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04/16/2007 - 6:43pm

Retiring Comfortably at Minimum Wage


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As a Libertarian, I've often advocated the abolishment of social programs and the removal of government intrusions into businesses (and people's personal lives) in the forms of such acts as minimum wage. The response I receive from the opposing view is often that people in this income bracket, who ever commonly referred to as being in poverty by federal government guidelines, can't support themselves. My blatant, but often unwelcome, reaction is that that's their own fault. If someone wants to support and make a good life for himself, he has to work at it just like the rest of us.

But in this article, I've decided to take a more practical position. Here, I've laid out a financial plan that will allow someone working nothing but minimum wage jobs his entire life to retire comfortably.

Our subject, let's call him Steve, we'll start out at 18 years of age just after finishing high school (which is not a prerequisite, since punching a cash-register doesn't require a high-school diploma), and we'll assume he has nothing. He has no money, no car, and lives with his parents as most of us did at 18. We'll also assume that since he lives with his parents that he has his basic necessities taken care of, like food (again, as most of us did at 18).

So it's time for Steve to get his first job. He'll get his first minimum wage position at the federal minimum wage level (I know some states have their own minimums that are even higher, but we'll go with the lowest just to make this fair) of $5.15/hour (as of the writing of this article), probably working at a convenience store or fast-food restaurant within walking distance, since he has no other transportation. This means if he's working 40 hours per week, no overtime, then he's making approximately $882.86/month in a standard 30-day month. Since this creates an income of $10,560/year, that puts him in the lowest income tax bracket and means that he'll owe very little federal and state income tax. With a taxable income of $2,110 (after exemptions and the standard deduction), his federal income tax for the year will be $211, or $17.58/month. A state amount of 10% the federal will yield $1.76/month in state income taxes. The standard Social (In)Security and Medicare rates of 7.65% still apply, totaling $161.42/year, or $13.45/month. So here is Steve's paycheck breakdown:

Gross...........................$882.86
Federal Withholdings............$17.58
State Withholdings..............$1.76
Social Security/Medicare........$13.45
Net Earnings....................$850.07

There are a few caveats here. First off, tax situations are unique to each person, so the above are only estimates. For instance, no one has exactly the right amount of taxes withheld from their paycheck. They either end up owing more, or getting a refunds. Regardless, these are the amounts that Steve will end up paying in taxes, whether he gets a refund or owes at the end of the year. Secondly, each state has their own income tax rates, and a few states have no income taxes at all, so the above state withholding is only an estimate.

Steve's take-home pay is $850.07/month. Honestly, that's not all that bad for an 18-year old kid living at home with Mom and Dad. But eventually, Steve will want to move out on his own. Some kids move out at 18, and some are still living at Mom's at 35, so to say that we want Steve to move out by the time he's 21 is perfectly acceptable. This means that during that time, he has no expenses, other than social expenses. Let's allocate $100/month for that. I know, it's not all that much, but it does allow him to go out with his friends on Fridays and catch a movie or spend time with a girlfriend. That means that he's going to put the remaining $750.07 away every month into savings. "Savings" should not be a generic term; there should be a specific purpose for savings. 15% of Steve's income, or $112.51/month, should be put towards retirement (this amount can be put into a tax-free IRA, which will further lower Steve's tax liability, but we won't get into those details). Steve has no debt, so he's making no debt payments. Now he's left with $637.56 each month. Normally, you'd want to have an emergency fund of some sort to cover 3-6 months worth of expenses, but really Steve doesn't have any expenses. Well, at 21 he will if he wants to move out. So let's build up an emergency fund of $5,000, and then start saving for a car and some furnishings.

Three years later when Steve is 21, here's what he's looking at:

For the first eight months of his new job, Steve worked on building his emergency fund, with a goal of $5,000. He dumped his disposable income (minus his fun money) into a 4% interest savings account (yes, they do exist) and built it up to $5,103.92. For the remaining 28 months, he put that income into a second savings account at 4% which yielded $18,590.76. But don't forget, the emergency fund continues to grow for that 28 months as well, which means he's at $5,602.35 at this point.

So Steve just celebrated his 21st birthday, has over $24,000 in savings, and is ready to head out on his own. So he does the smart thing and looks for a roommate. Ideally, he'd like to spend no more than 25% of his take-home pay on housing, which limits him to $212.52/month in rent. That's going to be tough! You certainly can't find your own place for that amount, so he finds two guys in the same position that he's in, and a two-bedroom apartment for $600/month. I know what you're thinking: Three guys in a two-bedroom apartment; but it can be done.

Now don't forget, Steve has saved up over $18,000 (not including his emergency fund). He decides he's going to furnish the entire apartment with furniture and appliances, costing him about $2,000, in exchange for his two roommates picking up his share of the rent for a year. His roommates, who haven't been as thrifty as Steve to create any sort of savings and would otherwise have to sleep on the floor, now each have their own comfortable beds, TV sets in each room, furnished kitchen and common areas, and all they have to do is pick up $100/month each in slack for a year. What a deal! That means that Steve will be able to continue putting a good deal of money into his savings each month for the next 12 months.

Living on his own, he now has additional expenses. Let's figure out what those are. First off, he's not living with Mommy and Daddy anymore, so he's going to need his to buy his own food. That'll cost him about $200/month if he wants to eat something other than generic ramen noodles. That leaves him with about $7.70/day for food (we're not counting Fridays, because he already has $100/month set aside that he spends on those days). This means he's going to have to do an awful lot of cooking for himself.

Steve also decides he wants to buy a car. He doesn't care for walking to work anymore, or bumbing rides from friends when they get together. So he decides to spend $8,000 on a used car that's a few years old and has about 50K miles on it. He uses cash from his savings for this car; no financing, no debt. Which means that he also has insurance, maintenance, and gas (let's estimate this at $150/month). This includes things like oil changes, new tires, and other miscellaneous repairs. And at $8,000, Steve isn't driving a piece of junk. This is a car that's in good condition and was brand new only a couple of years ago. This leaves him with disposable income of $287.56 since his expenses have increased.

On Steve's 22nd birthday, let's see where he's at:

Emergency Fund..................$5,830.60
Car/Furniture Fund..............$12,467.17

But we can't forget about the retirement fund being built with $112.51/month. Since this isn't something that Steve doesn't plan on touching for a couple of decades, he's invested it into a mutual fund earning an average of 9%/year. So his retirement fund over the past four years has grown to $6,520.19. This isn't something that will fund his retirement at age 22, but for someone who works a minimum wage job who has $24,817.96 in savings and investments plus an $8,000 car (completely paid for) is nothing to shake a stick at

It's a year after Steve has moved into his apartment with his roommates, which means it's time for him to pick up his share of the rent at $200/month, which only leaves him with $87.56 to put into his savings (after retirement investments, of course). He has also purchased his car and furniture, so he has no more need to save specifically for those items. However, Steve is aware that cars wear out and need to be replaced. He takes good care of his car and gets about 10 years use out of it, but now it's time to replace it. Statistically speaking, Steve should be able to sell his care for about $2,000, which he does, and replaces it with another $8,000 care very similar to the one he purchased previously. This means he'll need to pull $6,000 out of his car fund. At age 32, here's where Steve stands:

Emergency Fund..................$8,692.45
Car Fund........................$12,586.46 (after pulling out $6,000 for a new car)
Retirement Investment...........$37,918.90

Notice how Steve just spent $6,000 from his car fund on a new car, yet over that 10-year period his car fund actually increased by $119.29. Combining the $6,000 with the sale of his old car, Steve basically just got a free car. Deciding he likes the idea of free cars, and perhaps wanting some other luxuries, like vacations, Steve decides to step this car fund up a notice and move the funds over to a mutual fund averaging 9%/year. When Steve is 35, he decides that he's been extremely intelligent with his money and feels that he deserves a reward, so he takes a month long vacation in Disneyland at the resort that costs him about $5,000. This comes from his car/vacation fund. He also decides that it's time for a new "free" car. At age 42, here's where Steve stands:

Emergency Fund..................$12,958.99
Car/Vacation Fund...............$32,561.03
Retirement Investment...........$114,888.35

This is what Steve has after buying yet another car and paying for his huge vacation. Seems pretty good so far for someone who's done nothing but worked minimum wage his whole life, right? But Steve isn't completely satisfied yet; he wants more. He wants two weeks vacation every year, and by golly he's going to get two weeks vacation every year. And let's make these vacations worth having. Let's say they cost $3,000 each. Steve has also decided that nearly $13,000 is way too much for an emergency fund because that ratio is overkill relative to his expenses, so he shifts $8,000 to his retirement investments. 10 years later, Steve is now 52, and here's his financial standing:

Emergency Fund..................$7,393.02
Car/Vacation Fund...............$44,476.61
Retirement Investment...........$303,567.95

You'll notice that Steve's car/vacation fund grew more slowly than before. That's because, in addition to buying yet another car, he also spent $3,000/year on vacations. In spite of spending a whopping $36,000, even though he only works a minimum wage job, his car/vacation fund increased by just under $12,000. But the one we're really keeping our eyes on is the retirement account. Now well over a quarter of a million dollars. Steve could retire right now at age 52 from only working a minimum wage job, and draw a $28,476.77 annual income, almost three times what he made while he worked.

Just for those who aren't paying attention, I'll repeat this: At age 52, Steve has worked a minimum wage job since he was 18, and has never earned more than minimum wage. He's retiring at age 52 with an income of $28,476.77 purely from his investments, which is nearly three times what he made while he was working. And during his retirement, he can continue to take his $3,000 vacations every year.

And just for those interested, if we were to continue on until age 62 to retire, Steve would have $744,153.44 in his retirement fund, nearly three quarters of a million dollars, yielding an annual income of $69,806.73.

There are variables in this lifetime financial equation which work both for and against this situation. I'll continue my optimism for a bit and go over the major pro first.

Minimum wage jobs are a rarity. Even the most unskilled jobs usually pay a couple of dollars more than minimum wage. For instance, many fast-food restaurants have wages between $8-$10/hour. Someone following the above plan making $10/hour could retire a multi-millionaire at age 60.

Now to oblige the naysayers:

"You mean Steve lived to be 62 years old and never once had an emergency?"

Let's say Steve was out of work for several months on a couple of occasions and completely wiped out his emergency fund. The emergency fund doesn't even play a role in his retirement, so he wouldn't miss it.

"The guidelines you laid out are extremely strict. How can you expect someone to live like that?"

Steve had food and fun during his entire life. He wasn't the most extravagant person and paid attention to where he spent his money, but he certainly wasn't homeless or starving. And if you consider that this is the bottom of the financial food chain, being able to retire at 52 seems like more than someone in that income bracket could have ever hoped for.

"When you say 'someone in that income bracket', it sound very derogatory."

Perhaps, but it's not meant that way. The simple fact is that it comes down to basic economics. If someone wants to be paid a valuable wage, they must make themselves valuable. The point of this article was to illustrate how someone earning the lowest possible income can still live a comfortable life and retire early without financial worry. And it shows that people that aren't doing at least this well are in that position solely because of their choices in how they spend their money, not because of their circumstances that only allow them to earn minimum wage.



Comments
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Posted by: Amber
05/28/2007 7:50pm

So when I am done with school (3yrs.) I intend to come to your house so you can write up a budget for me, as it is apparent to me that you are much wiser than I in the finacial department!

Posted by: Nick Coons
05/29/2007 8:19am

Most of my principles come from Dave Ramsey, so you can find lots of details on his site. But the primary thing here is NO DEBT. Steve never borrows money, he pays cash for everything. It seems odd to think that someone can live and never have borrowed money. But when you have no debt payments (credit cards, car, student loans, etc), you'd be amazed at how much extra money you have every month freed up for investment, even on a very modest income.

Posted by: Tiffany
07/13/2007 7:52pm

Actually, the "primary" here isn't that Steve has no debt, but that he begins planning at age 18 and that he has the option of living off of his family for the first three years that he's working full time. You may say that if he doesn't start planning the moment he graduates from high school, it's "his own fault", and it may be--but it's a reality that many 18 year olds are not mature enough or fiscally educated enough to think this way or even understand how to make it work. In addition, not everyone has the opportunity to live expense-free for the first three years. Aside from those who aren't able to live with parents during that time (parents are deceased, parents remarry and they're not welcome, parents believe it's time for them to get out on their own, parents are abusive or alcoholics or drug addicts or ill or financially unstable themselves, just to name a few common scenarios), and even those who are able to live with parents are often making a contribution of at least a few hundred dollars a month to the household.

So your planning works very well in a bubble, but the moment one outside factor intervenes, the whole thing crumbles.

Posted by: Nick Coons
07/16/2007 9:37am

Tiffany,

The plan was to be used as an example of how someone could live and retire comfortably with only a minimum wage income. In addition to the negative factors that you add that could damage my "bubble", there are a few significant positive factors.

For instance, even though minimum wage is $5.15/hour, and that's what this article was based on, it's easy for an unskilled person to get a job making $8/hour or more. As an example, the various fast-food restaurants down the street from my house have banners hanging up outside that say "Help Wanted - Start at $8.50/hour." You can deliver pizzas for $12/hour plus tips.

The point here was that even at a ridiculously low income of "minimum wage", which very people actually make anyway, one can still do well. If someone were to take an unskilled job at $9/hour instead of $5.15/hour, imagine what that would do with compound interest, even if this person had to pay for their living expenses entirely for the first three years.

You bring up a good point about 18-year-olds not being mature enough to plan this well, and that's probably true in most cases. The lack of skilled planning ability is a recent phenomenon (i.e. within the last 100 years) caused by the lack of a need to plan because government will "take care of you." This is running off on a tangent a bit, but people will do what they need to do to survive. If they can do nothing and still be taken care of, then many people will do nothing because there is no necessity. But if it's "sink or swim", I think people will choose to swim.

Posted by: Nick Coons
07/16/2007 9:39am

But I do think that a big part of it is that he has no debt. With debt comes interest (paying more for something than it would have normally cost) and risk. Living debt-free is an amazing freedom.

Posted by: nobody
07/18/2007 11:59pm

IF:
For instance, many fast-food restaurants have wages between $8-$10/hour.

THEN WHY:
I've often advocated the abolishment of social programs and the removal of government intrusions into businesses (and people's personal lives)

What difference does it make? Why advocate for the abolishment of something that makes no difference anyway? The entire minimum-wage argument is a political ploy to keep minds focused on something other than important issues, much like abortion, gay-marriage and illegal immigration.

It's nice to see that if an American is ever-vigilant at being frugal and saves religiously and is a faithful wage-slave, he can have enough money to retire and be able to survive for a number of years by the age of of 60 or so without depending on anyone else. It's nice, but again, a tad unrealistic to make it sound as if it is idyllic, especially in the richest country in the world.

The argument over minimum-wage is a moot-point in the much larger argument over the state's rights regarding the redistribution of wealth.

The Social Security program was devised when it was observed that an overwhelming majority of the population were not such people, that the majority of Americans were neither frugal or intelligent about saving their money for surviving later in life when they may no longer be capable of working and supporting themselves. The Social Security program was devised in an era when the majority of people, whether they had saved sufficiently for their later non-working years or not, had their savings completely ransacked by the economic collapse of the nation, which could happen again, anytime.

The main principle here is not "no debt" as you claim, but saving a little from each paycheck, STARTING FROM A VERY YOUNG AGE (that's the key), which is something most people do not do, except in the form of paying into Social Security involuntarily (that is to say, by force, which I don't think is nearly as horrible an intrusion into a person's private affairs as you claim). As you have shown, people are much better off later in life if they manage to continually save (and successfully invest) a small percentage of their material reward for their labor (FROM A VERY YOUNG AGE). However, observers of reality can easily note that most people are not good at, first and foremost, saving a small percentage of their income (especially at a young age), or secondly, investing it wisely (if they have managed to save something).

Taking a fraction of my (or anyone's) earnings (when I am young and possibly irresponsible or un/misinformed) to give it back to me (or whoever) when I am older and may need it doesn't seem tyrannical or harmful to me. A state (government) has a right to redistribute wealth so long as their is mutual consent from the majority of the governed (in a democracy), and I believe the majority of the governed in this country do mutually consent to this forced form of savings, and I think the majority is wise in doing so. Of course, there are those who disagree, like yourself (and myself, years ago), but you've shown very little to convince anyone that removing any of these policies (like minimum wage or social security) would benefit the average person. I doubt that it would benefit you, but if you think it would, please explain how the "abolishment of social programs" would benefit you personally?

I no longer advocate such radical ideas as abolishing social programs, although I did at one time, as over the years I've questioned how it would benefit me or the society I live in, and have found that it would not significantly benefit me in any scenario, could significantly harm me depending on what life brings, and probably would significantly harm a large number of other people in any case.

Posted by: Nick Coons
07/19/2007 8:41am

<What difference does it make? Why advocate for the abolishment of something that makes no difference anyway?>

I said that many fast-food restaurants pay starting between $8-$10/hour. If I said that all jobs pay at least $8/hour, then your argument would hold weight.

<The entire minimum-wage argument is a political ploy to keep minds focused on something other than important issues, much like abortion, gay-marriage and illegal immigration.>

I agree that it is often an argument to move people's focus from more important issues, but the issues that you list are all similar ploys:

Abortion, like all "violent crimes" (if you're against it), should be dealt with at the state level and the federal government should be left out of it. The federal government has no jurisdiction in this matter.

Gay Marriage: Another issue that should be left entirely to the states. Nowhere in the Constitution is the federal government given any authority over making this decision.

Illegal Immigration: Many of the current political leaders of the US, Mexico, and Canada are involved in creating the North American Union (similar to the European Union), effectively eliminating our borders. The reason nothing is being done about illegal immigration (and the reason there are even "amnesty" bills in progress) is because of this. The idea of "doing something" about illegal immigration is lip service.

The issue that is at the heart of all issues is the Federal Reserve. All other issues (illegal immigration, gay marriage, the war on "terrorism", the war on drugs, etc) are all to avoid the issue of the Federal Reserve.

<It's nice to see that if an American is ever-vigilant at being frugal and saves religiously and is a faithful wage-slave, he can have enough money to retire and be able to survive for a number of years by the age of of 60 or so without depending on anyone else.>

Yes, it is nice to see that, since most people probably believe they'd go homeless if they worked only minimum wage.

<It's nice, but again, a tad unrealistic to make it sound as if it is idyllic, especially in the richest country in the world.>

"Richest country in the world" is often a term used to describe the United States, but what is that actually based on? Our country's success is based on borrowing $3 billion a day from China, printing money, and an ever increasing inflation rate and decreasing of the value of the dollar. Eventually this will collapse, because it's unsustainable.

<The argument over minimum-wage is a moot-point in the much larger argument over the state's rights regarding the redistribution of wealth.>

Oh? And where exactly does the government get this right? The government has no such right.

<The Social Security program was devised when it was observed that an overwhelming majority of the population were not such people, that the majority of Americans were neither frugal or intelligent about saving their money for surviving later in life when they may no longer be capable of working and supporting themselves. The Social Security program was devised in an era when the majority of people, whether they had saved sufficiently for their later non-working years or not, had their savings completely ransacked by the economic collapse of the nation, which could happen again, anytime.>

The Great Depression was caused by the Federal Reserve.

In 1913, before the Federal Reserve Act, the country never did better. We had no income tax, no social security tax, and people were saving their wealth at an alarming rate. Because of this, the banks were doing poorly because no one wanted to borrow money. The major banks wanted a way to loan out more money. They convinced Congress to pass the Federal Reserve Act, and here's how.

Congress always wants to spend more money. Raising taxes is unpopular, so it would like to borrow it. According to the US Constitution, the only legal tender is gold and silver, which Congress can legal coin. But they can only do it if they have gold and silver. So they establish the Federal Reserve (a private bank), which prints the money for them, Congress borrows it and pays interest on it. Our Federal Income taxes pay for nothing but the interest on this debt (see my blog entry titled "Your Federal Income Taxes Pay For Nothing").

So, in the midst of everyone doing well, Congress introduces an illegal income tax to pay the interest on the debt to the illegal Federal Reserve. For more information on how this works, search for "Fiat Empire" on Google Videos. It's a documentary approximately one hour in length.

Less than 20 years later, enter the Great Depression. Now, with earnings down, and therefore federal revenues down, the federal government needed a way to increase revenues. This is when the New Deal was introduced that brought about Social Security (which involved another illegal tax). It was passed off as a way to take care of people in their old age because they were now incapable of taking care of themselves (because of what was done 20 years earlier with the Federal Reserve), but it was really a way for the government to collect additional revenue in a time of crisis.

You're right that it could happen again anytime, so long as the Federal Reserve exists, because all paper currencies eventually fall. My solution is to get rid of the problem (abolish the Federal Reserve) and go back to a sound money system, not to put a band-aid like Social Security over the problem.

<The main principle here is not "no debt" as you claim, but saving a little from each paycheck>

Which is virtually impossible to do if you have debt (if you have debt, it means you spend more than you make).

<STARTING FROM A VERY YOUNG AGE (that's the key), which is something most people do not do, except in the form of paying into Social Security involuntarily>

People did do it before Social Security. People don't do it now because after the gross intrusion by our government, it's often difficult to have anything left after paying living expenses.

<(that is to say, by force, which I don't think is nearly as horrible an intrusion into a person's private affairs as you claim).>

Oh? Well let's see. The average American family makes $40,000/year (I found that statistic awhile ago, it may not be accurate, but let's go with it for now). Social Security taxes are 15.3% (half of which is paid for by the employer, which the employee would receive from the employer if the employer didn't have to give it to the IRS). 15.3% of $40,000 is $6,120. In other words, if I made $40,000/year and didn't pay Social Security taxes, I would have $6,120 available for investing.

Let's say now that I invested that $6,120 into a mutual fund. I like to use 9% in my examples because it's low, since the help of a good financial advisor will allow you to invest consistently at 12%. So let's say that I did this for 30 years (i.e. I didn't start a very young age). At the end of that 30 years, I'd have $933,679.17, which would give me an annual salary (scraping the interest off the top each year) of roughly $85,000, a very nice way to retire (making double what I made while I was working). It would also allow me to leave a $900,000 nest egg to my children.

Now, let's say I pay that $6,120 to the government instead. When I retire, I'll probably get a Social Security check for about $1,000/month. That's a far cry from an $85,000 annual salary and a nice nest egg at the end.

You still think this isn't a horrible government intrusion?

<As you have shown, people are much better off later in life if they manage to continually save (and successfully invest) a small percentage of their material reward for their labor (FROM A VERY YOUNG AGE).>

Yes, they are much better off that way, but it's not the only way.

<However, observers of reality can easily note that most people are not good at, first and foremost, saving a small percentage of their income (especially at a young age), or secondly, investing it wisely (if they have managed to save something).>

I completely agree with that, though I believe this is all related. Because things like Social Security and other government safety nets exist, people don't have motivation to take care of themselves. They know that if they fail, they will have something to fall back on. People don't have this sense of responsibility as they very much did 100 years ago.

But I think most people mix up the cause and effect. They believe the cause is that people become irresponsible (for whatever reason) and the effective response is the implementation of government safety nets. When in fact the cause is the creation of government safety nets (to justify a higher extraction of wealth from the population) which effectively creates dependent people.

<Taking a fraction of my (or anyone's) earnings (when I am young and possibly irresponsible or un/misinformed) to give it back to me (or whoever) when I am older and may need it doesn't seem tyrannical or harmful to me.>

It seems very much so to me. How about this -- We allow people to opt-out. If you like the way it works, then you can participate. And if I don't like the way it works, then I can opt-out. The reason it's tyrannical is because I don't have that freedom.

<A state (government) has a right to redistribute wealth so long as their is mutual consent from the majority of the governed (in a democracy), and I believe the majority of the governed in this country do mutually consent to this forced form of savings, and I think the majority is wise in doing so.>

You are severely misinformed about how our government works (or, at least, how it was designed to work by the Founding Fathers and our Constitution).

First, we are not a democracy. Nowhere in the Constitution does it state that we are a democracy. In fact, nowhere in the Constitution is the word democracy even found. Our government is run by a democracy, which means we democratically choose people to hold certain offices, and those people democratically make decisions within their authority (see Article I, Section 8 of the US Constitution for a list of powers Congress has; you'll notice nowhere in there do they have the authority to redistribute wealth).

A country that is a democracy allows the majority to impose their will on the minority. Our country is exactly the opposite. The Constitution protects the individual from the oppression of the majority.

Thinking that our country is a democracy is a common mistake.

Second, I think the only reason the majority of people may consent to Social Security is because they are skewed about what it is and how Congress uses it. Too many people think that the government takes Social Security tax and sets it aside in a shoebox to give back to you when you retire. Instead, the government uses that money to pay for people currently receiving Social Security. That means that while you may have paid into Social Security your entire life, there may be nothing for you to receive when you become eligible because there may not be enough people working to generate the revenue, as is the case with the baby-boomers. We have $60 trillion in future Social Security and Medicare obligations in the coming decades, and our country simply doesn't make that kind of money. On top of that, we have a $900 billion deficit, which means our debt grows by $900 billion each year (primarily because of our severely-flawed foreign policy, but that's another issue). If we continue on this trend, by 2040, the entire federal budget will be consumed by Social Security and Medicare. Of course, the Federal Reserve will just print the money, which will cause more monetary inflation and deplete people's wealth even further. The people that suffer from monetary inflation are the poor and middle class.

"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
-- Thomas Jefferson

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
-- Henry Ford

You can argue for the existing system (Social Security, fiat money, etc); but the only certainty is that it is going to go away, either voluntarily or by collapse. I choose voluntarily.

<Of course, there are those who disagree, like yourself (and myself, years ago), but you've shown very little to convince anyone that removing any of these policies (like minimum wage or social security) would benefit the average person.>

Hopefully what I've shown you in this response is more enlightening.

<I doubt that it would benefit you, but if you think it would, please explain how the "abolishment of social programs" would benefit you personally?>

I'm not generally so selfish that I try to make arguments that the government's policies should be changed to benefit me personally. My arguments are based on historical facts, that the way government should run things is best for the most amount of people while at the same time providing for the least amount of government intrusion and the most amount of personal freedom.

However, in this instance, it does benefit me personally. Remember my example above about the average family making $40k/year? I make well over that amount, so my nest-egg at retirement would provide me with a healthy $200k/year income. That is given my current salary, which as become I'm self-employed and doing very well, increases at the rate of about 20%/year.

<I no longer advocate such radical ideas as abolishing social programs, although I did at one time, as over the years I've questioned how it would benefit me or the society I live in, and have found that it would not significantly benefit me in any scenario, could significantly harm me depending on what life brings, and probably would significantly harm a large number of other people in any case.>

I agree that the instant abolishment of all social programs (or even some of them) tomorrow would be devastating to a large number of people, and I do not advocate that. But it's clear that because these social programs (I believe) are the cause of the problem they are supposedly trying to fix, and because the government has no constitutional authority to implement them, that they eventually need to go away. A transitionary period would be needed. Social Security could be phased out over the next 50 years.

It took us almost 100 years to get into this mess, so I think cleaning it up within 50 years would be highly optimistic.

Posted by: nobody
07/23/2007 2:56am

Just a quick note. Was the title how to subsist on minimum wage for over half your life and retire to an income you can survive on?

What about health insurance? Minimum wage jobs don't give health insurance. The renter's insurance, the car insurance? What about the wife, the kids, the diapers, the child-support, the alimony, the college educations, the pangs of inflation, the cable bill, the phone bill, the electric bill, the water bill, the garbage bill, the ever-growing gas bill, the annual vehicle registration, the new PC every year or two? Replacement furniture every few years? The toothpaste and toothbrushes, soap, deodorant, trash bags, house-cleaning products? Vet bills, pet food? Dentist and eye-doctor visits and glasses/contacts? The therapist bills for treating his depression?

Speeding ticket?

What about taking a year or two break every now and then? What about the lay-offs?

Doesn't this guy ever get tired of sleeping in the living room? I guess that explains why he doesn't have a girlfriend, much less children.

There is a book, how to travel on $10 a day (at least that's what it was when I saw it, although there were early versions where you could do it on a dollar a day). You said it takes $3,000 to have a vacation worth having, but it doesn't. A vacation is just a short adventure, where one does things out of the norm, having new and unique experiences, thus having fun. How much does it cost to have a life worth having? The one you describe sounds awfully robotic.

And what about people who haven't done all this stuff? What about women who have three kids and want to get away from an abusive husband/boyfriend who controls all the money? How does she get a new place and continue taking care of her kids on minimum wage? It's extremely difficult for women to manage that WITH the safety nets that exist, much less without them, and much less without at least a reasonable minimum wage. How horribly do you want your fellow Americans to have to live? And why?


What about the scores and scores of millions of people who were not savvy enough to stay out of debt and were victims of the rampant predatory lending in this country who have more than $850 a month to pay in debt alone?

Posted by: Eric
07/26/2007 8:25pm

Just wanted to point out that Minimum wage doesn't help anybody and it doesn't matter how high it goes. Any economist will explain why that is. Even former Pres. Carter declared, back in the fall of 06, on (The Charlie rose show) that raising the "minimum wage" was the single biggest regret of his administration because it simply "led to the inflation that the country is still reeling from today" over thirty years later. MINIMUM WAGE and THE RAISING there of is one of the SINGLE BIGGEST CAUSES of INFLATION! Every time things go up, thats inflation! Raising minimum wage simply gives businesses another excuse to raise their prices, so why raise it when it doesn't do any good? Also statistically speaking the vast majority of the people that are making the minimum wage are middle/middle class high school kids. Nuff Said.

Posted by: Nick Coons
07/26/2007 10:11pm

Eric,

I have argued many times against minimum wage using the same argument you've just made, such as here:

http://www.nickcoons.com/blogs/comments.php?blog_id=33

And I agree with you. However, that argument often falls on deaf ears with responses such as "but people can't survive without a minimum wage." So the purpose of this post was specifically outline how someone can not only survive, but thrive, on a simple minimum wage income.

Now there are no more remaining arguments for minimum wage :-).

Posted by: Nick Coons
07/28/2007 8:28am

nobody,

Sorry it took so long to respond, I didn't notice your other comment. I think you missed the point of the article. It was simply to refute the argument that someone cannot survive on the minimum wage. This article shows that they absolutely can.

The lifestyle you describe (having a family, longer vacations, taking a year or two off of work) belongs to someone who took the responsibility of making something of their lives. I worked eight years starting at a business and living very close to the poverty line so that today I have a successful business and my wife and I make well over what the average American family makes. My success is my reward for the risk that I took and the amount of benefit I've provided others (good services to the community and the creation of jobs).

Someone who does nothing but fill out applications for minimum wage jobs doesn't deserve to reap the benefits of a luxurious lifestyle.

A wife who lets her husband control all of the money is negligent in her duties as a spouse. If she lets someone else control her life, then she deserves to have someone else control her life.

The only point where I see gray area is where the children come into play. Children are innocent bystanders of stupid parents.

Of course, I will revert back to my statements made in a previous comment in this thread that the level of poverty and poor children that we have in this country is astoundingly high *because* of these safety nets, not prevented by them. More safety nets will lead to more poverty, for reasons already explained in great detail.

Posted by: someone
07/31/2007 3:56am

Also, I'd like to point out that the "minimum wage" is not economics nor is it economically sound. It's something that the Left-Wing Liberal
Socialist types came up with in an effort to make people feel good. Anyone can learn the truth about the "minimum wage" at (The Heritage Foundation)

Posted by: nobody
08/06/2007 1:41am

"Of course, I will revert back to my statements made in a previous comment in this thread that the level of poverty and poor children that we have in this country is astoundingly high *because* of these safety nets, not prevented by them. More safety nets will lead to more poverty, for reasons already explained in great detail."

Then why do the states (like Texas and Florida) with the least safety nets have the highest numbers of impoverished children? Why do countries with vastly superior safety-nets all-around, like many in the EU, have very little or no impoverished children?

"Anyone can learn the truth about the "minimum wage" at (The Heritage Foundation)"

The Heritage Foundation is a Fascist think-tank that proclaims itself as pro-capitalism.

Posted by: Eric
08/06/2007 8:15am

Nobody--you live in a fantasy(as left-winger socialist usually do) obviously your another left-wing liberal socialist thats trying to socialize socialism. But everyone knows how that worked in Russia under Stalin, China under Mao and Cambodia under Pot. Sorry, but the government ain't gonna save us. The Heritage Foundation is more correct than you'd ever possibly care to admit. And you try to use yer own hate and ignorance to denounce such a great caring, humanitarian organization. Now why don't mention the higher prices, taxes, lower population numbers and less land mass etc. or go live in those countries your so eager to brag about?

Posted by: tyson
03/17/2009 12:22am

Please send me a spreadsheet with your numbers. I would like to compare your assumptions to historical data; and maybe add in inflation, health care costs, and other factors.

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