This article on MSN was convicting:
Too broke to save money? Never
Liz Pulliam Weston responds to a reader's e-mail. Jason Adair supports a family of three on $40k per year, and he finds most of the money-saving advice available — some of mine, probably as well! — quite unhelpful:
“Please, spending $15 at Arby's every other month is a splurge. My wife and I have not purchased a meal in a real restaurant in about three years,” Adair wrote MSN Money in an e-mail. “I want to see an article that helps people that are truly struggling.”
I admit that it's an awful lot easier to trim your budget when there's a lot of fat in it. Cutting out gourmet coffee isn't exactly an option if you're on WIC. Not eating out as much isn't really an option if you're not eating. It's a whole new level of budget cutting when your discretionary income is near zero.
But how does one go about giving this kind of advice? It's not easy to do this because it's a fine line to walk between helping someone in this situation and insulting them. Northwest Airlines found this out the hard way. Many things that people like to do when they have the choice are degrading when they don't have the choice, like dumpster-diving or shopping in thrift stores. It stings more if the person giving the advice hasn't “been there and done that.” Staying at a Holiday Inn Express doesn't cut it.
The advice given in the article offers some good ideas:
- Revisit fixed expenses. Like rent, health insurance, and transportation. These aren't easy things to trim, but it is possible.
- Boost your income. Making more will get finances back on track as well as cutting expenses. She suggests asking for raises, starting a side business
I'll elaborate and add a couple of other suggestions, at my own peril. Please leave a comment if I'm way off-base or if you have other suggestions:
- Blog. If you have access to an internet connection, you can blog on your area of expertise, sign up for AdSense and other affiliate programs, for free, and make money. Just add your time. If you have $10/month you can throw at getting your own domain name, so much the better. This is a shoestring business that can bring in an extra $100/month without much problem within a few months.
- Move. If you live in an expensive area, you can cut your living expenses by moving to an area with a lower cost of living. This isn't an easy thing to do and it isn't without cost. It also requires some planning to make a smooth transition.
- If despite your best efforts the ends aren't meeting, talk to your church's benevolence committee if they have one. (I'm on this committee at our church.) That's what they're there for. Usually the people on the committee will have financial resources for the times they are truly needed. They also will confidentially administer or know where to get other assistance like work for hire or free financial advice. Charity is an ugly word if you're in need of it, so I really hope that this didn't come across the wrong way. The good thing (for those who honestly want to improve their situation) is that the charity won't continue forever (or at least shouldn't). It's the job of the benevolence committee to equip but not to enable.
Any other suggestions? Do the things I mentioned ring true or fall flat?
I see people growing networth by thousands of dollars a month and ask where do they get the money? I tend to see the stock market increasing many of their networths, mostly in Retirement accounts. We do make a fast food stop every couple of weeks, if we happen to be out near eating time. I have cut going out for lunch at work, saving $20+ a week. I have also taken the suggestion of the blog hopefully giving others a view of the the smaller networth increases and the occasional networth fall. I am as planning to try to make money off of it, we are all trying to get out of debt after all. Once my blog is 90 days old I will be adding payforpost as I see it as rather easy money. People can always ignore those posts.
I think you bring up a very good point here, and I'll have to spend some time thinking if there are any ways I can come up with to give really useful advice in this situation. I think of the ones you offered, the last one is probably the most pragmatic. In my experience, people in this reader's situation probably don't have access to internet/blogging software or even the ability to really move. (Although I did hear an NPR story about how homeless in SF manage to blog, strangely enough!)
Here's a case where increasing earnings rather than cutting expenses would really have a greater impact. If there's a way the reader could do that immediately, that might aleviate some of the pressure.
I have a few friends who grew up living in similar situations or worse, and in the long term, the main thing that has helped them has been support and encouragement from family members to focus on school, the ability to get scholarships for a good higher education, which then led to higher paying jobs, allowing them to support their family. But for every one who succeeds this way, there are hundreds who don't make it as far.
Regardless, it's a difficult situation that I guess many of us pfbloggers don't, but probably should, consider when we dole out advice. Thanks for bringing it up.
The best advice I've found, outside of that given here, for folks who are truly struggling is the Tightwad Gazette. There are multiple volumes with TONS of money-saving tips for running a household. (Ever thought of creating your own "Bisquick", rather than buying it premade?)
Available at the public library (another excellent resource for everyone, not just those with a short paycheck).
The big ticket things are where people do not want to tread.
I have several co-workers who live in neighborhoods w/ McMansions and wonder why they are living paycheck to paycheck, while I live in a little ranch house w/ 3 kids and a stay @ home life partner on the same salary. DUH! My house has low ceilings- less costly to heat. I could walk or bus to work when they *have* to commute and pay for parking. They are so worried about where they live and the appearance of "having" that they don't really have.
Housing costs, transportation costs, energy costs are 3 big areas people don't look at enough. Yeah, I get food costs can be adjusted- but as you said in the article, saving on eating out doesn't make any sense if the family is on wic.
I would also throw out free money offers like the $50 Sharebuilder bonus offers – use your local library access and sign up for a couple of accounts. Or credit card offers with sign up promotions like the Citicards w/ $100 giftcard. Its a great way to add a little something
I don't have any great advice, but we are living on $24,000 a year, so I know the pinch. The best thing is to boost your income, but it's not always that easy or possible. I have a blog, but I don't even come close to making enough to get paid though Adsense. We do freelance on the side but of course we can't count on it as consistant.
Here is what we do. We don't eat out, we do home hair cuts, we use the library, we don't go to movies (we use Blockbuster online to rent them instead), we cook at home, we don't have magazines, and we use prepaid cell phones (cost is about $200 a year versus what we were doing before at $1200 a year). The key is to get creative and spend on the things you acutally value.
I also get annoyed by all these financial makeovers where the after picture looks worse than my before picture. I'm tired of all the advice being for people in at least the 25% tax bracket. Most people are in the lower tax brackets, and they should need financial advice even more.
I've known students who lived in apartments with two bedrooms and four (or more) people.
I think people with really low incomes mostly survive with bartering skills. They get relatives to watch the kids and/or trade off with friends. Find which friend knows how to cut hair, which knows how to fix plumbing. You really just all share your skills. And maybe only one person per block needs a lawn mower if they all share. Or in a more expensive neighborhood I know someone who mowed an elderly lady's yard in exchange for use of her mower for his own yard, too. You just get more creative like that.
Eat only low-cost nutritious food cooked from scratch–no sodas, no cookies, no steak. People living during the Depression came up with some pretty amazing and creative recipes.
I've lived with no car in a place with extremely mediocre public transportation. One year I wouldn't even let myself ride the bus, even on the 1.5-mile trip back from the grocery store, because it cost a quarter. I just learned that you buy juice concentrated, not in big jugs, so it's not so heavy. And you put the heavy things in the backpack (my one investment that year) and carry the lighter things in your arms. And when it snowed, it was slippery (so I had to get shoes with good traction), but at least you can stay warm when you're carrying all that weight! I considered it my aerobic activity for the day.
I think even when you are extremely poor, you can still feel empowered by making some of the depressing choices you have to make. If you go just a little more extreme than you have to, you can save enough to do things like move somewhere cheaper, etc.
What I don't know is how sick or weak people do it. All the defensive measures I've taken were no problem because I was still healthy and in good shape. Also I expected the extreme measures to be temporary. What about people who get poor because they can't work because they are always in intense pain or something?
In the job loss scenario, you have some advantages over serially poor people and some disadvantages. The disadvantage is that you may have large debt payments or other obligations that you would never have signed up for if you had known this was coming.
An advantage is that you probably qualify for unemployment compensation. You probably have a lot of supplies. You can just plain stop buying clothing, for example, until you wear out or grow out of too many things. You can eat what's in your pantry, just shopping to supplement that. You probably have a working TV, though you might need to cancel cable. You probably still have a working car, so you can get to job interviews and libraries and free concerts. You probably still have a working computer so you can personalize your resumes.
Northwest should never have tried to suggest things directly–they should have recommended some third parties to give that kind of advice. Even good advice coming from, basically, the people who still have their jobs or can probably quickly find new high-paying ones and thus do not have to follow the advice, will come off as patronizing no matter how well it's presented.
I don't know how financial bloggers can help a wider range of readers. On one hand, most money-saving tips can be generalized to apply to many income levels. For example spending less than you make seems hard for even some rich people. Spending less on housing can mean having fewer houses, having a smaller house, moving in with others (or having boarders), living in a trailer, living out of your car, living in a shelter, living on the street, and probably more options I don't know about.
On the other hand, it's just hard to think beyond the edges of your everyday experience. It seems to me that many pfbloggers don't know much themselves and are sharing as they're learning. Unless things get really bad, they're just not going to have advice for staying safe when you're homeless or preparing meals when your gas and electricity have been turned off (coolers? BBQ grills?).
Thanks everyone for your comments! I really appreciate the additional perspective and the personal sharing.
Sometimes it is not about the money. It is our beliefs about the money. We can always find reasons why a suggestion (like the ones Northwest Airlines gave or TV shows do for higher income level) do not work. Yet as the MSN article said, a key is to go from I can't/won't to I can/will. Yet, it starts well before these words in our beliefs that finances need/should be a struggle.
I like what Debbie said above. Yet, when people get focused on the factor that I need to walk 1.5 miles instead of driving to the store, it brings up how hard life is today. Yet, in reality, this was the life for most (not just a few) back in our grandparent's generation growing up. And, when we see how hard life is, that is what will keep showing up in our lives. It is the law of attraction. We attract what we think about. Thus, if we think about how lacking our lives are, that is what we will attract. The key is to start with gratitude. What do you have that you are grateful for? This starts to change our beliefs about life, our words (I can/will vs. can't/won't) and changes our energy. Sometimes it is not about finding a second income. It is about giving a renewed energy at work. If your energy is down and dragging, will you ever get promoted for find a new job? If you energy is at a higher frequency, is it easier to get promoted or go into a interview and convince them to hire you? So it starts by changing our beliefs with gratitude.
The best advice I have for the working poor is to remain vigilant about getting a month of savings in place. The treadmill of paying late fees every month because you come up a little short each month is dreadful and feeds into a cycle of short term decisions. It takes a critical mass of capital to avoid resorting to pay day loans, renting furniture, bounce check fees and late fees. All of these easily can eat up 10-15% of the funds, but it can be eliminated when buying today's goods with last month's income.
It isn't easy to do, but I believe it presents a workable goal.
Do whatever it takes to get the book by Robert Scheinfeld "Busting Loose From The Money Game"
Many greetings
Halina
Personally, I totally agree with you.
For the truely poor, there is no way to save money. They already live below the poverty level. They can’t cut their cable because they don’t have cable. Ditto for a cell phone (many can’t even aford a land phone). Most can not afford cheaper housing because they are already in the cheapest house available, section 8 can take over a year to kick in their help (and even then, they have so many rules and regulations they won’t always help you). Taking in a room mate can cost you more than living alone when that person is mentally disturbed, a drug abuser, has the police looking for them every week, eats your share of the groceries, runs up your phone bill, steals your belongings, and skips out without paying their half of the rent, and you end up getting evicted for it. Not all towns have bus service, or even a grocery store you can walk to. Most grocery coupons are for items the poor can’t afford to buy even at the discounted price, so what good are they? Too many of the social service societies also have rules about what they will and won’t help you with, and if you are lucky enough to have a piece of junk car you depend on to get to the store and needed medical appointments, they won’t help you put gas in it or get a critical repair unless you have kids. Savings accounts can be your enemy. Keeping money in the bank for that rainy day counts as income most of the time, and many public assistance programs the poor depend on to survive will reduce your monthly benefits by how ever much you have in savings. Working is not a better option in many cases, because assistance programs either take half what you make or you loose all of your public benefits (like medicaid, and if your can’t afford insurance for pre-existing medical conditions on mimimum wage, you need those benefits), so you end up with less than you started with. Not reporting income can get you in trouble legally, and get you banned from recieving some public benefits for life. employers want you to look and smell decent, but the poor often can not afford the clothes, laundry and water bill (especially if they aren’t getting paid for two weeks). Some programs will give you one outfit to wear to get a job, so are you supposed to wear the same outfit the whole two weeks? Food stamps are not enough money to eat healthy, and hard enough to eat cheap on. Utility companies offer “assistance” by reducing your bill by some really small amount of money, which isn’t really all that helpful when it’s less than two bucks a month. Free delivered meals and soup kitchens you have to go to operate on limited hours (understandable) but not always hours the poor can manage (bus service late getting you back from your appoitment, too bad, meals on wheels already came by and you weren’t home). All these programs to “help” the poor sound wonderful, unless you really need them to survive. Most of the time, assistance is only enough to keep the poor from dying on the streets, it’s not enough to really help the poor get off the programs (and most want to if they could). If those lucky enough in their life’s circumstances stopped blaming the poor for “not trying”, maybe real assistance would be available. You can not truely understand how difficult it is unless you have been that poor.