How To Live Comfortably On $10.10 Per Hour

Earlier this week, Jon Stewart had Florida Senator Marco Rubio on The Daily Show to discuss his new book. During their interview, which contained many good points, Sen. Rubio said that it’s impossible to get ahead on $10.10 per hour, the new federal employee minimum wage.

This is an oft-discussed issue, that the American minimum wage is too low to support yourself on, let alone get ahead. There’s even the Live the Wage challenge going around the past couple years to demonstrate how impossible it is.


The problem isn’t the wage base. Rather, it’s the exhaustive consumerism of the standard American lifestyle.

Much has been written about the Standard American Diet (SAD), and it has become mainstream thought to accept the fact that, in general, Americans eat like crap. Two thirds of us (myself included) are fat, and the reason why is not a mystery.

Much less, sadly, has been written about the waste that exists in the average American household. The cadre of bloggers and authors covering the topic is small, albeit vocal within their specific sub-groups. Unfortunately, those of us that embrace simpler, low-budget lifestyles are viewed as oddballs — the idea of living well below your means has not yet crept into the American mainstream. I don’t expect this post to have any impact on that, but I’m at least going to take the time to throw my two cents into the debate.

I’m going to specifically address Sen. Rubio’s comment about not being able to get ahead on the new federal employee minimum wage. All of the numbers I’m about to put out there onto the Interwebs are on a per person basis.

The first fact that I want to mention is that almost everything that we spend money on is a want, rather than a need. Westerners in particular are too quick to confuse the two.

Needs are things like oxygen, water, and food. Technically speaking, humans don’t need shelter and clothing — they’re simply contrivances that allows us to extend our habitat range. For the sake of this discussion, however, I will put those into the “need” category.

I also want to point out that a large chunk of what we spend money on is straight up a waste of money. The irony never ceases to amaze me when a low-income individual complains about their finances while smoking two packs a day.

So let’s see how to go about living comfortably on $10.10 per hour. I’ll make the assumption that such a person is working 40 hours per week. That’s $404 gross per week, or $1737 per month, or $21k per year.

Let’s start chopping.

The average American earning $21,000 per year actually has a negative effective tax rate. In other words, due to such things as the Earned Income Credit and the Child Tax Credit, the average low-income worker doesn’t actually pay income taxes, but rather receives a refund for, well, free. Yes, this is a wealth redistribution mechanism, but that’s a topic for another post.

For the sake of argument, we’ll consider that this is a single person with no children. For 2014, that makes their combined personal exemption and standard deduction equal to $10,150. This person is not eligible for the EIC or CTC, so their tax bill is actually $1,178 for the year. As an aside, one of Sen. Rubio’s other suggestions is to expand the EIC,which would impact this particular single taxpayer.

Let’s not forget Social Security and Medicare. That’s going to eat up another 7.65%, or $1607, from our Jane Doe’s paycheck.

State and local taxes are also going to take a bite. The national average for all income earners, of all wage levels, is just under 10% for state and local taxes. I prefer living in states with no state income tax, but others don’t hold that view. Since there is such a wide range of possibilities, I’m going to pick my old home state of Colorado and say that Ms. Doe is paying 4.65% to the state, or $505, on her taxable income.

Add that all up, and we see that she’s paying $3,290 in federal and state payroll taxes. That’s an effective tax rate of 15.6%. Don’t try comparing this number to other articles you find online, because most sources are only taking income taxes into consideration when running these numbers, which simply isn’t accurate.

I’ll also point out that if Jane had one child, she’d actually have a $2800 Earned Income Credit in this scenario. That tax credit is not a good reason to have a child, in my opinion, but it illustrates how our tax code is used as a wealth redistribution and social engineering tool.

So Jane is now down to living on $17,790 for the year after taking into consideration the government’s cut. Let’s look at what is normally the biggest chunk of any person’s spending: Housing.

Too many people, when looking at these scenarios, grossly overestimate the housing level required to be comfortable. To put it bluntly, Jane doesn’t need her own apartment. She might want her own apartment, but she sure as hell doesn’t need it.

Instead, let’s have her rent a room in somebody’s home. A quick look on Craigslist shows me quite a few rooms for rent in the $350 to $500 per month range. Let’s pick something for $450, in a nice home living with a married couple without kids. That’s $5400 per year to live quite comfortably by global standards.

Now, I do want to point out that living in a traditional residence is not the only option. People live full time in RVs, boats, and other situations that are quite comfortable. Sometimes you have to think outside the wood and Tyvek box.

Jane is now down to just $,390 for the year to live on. Let’s talk about getting around town.

I just checked, and Jane can get an RTD monthly pass for $869 per year. This will allow her to get back and forth to work, go get groceries, visit friends, etc. The Denver bus system is quite good by American standards, and Denver has a growing light rail system, also.

I know what some people are saying. “Hold on partner, you expect her to take the BUS?” Yes, that’s correct.

For a city dweller in particular, owning a car is a totally unnecessary luxury. That’s a blasphemous statement in the United States, to be sure, but it’s true. In some cities, such as New York City, it’s more normal not to own a car, but in general, this would be “strange” in most cities.

Cars a tremendous expense. Even though gas prices are going down, there’s the cost of acquisition, maintenance, parking (in some places), etc. The IRS National Standards allow for a whopping $517 per month car payment and, for Denver, $236 per month in operating costs. These standards, used for calculating ability to pay back tax debts, represent a “middle class” American lifestyle.

Do you realize how much money that is? That’s over $9,000 per year in expected vehicle costs. That’s insane. For the past several years, I’ve gone just fine without owning a car (granted, I had a motorcycle, which is far cheaper to own and operate, but it mostly just sat in storage). For the types of errands that most Americans run, we do so very inefficiently. By planning ahead and clumping our trips, taking the bus is just fine.

So, Jane is now down $11,521 to live on. Let’s talk food.

As somebody that’s done, I can tell you how easy it is to spend $900 per month, as a single person, on food. This is accomplished by eating out for every meal. It’s very easy to do.

What’s also easy, also speaking from experience, is to just cook at home and make simple meals. Simple, healthy meals really aren’t that expensive. I personally believe that the slow cooker is one of the greatest inventions ever. Ten bucks worth of ingredients in the slow cooker can easily feed me for three or four days.

Taking this into account, plus a number of other articles I found online in a super simple Google search, proves my point that a single person can eat quite well on as little as $100 per month. Really, really well on $200 per month — this is about what I currently spend myself. So let’s cut the difference and give Jane a $150 per month food budget. In a future post, I might break this down to prove the point that it’s actually a lot.

Jane is now down to $9,721 per year to live on.

Let’s talk health insurance, now that it’s required by law. Jane’s situation qualifies her for a $71 per month Premium Tax Credit to help pay for health insurance. On the Colorado Healthcare Exchange, her cheapest plan is going to run $107 per month. Minus the credit, that’s only $36 per month for health insurance, or $432 per year. This brings Jane down to $9,289 to live on for the year.

What else does Jane need?

Nothing. Jane doesn’t need anything more.

I’m making an assumption here that Jane has a wardrobe already. If Jane is smart, she’ll recognize the fact that she doesn’t need to spend hundreds of dollars per month on clothes that will just sit in her closet anyway (I’ve read studies showing that, on average, Americans never wear 3/4 of the clothing they own). Maybe Jane needs to replace a worn out piece of clothing occasionally, but this will be  only a few hundred dollars per year, at most. Even less if she shops at thrift stores.

Note that I’m not going to the super-extreme here. There are other blogs, such as this one, that advocate mending your own clothing, darning socks, etc. Most people aren’t going to be willing to do that. I know I’m not.

Jane’s going to probably purchase personal care items like soap and deodorant. I’m not suggesting giving those up. But, at most, these items shouldn’t run more than a couple hundred bucks per year.

We’re also going to assume that Jane has no debt. In this scenario, Jane is in her early to late 20’s. Smart people don’t get into debt, for anything… Ever.

I used to be a total moron in this regards. Absolute idiot. Dumbest person on the planet. To the point of bankruptcy. I’m not proud to admit it, but filing for Chapter 7 bankruptcy is one of the smartest financial moves I ever made, because now I’m debt free.

We’re going to assume that Jane is smart, and doesn’t have any debt. Not even student loans, because she didn’t think she could afford college, and her parents didn’t have the money to send her, either.

So look at what we just laid out. Jane is making $10.10 per hour, the new minimum wage for federal employees. I even made her pay for her own health insurance, just in case she’s just a federal contractor and doesn’t get health insurance at work. Jane lives in a room in a nice house in suburban Denver, and pays her own way in life. She earns about $9,000 per year more than she actually needs to live on.

You’ll notice that there are some things Jane doesn’t have. For example, a cell phone. With many cell phone plans breaking the $100 per month mark, this service is yet another example of the extravagance of Western life, and it’s a needless expense.

Blaspheme, yes. But really, it’s true. Jane doesn’t need to be reached at a moment’s notice. She doesn’t need to check Facebook every two seconds. Jane can spend time with her friends face to face. Heck, she can buy the first round of beer because she’s not paying for a cell phone. Ya’ know, the way life was 20 years ago, when hardly anybody had a cell phone.

Does this mean she doesn’t have one? No, it doesn’t. Jane likes the security of being able to call a cab if her friends ditch her at the bar, or to quickly check the bus schedule if she’s on an unfamiliar route. She also calls her mom once a week for half an hour.

Well, guess what? That level of realistic talk and data can be had with a $20 phone and about $20 per quarter in pre-paid cell phone cards. I’m a tax consultant and marketing consultant, for crying out loud — you know, somebody that spends a fair amount of time on the phone — and this is the type of cell phone service I use.

With all this said, and even some cash here and there for entertainment or a round of drinks, and the math clearly shows that Jane has well over $8,000 per year extra to do with as she pleases.

The point of all this math was to counter Sen. Rubio’s comment that a person can’t get ahead on $10.10 per hour. Well, using this calculator I was able to determine that full-time attendance at Front Range Community College in Colorado will cost Jane $5,024 in tuition and books. Interestingly, the same calendar states that, since she’s low-income, she’ll receive $6,450 in grant aid (NOT LOANS). This covers her full cost of college.

This handy calculator from the college shows something else pretty awesome. It says that Jane’s room and board cost is only $8,982, plus gives her an allowance of over $4,800 for transportation and miscellaneous expenses. Jeesh, those numbers look familiar, don’t they?


The reality here is that Jane can pay her own way through college at FRCC while working her $10.10 per hour job, even without grant money. She has the cash from her job to do this.

Is her schedule going to be hectic? Yes, it is. Is she going to be tired, and have to sacrifice having an iPhone 6 and a daily latte? Yes on all counts.

But come on, those aren’t sacrifices. They’re luxuries. And since Jane wants to get ahead in life, she’s going to spend her nights and weekends going to class and studying. She’s going to apply herself, and avoid wasting money on needless spending. If necessary, she’ll make two trips to work each day in order to accommodate a class she needs for her academic program that is only offered mid-day.

When she finishes her certificate program, Jane will earn $15 to $20 per hour as a welder, LPN, computer technician, etc. These are one year or less certificate programs. After her career change and significant salary increase, Jane may decide to pursue her Bachelor’s degree in her spare time. Or maybe not, because now she has a valuable skill and a career.

This is how Jane gets ahead on $10.10 per hour, Sen. Rubio. In fact, based on these numbers, and using financial aid, Jane can actually get ahead in life on pure minimum wage.

Oh, but what if Jane is a single parent? Doesn’t that change the equation? Yes, of course it does. Maybe Jane is going to have to suffer the indignity of living at home with her parents for a couple more years (which many 20-somethings are doing already anyway). Maybe she’ll have to work a swing shift job while her father watches her child in the evening, and she can only take two or three classes at a time. Regardless, Jane can still get ahead in life by making the right choices — even on minimum wage.

Sen. Rubio, I like you. Heck, I’d probably vote for you in 2016 if you ran for the White House. But your assertion that somebody can’t get ahead on a low income is just plain wrong.