I have a reader who sent me in a cry for help about a large gorilla on their back. This reader we will call “Sara,” since they don’t want to be identified, is a single mom of 3 children in the Mountain West. She makes $16 an hour, and brings in $1105 every 2 weeks for a total of $2,210 a month or $26,520 a year. The poverty line in region is $24,250 for a family of 4 to give this some reference. Sara’s bills are as follows:
Rent- $750 (soon to be $1100)
Insurance (auto, rental)- $52
Cell Phone- $60
Car Fuel- $120
Student debt- $200 ($7,500 total)
Church Tithe- $110.50
Charitable giving- $50
$2,192.50 Total and soon to be $2,447.50
Sara also has about $5,000 in savings for an emergency, but no health insurance, no life insurance, and has stopped saving since there is no room in the budget to do so. Sara is feeling stressed! The best thing going for her is her Bachelor’s degree, which she holds and is not utilizing properly. Someone with a college diploma shouldn’t get out of bed for anything under $30 an hour pre tax, which about what she is worth in Idaho. I see this has a few options to help free her from the beast. Lets explore a few options.
Option 1: Get a new job as soon as possible. Sara is worth more and should be able to make double her current salary. She has to childcare costs listed so I would assume she is not working long hours, but hours that work out well for her children. With a better job she will be able to pay childcare, get medical coverage for her and her children and she can afford the rent hike happening. You need to be a free agent in the marketplace and always be looking for the best deal out there. Also, since a rent hike is happening you can become more mobile and look at other areas for your family.
Option 2: Cut your bills. There are places where we can free up money, such as get a flip phone for about $10 and month, cut the internet and use Starbucks, McDonald’s or you work internet for free, use a bike instead of a car to commute, move to more affordable housing closer to town to make everything walkable. You can cut out charitable donations since you are in a charitable situation. (Most studies show those who are poor pay a higher percentage of their income to charity then richer Americans.) You can find a way to eat cheaper and get that down to $100 a week, but none of those solve the medical care problem because all the money saved will go into medical coverage or paying more on the student debt.
Option 3: Get Extreme. You can move into a camper and live in the free forests in the mountains or live in a boat on the rivers there, and that would cut a lot of bills. You can also shun civilized technologies and go no phone, internet, no tithe, no charity and this extreme measure would leave you with car insurance, student loans, food, and misc. You would still need medical insurance because you have children and they will get sick at some point.
Option 4: Get a roommate: You can split your bills with a roomie like the good old college days this frees up rent money, rental insurance, utilities, internet, and maybe some food as well. This allows you have medical insurance money and pay your student loans down faster thus freeing up that money to go into savings.
Sara you can pick a plan or combine plans or come up with something we haven’t even discussed here. I have more ideas, but the bottom line is you need to act quickly because you are about to start going into the red with the rent hike, and you are 4 new tires away on the car or one sick kid away from loosing it all. I believe you are underpaid for your education and you need to get your income up, also I would get out of a rent hike that big and look for something in the $700 range. No more than 30% of you salary should be rent or mortgage. You also need to get to a point where you are saving 20% so you can plan for your future and your children’s future. You need to get some for of health insurance for your children and a good job can solve this for you. I hope you take action soon and you will feel the stress melt away. I was in a similar situation as you about 10 years ago and a better job really helped me and my family change out lives around, and help postpone my grey hairs until later years.