My rent on a 1 bedroom apartment was $1k/month, and I was happy to find something that affordable. Again food and transportation seem high, but since housing is low by over $5k/year, I don't think that evens out.

The main city in the county would have even higher housing costs. I'm not sure if there are just enough rural bumpkin towns with low rents to drive down the overall average or what, but that seems weird to me. I think what's listed could be a living wage in the town I live in now, but not in the town I lived in before.

[r3dt4rget]

I think the recent MMM article sums up how I feel about phrases like "Living Wage":

“Expenses”, “Needs”, and “Cost of Living” are terms that come from a mindset of weakness. Instead, use the words, “My Spending”, and realize it is in your control. By making the right moves and the right arrangements with other people, you could theoretically live for free. You can end up in any job, any city, any country, with any number of additional dependents – all at your own choosing. Even if you never do so, knowing that you have complete power over your spending is a key ally for financial freedom.
And finally, money is not the end of the quest of having a good life. While it is currently a major barrier to most people, it is easy to master it early in your life. Then you move on to the real challenges: finding out what life is really about. Hard work, being good to others, a good amount of proper difficulty, and learning as much as you can pack in during your time alive.

The calculator gave me these results: $20k is a livable wage in my area, and spending at that level would allow one to live a luxurious lifestyle with a nice car, decent apartment, quality groceries + eating out, and a lot of healthcare spending. Our household of 2 adults makes 5x the livable wage but we spend the same as the 1 adult "livable" scenario. This is why the above quote is so important to understand.

[purplish]

Oh was that amount post-tax or pre-tax? I listed what I made gross so technically it was closer to $17k I was living on. I think it depends on what situation you're willing to be in-for example I had roommates, cause that's what I could afford. 

[sky_northern]

These kind of numbers are good for someone that is considering retiring to a different area than they work. Gives some ball park numbers to make sure that their number for FIRE is in the right range.
I'm going to be retiring to an area with a very different COL than the area I am working in. Any information about cost in the area I want to retire to for me is good, because I won't be able to look at my current spending to accuracy gauge what I need for FIRE.

[Gone Fishing]

If by "Living Wage", they mean the good life, then the total spending numbers were about spot on for me.

Categories were a little off though, as others have noticed.  Food is high, transportation is high, full on childcare is an age limited expense. Wrangle those in and there should be plenty for fun stuff.     

Also, not quite sure why a 1 adult, 3 children household would require more housing expense than a 2 adult 2 child household, they must assume every kid gets their own bedroom.

It would probably make a pretty good tool to show big spenders what they should be able to live on.