The Reality of What You Can Afford on Minimum Wage

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108photo / Shutterstock.com

The federal minimum wage was established nearly eight decades ago in 1938, clocking in at a mere 25 cents per hour. These days, it sits at $7.25 per hour.

However, now that each state — and now cities — have their own minimum wage, the average national minimum wage of $8.32 per hour was used to calculate the following examples in order to provide more accuracy. This average national minimum wage results in a monthly salary of $1,442 and an annual salary of $17,306.

But whether it’s Los Angeles or Louisiana, Miami or Montana, getting by on minimum wage is tough. Click through to see why it’s hard to live on a small income.

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What Can You Afford on Minimum Wage?

Based on a Living Wage study by the Massachusetts Institute of Technology (MIT), the average American spends the following amount on expenses each year:

  • Food: $3,237
  • Housing: $7,821
  • Transportation: $4,059
  • Clothing and misc. supplies: $2,551

Total Average Annual Expenses: $17,368

Even at the average national minimum wage — let alone the federal minimum wage annual salary of $13,920 — you would still have to cut a chunk out of your budget to make ends meet. Even worse, this assumes that medical coverage is included along with minimum wage. If it’s not, the situation becomes even more of a struggle.

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What Can’t You Afford on Minimum Wage?

It might be an everyday expense for some, but here are 15 things that people on minimum wage would have to sacrifice.

See: Is This $17 Chick-fil-A Minimum Wage Sustainable?

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Cellphone service averages $50 to $95 per month based on the smartphone chosen and data provided. That’s not something you can afford on minimum wage. However, a basic phone — often called a throwaway or “burner” phone — can be had for as little as $20 with a very limited data plan of say 100 minutes. At least you’ll have a phone for emergencies.

Bookmark This: 7 Paycheck Laws Your Boss Could Be Breaking

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Getting a Degree

Furthering your education means you might qualify for a better paying job. The catch is you simply can’t afford to go to college at an average annual cost of $9,665 for tuition and fees.

One option is to take classes at a community college, which is less expensive than a four-year university — or obtaining a loan to attend a trade school.

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Attending entertainment events such as sports, concerts and movies are out of reach. Consider that the average cost per person to attend an NFL football game was more than $125 in 2016. Even going to a movie is not in the budget very often.

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The good news is you must work 40 hours a week every week to make ends meet, so you don’t have time for a vacation. The bad news? Even if you could take a week off, American Express says the average amount spent on an annual vacation in the United States per person is $1,445.

Other options are to spend your days off exploring your own city or to go camping.

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Professional Services

Professional services, such as retaining an accountant for taxes or an attorney to represent you in defending a lawsuit, are crucial. Attorney fees, however, vary widely from a few hundred dollars an hour to over $400 an hour — even a prepaid legal service isn’t in the minimum wage budget at an annual cost of $300. Professional services not might sound like a luxury, but it’ll seem like one if you can’t afford it.

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Debt Repayment

Debt repayment is not feasible on minimum wage. Some credit cards require an application fee on an annual or monthly basis. The average credit card interest rate is 15.59 percent, which means if you buy $100 worth of merchandise and only make the minimum payments, that $100 turns into $115 at the end of the year. If a credit card is obtained, it should be used for daily living expenses within the budget and paid off every month.

For example, use the credit card to buy the monthly food at a budget of $270. Then pay off the card at the end of the month — you’ll build up your credit without piling on debt.

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Setting aside money for retirement isn’t an option when it’s difficult to pay for basic needs. The sooner you start saving for those golden years, the more money you’ll have because of compound interest — but it doesn’t make sense to forego needed dental work now, for example.

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Emergency Savings

This fund can cover a period of unemployment, sick days and unforeseen expenses. The recommended amount of three months pay would be $4,326 at the average national minimum wage level. That would require saving $360 per month for 12 months or $120 for 36 months.

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Internet access would seem to be a critical service and for most people it is, but it’s not low cost when accessed with your computer. One option is to use the computers and internet at your local library for free. Grocery stores, fast food restaurants and coffee shops often offer free internet access as well.

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TV costs depend on the service provider and whether or not you select the basic service or add additional premium channels. But on minimum wage, $99 per month could be the difference in making rent.

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Eating Out

Going out for dinner is not an option when you only earn minimum wage unless you’re working at a restaurant and meals are a benefit. An average fast food meal costs between $5 to $7, and an upscale restaurant is way beyond the budget at over $50 per entrée. If you’re determined to still eat out while earning minimum wage, use these tips to save money.

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New Clothes

Brand-name clothing is not affordable for minimum wage earners. Calvin Klein jeans sell for around $100, whereas generic jeans at a big-box store are around $15 to $20. Secondhand stores or thrift shops are less costly alternatives.

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Personal Care

Personal care beyond the basics, such as visiting a hair stylist or a standard barbershop, cannot be done on a regular basis. The average hair stylist’s charge is about $144 — even a basic one can be $55. Most men might choose a national chain like SportClips, which offers quality haircuts at an affordable price. No matter what bargain you can find, personal care products will always be a bottom priority for people living on minimum wage.

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