2/18/2011 12:13 PM ET|
Can you live on $330 a week?
Maybe barely -- and maybe not. But if you have to try, as millions of Americans do, you'll need to understand every trick for stretching your income.
Being unemployed has taught Cindy, a former airline contractor from Cincinnati, an unusual lesson: If you want to save money, try freezing your milk.
"I had no idea that you could freeze milk, but it turned out to be a brilliant discovery," said Cindy, who asked not to be identified for fear of people knowing she lost her job. "Milk is not cheap and being able to store it in the freezer has been incredibly helpful to manage my expenses."
This revelation fundamentally changed her approach to grocery shopping and saved her valuable dollars in the process. Now, rather than buy a new carton of milk each week, Cindy, 34, has taken to buying milk in bulk, freezing it, and taking out a carton only when she actually needs it. She applies the same technique to buying loaves of bread as well.
It might sound like an extreme way to live, but to Cindy, who lost her job last fall, "desperate times call for desperate measures." She was among the nearly 6 million recently laid-off Americans who started collecting jobless benefits in the third quarter of 2010.
Like many of these workers, Cindy has little choice but to lean heavily on her weekly unemployment check of $330 to help pay her bills. But while she appreciates the money, it is still only about 40% of what she earned at her previous job. As a result, she must resort to all sorts of financial acrobatics to make ends meet, whether that means forfeiting eating out and replacing her cell phone with Google's free calling service, or negotiating with her energy company to freeze her heating bill for three months so that the cost doesn't go up beyond her means.
The difficulty that Cindy and other out-of-work individuals around the country are running up against is that unemployment benefits are rarely enough for most Americans to live on for very long.
"I am surviving on these cost-cutting measures for right now, but it's very tight getting by and I'm not sure how long it will last," she said.
A fraction of a paycheck
The goal of the unemployment insurance program, according to the Center on Budget and Policy Priorities, is to provide people with about half their normal wage. However, it almost never works out that way. The average American collected $295 in weekly unemployment benefits in the third quarter of 2010, according to the most recent government data. But the average weekly salary in that same quarter was $865, which means the jobless benefits replaced just over a third of the average worker's salary.
In fact, even as Congress has successfully extended the length of time one can collect jobless benefits four different times in recent years, from 26 weeks to 99 weeks, the actual amount that the average person collects relative to the wage he or she earned before becoming unemployed has slightly decreased. In 2007, before the recession began, unemployment benefits compensated for 35.6% of one's last salary. In the third quarter of 2010, that number was 34.2%.
Part of the problem, according to Rebecca Dixon, a policy analyst at the National Employment Law Project, a national advocacy group for low-wage workers, is that only a handful of states actually adjust the amount of benefits offered to meet annual increases in wages. In the states that do, like Pennsylvania, New Jersey and Kentucky, benefits tend to be significantly higher and come closer to meeting the standard of living that workers might have grown accustomed to. New Jersey, for example, offers maximum jobless benefits of $598 a week, nearly twice the national average.
But whether you're living on half your normal salary or a third of it, getting by on these benefits alone is nearly impossible.
"The benefits definitely aren't adequate," Dixon said. "If your benefits are replacing 40% to 50% of what you used to make, or less, there are a lot of bills you won't be able to downsize quickly enough."
Indeed, some might argue that's the point. If you give the unemployed too much money for too long, it could theoretically take away their incentive to search for work. Instead, unemployment benefits are essentially intended to provide just enough money to keep jobless Americans -- and the economy as a whole -- temporarily afloat.
But as the term "temporary" has come to mean 99 weeks or longer, many Americans have had to find ways to get by, whether by cutting corners or occasionally supplementing their benefits whenever possible by taking odd jobs.
Shrinking your lifestyle to stay afloat
When Janet Raiffa lost her job as a director of recruiting at a New York City law firm in 2008, her salary dropped from more than $200,000 a year to the roughly $20,000 she was eligible to collect during her first year on unemployment benefits. Though Raiffa did have money in savings, her lifestyle quickly started to bleed her bank account dry.
"My mortgage and maintenance are more than $3,000 a month, not counting all the other necessities," Raiffa said.
This led Raiffa to make several immediate changes: She canceled her gym membership and stopped eating out, which is to some New York City residents a way of life. She was also forced to dip into her nest egg to improve her cash flow, including cashing in her 401k and selling off her stocks.
But Raiffa has found some creative ways to supplement her unemployment benefits since then, for example by renting out her room from time to time through Airbnb, selling some of her wardrobe and pawning off memorabilia that had belonged to her father, including a set of Canadian coins from the 1976 Montreal Olympics.
She also jumped at random small jobs, ranging from being an extra on shows like "Law & Order" to writing a column for the 405 club, a popular website devoted to the unemployed. Today, Raiffa is essentially a full time freelancer -- a "permalancer" -- who no longer relies on unemployment payments at all.
Nicholas Carroll, who had previously worked in the world of e-commerce, followed the same path and took a number of odd jobs while unemployed, including trimming trees for $18 an hour. But even with these odd jobs, Carroll still had to change his lifestyle, particularly in terms of the food he ate. Rather than eat out with friends, he would suggest a potluck dinner instead, where everyone prepares a dish.
"The potluck food was nearly as good, a quarter the price, and the parties are a lot more fun," Carroll said.
Along the same lines, Marc Levy, one of the Voices of MainStreet, notes that some coffee shops offer day-old bread and bagels for next to nothing, options that can prove essential for someone on a tight budget.
For many others, though, the lifestyle changes brought on by unemployment have been more severe. According to Dixon, the policy analyst at NELP, plenty of unemployed Americans have little choice but to rely on food assistance and welfare programs to supplement their benefits. Indeed, the number of Americans who rely on food stamps has skyrocketed as the unemployment level remains near 10%.
Likewise, Raiffa notes that while most unemployed people may start cutting costs by canceling their cable TV and gym memberships, she knows some who have canceled health insurance plans as well, and others who have no choice but to move in with family and friends to save on rent.
"I think we're all grateful for the unemployment benefits we have," Raiffa said. "But it's nowhere near enough."
This article was reported by Seth Fiegerman for MainStreet.
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You can live on that and less, but it's not fun! I'd love to swap postions with someone in Congress or even higher. Give them a taste of the Americian Dream for six months, then I bet things would change then!!!
I can remember when I was 21 and living on my own with a new baby and a new husband. I went to school full time and worked odd jobs, and he worked full time (if you could call it that) as a construction worker in Southwest Michigan for $9.00/hour. We thought he made good money. My rent was $505 a month and all heat included, but I had to pay my electric, cable, and phone bill.
I only planned on having $300 a week. Some weeks we only got $200. Some we got $400. But I budgeted on $1200 a month for a 3 person family.
We ate every night, never got an eviction notice, and kept a vehicle in good running condition at all times.
Today, I’d have trouble, but if my current significant other ever left me, I could peel back my expenses to $1900 a month (much less than what I make). It would be tight—I mean, tuna fish sandwich lunches and mac & cheese dinners tight. If he took care of his half of the mortgage, that would come down to $1500. Those are necessities we’re talking about, not frivolities. We must have a place to live—there is a mortgage. I must make my car payment (necessary evil – I drive 70 miles one way every day to work). I must pay the insurance on the car, or I go to jail. We have to eat.
$1200 for a family of 3 about 15 years ago.
$1500 for a family of 2 today.
It just isn’t possible to live on unemployment any longer. Ten years ago, the maximum benefit in Michigan was $720 every two weeks. Now, apparently it’s down to $660 every two weeks.
My heart goes out to those of you struggling. It is not easy. Do what you can—you’re in my prayers.
The middle class is being squeezed to non-existence....I havent had health insurance in 7 years....Whats really sad..is that I make too much money to qualify for anything..THAT makes me LMAO..what else can you do??? Keep looking for work...
Receiving unemployment benefits is not a job and shouldn't be expected to pay all your bills. It is to supplement and "help you get by" until you get another job. That's why it is important to have an established emergency fund.
If you are currently employed and are living paycheck to paycheck, now's the time to cut back and save money (as in save it in the bank). Without savings in the bank, you are one disaster away from living on the streets.
And remember: unemployment benefits=taxable income. Most people don't realize that until it's too late.
$330.00 a week? Ok, what about those who live on less than that?
Come on, MSN, put original the Smart Spending stuff like the blogs and message boards back up so readers have actual advice that we all can utilize.
I could scream vomit over this kind of article. As a single mom who raised 5 kids, I have NEVER made more 20 thousand in a good year. I finally made more after they left home. We never once took a welfare check, always had a place to live and a car to get back and forth to work. You can live on what you have because you learn to adjust. This is so stupid. People, cut to the basics, learn to enjoy simple pleasures and quit belly aching.
We have more a day in this country than most people in the world have all year long in this country. Americans are the most spoiled bunch of brats ever. WA WA WA...get over yourselves and settle in. Do the best you can, because it is not getting any better. The glory days are gone and we all better get used to beans twice a week...
My budget is $1640 per month and that includes a monthly average $188 for college piano and musicianship class tuition, $110 for the shed/gazebo/gardening renovations/additions I'm doing this year, $94 for boatel fees for my boat on the Chesapeake, and $50 for restaurants.
If I cut out those extras, that leaves $1198 per month. I have the advantage of a mortgage-free home for which property taxes and homeowners plus car insurance come to only $241/month. I'm also retired and that certainly saves a couple hundred a month.
It's amazing how much people waste due to "branding" -an affliction I no longer have. The $24.99 athletic shoes I bought at KMart are as good as and come in widths like the $179 New Balance shoes I foolishly used to buy a decade ago when I was a high school cross country coach. They have the same kin anti-pronation soles, etc. and are probably made in the same Chinese factory.
Couponing and waiting for sales is important. My last receipt from ShopRite supermarket shows I paid $39.26 after getting $12.95 in On Sale Savings, $4.50 in Manufacturers Coupons, and $1.82 in Store Coupons for $19.27 in savings - roughly 1/3 off my bill. That's about the average proportion for what I save on food.
I used a $1 for Filet o' Fish ($2 off) at my last visit to McDonalds and I bought five $10 tickets to the International Car Show in Baltimore for $25 at groupon.com - getting an addition $5 (20%) cash-back by doing it through Shop Discover. Restaurant.com sells $100 per table coupons at lots of places for $40 and my group's been sampling different restaurants that way.
I buy lean ground beef for $2.69/lb in 6 lb packages and divide it up (with an electronic scale) into 1 lb portions I freeze in ziplock bags (4 cents each in bulk at Costco). I similarly buy chicken parts for 49 cents/lb, top or bottom round steaks/roasts for $1.79/lb, etc. and stock up on all I know I'll eat within 9 months (quality of frozen meat can drop after that). The freezer costs little to operate since it's not often opened. I check out the prices at Aldi, dollar stores, etc. before hitting the supermarket. I spend about 50 cents a can for diced tomatoes, condensed vegetable soup, peas, sauerkraut, etc.
If I decide to start collecting Social Security in 20 months when I hit 62, my budget will be a lot less than my income, but I don't expect to raise it significantly. I've learned to live a comfortable life without wasting money!
Sure you can, with single income to include wife and kid, we have for the last thirty years . It's called attitude adjustment or survival of the fittest. As Dave Ramsay says, "Live like no one else so you can live like no one else."
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