How to survive series - On $30,000 in Austin, TX
In this series, I examine how to survive on a specific income in a specific city in the United States. I will make some assumptions in each scenario, the main one being that the income considered is post-tax and any deductions.
The scenario: A single, low income earner, no family to support, has a job, has no car and no other loans but needs to save for a car. Unfortunately, this income does not qualify for SNAP or Medicaid benefits, so food and health will have to be handled without assistance.
Income (Post-tax): $2,500 per month
Status: Single
Loans: None
Location: Austin, TX
Car Payments: No, car needed
Car Required: Yes
Car down payment: Not Saved
Insurance: None and not eligible for Medicaid
Housing | 750.00 | Shared housing is entirely possible even within the core city. Casting the net a bit further afield will make it even cheaper. Plenty of options available on roomies.com. Try to find a place closer to work and shopping to minimize the need for a car (easier said than done, true). |
Groceries | 400.00 | Prioritize cooking and eating at home. $400 a month for one person is enough to afford healthy food options at local grocery stores. USDA estimates show that 400 dollars will be more than enough for one person for one month of nutritional groceries. |
Bills and Utilities | 500.00 | This includes all shared utilities in the house (gas, water, electricity), plus cell phone plan, internet, subscriptions like Netflix. This is a flexible expense but a high enough number that quality of life is not overly compromised. |
Unexpected | 250.00 | Surprise expenses always come up. Use this money especially to take care of health issues because it is likely that those get ignored with no insurance. Look at online resources to help you decide where to get help. This bucket will also take care of expenses for your unique situation (like transport, other fees, etc.). If you don't have unexpected expenses - ROLL THIS OVER TO SAVINGS |
Going Out | 250.00 | A few meals and a movie or two. Ideally, you can limit this to about $150 and roll over the extra hundred to savings. |
Savings | 350.00 (to 600.00) | Save for a cheap, reliable car. Buy from a reliable source, even if it is slightly more expensive. Target a Toyota Prius or a Toyota Corolla from Carmax. You will need to save for about 18 months for the down payment. |
TOTAL | $2,500 |
Savings Goals
Save at least 3 months of expenses for unexpected costs. If you can save an average of $400 per month using the above plan, it will take 15 months to save that amount. If living without a car for that long is impossible, use these savings first to save for 20% down on the car. For a $15,000 used Corolla that will be about 8 months of savings.
See below for trying to earn extra cash. As much as possible, try to earn enough outside your regular income to cover for the car payment (about $255 for a 15,000 dollar car with 20% down and 8% interest for 60 months).
Maximizing Income
Let's face it - 30,000 (even after taxes) is not enough to live a good life. This means that to have significant savings and move up in life, you will need to focus on maximizing your income, not just budgeting scrupulously.
Get and keep a job, any job. Seems obvious enough but many people hold out for "something better". Nothing wrong with that, but remember - money begets money. Even a shitty job is better than no job. Keep looking for the next best thing, but not at the expense of denying yourself a basic income.
Be prepared to work long hours. Work-life balance is important. But the only way to get there is to work yourself into that position. You'll be well-off and comfortable before you know it, provided you put in 60 hour weeks for a few years and are smart with your money and your (admittedly little) time. After all, you have to play the hand you have been dealt.
Do legitimate side hustles. Don't chase get-rich-quick schemes. Don't bet your life savings on bitcoin or meme stocks. Speculative investments are for people who are OK to lose their money. You are not that person - yet.
Always be on the lookout for better paying jobs. There's ubering, deliveries, warehouse and factory jobs, retail and everything in-between. You might be able to swap into a gig that pays a bit more, so never "settle" for where you are.
Investing
Investing doesn't necessarily mean putting money into the stock market, though that is something one should definitely do as early as possible. In this scenario, once your core cash savings (~3 months worth of expenses) and car down payment is taken care of, roll all the extra savings into a ROTH IRA and invest in VOO. Set it and forget it for the next 30 years. You will be a millionaire many times over by your early sixties. The key is discipline and consistency. I will examine the power of compounded savings in another post.
Investing also means bettering your skills so that you can improve your earning potential. Save up for school. Look at vocational training. Plumbers, electricians, contractors are always in high demand. For example, apprenticing under a master electrician is one way of investing in yourself and setting up for a much higher income in the future. Or, look into becoming a hair stylist.
Disclaimer: The information and links provided herein are for general informational purposes only and should not be considered as specific advice or recommendations. While we aim to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Please consult with a financial advisor, attorney, or tax professional regarding your specific financial, legal or tax situation.
Comments