Given that lack of financial education, it's no small wonder that, according to MarketWatch.com, half of the Americans who pay for their housing cannot afford it. They have to give up medical insurance, move to cheaper and less desirable neighborhoods, forgo luxuries, get second jobs, and run up credit card debt just to have the cash needed to afford their mortgage or rent. Standard wisdom is that you spend not much more than 30% of your after tax income on housing, no more than 60% on housing, utilities, and other fixed expenses like groceries and car notes combined. Let's get real here. That's what you shoot for if you make more than minimum wage. If you make more than more than minimum wage.
Federal poverty guidelines state that a single person with no responsibilities to anyone else needs to make $11,888 pre-tax to be considered above poverty. Add another person to that (ooh-la-la) and the line jumps to $15,142; $15,600 if that's one adult, one kid. Breaking that down, if you work a solid 35 hours per week, every week, all year long, and have no responsibilities, you aren't in poverty. Technically. But between Uncle Sam and Aunt 'Bama, you are only bringing home $500 every two weeks ($1,000 a month). Keep following guidelines and your rent should be no more than $300 a month, utilities no more than a couple hundred, then a couple more hundred for groceries. That's $700. Figure in gas, clothes, entertainment and what do you have left? Enough for medical care, emergencies, savings accounts, retirement? Not likely. What happens when you want to get married, buy a house, raise a family? And WHERE do you find a place to rent that's only $300 a month and isn't in some nosy grandmother's basement? As Tina says, "Uhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh"
Looking at it that way, with the numbers laid out neatly, you would think that people would know they are operating in the lower tiers of the socio-economy and would be able to plan accordingly. It is, after all, pretty well defined: you make this much and you are the working class, this much is middle, this much is upper. But, according to a study done by Kristjen B. Lundberg and B. Keith Payne of the University of North Carolina and Aaron C. Kay of Duke University,
So what do we do? The first step to clearing up those false views is as simple as a sitting down and making a list of money coming in and money going out. Get a clear picture of what your finances look like. Then put your Google-fu to practice and research. Find out where you sit on the socio-ecomonic scale. Maybe you are lower than you thought; there's no shame in that. Information is power and once you understand where you sit, you can begin to make plans to achieve your goals. Maybe you are higher. Congratulations! Make sure that you educate yourself on ways to wisely spend your money and manage debt. Community colleges sometimes offer money management courses. Get to know your local organizations. Places like the Link of Cullman County make it their business to collect resources that help with everything from buying furniture, finding housing, and joining support groups to finding day care, getting a job, or learning about sound money management. Join local couponing groups to stretch your grocery budget. Every little bit of knowledge that you gain puts you one step closer to becoming a financially independent person that everyone has it in them to be.