Why You Have To Live In Your Mother's Basement (Monday Musings 69)

Best book on Peronal Finance

During my Twitch streaming (channel link), I discussed plans to write a synopsis of Elizabeth Warren and Amelia Warren Tyagi's All Your Worth, which really can help improve your financial health, as my streamed video-blogging series focuses on health in general.

In this politically divisive time, regardless of what you think of Sen. Warren, please don't be too concerned that she co-wrote the book (with her daughter) and keep an open mind even if you don't like her politics, as the advice here has helped lead to my own financial stability, even in tough times.

You can go to the library and check it out, if you want to read the best book on personal finance for the average person without giving the authors further funds. I read quite a few personal finance books and this is the best I've found, where it shows how to take concrete steps and learn what you need to do now to improve your financial situation.

Warren and Tyagi write very clearly and interestingly; I found it a page turner. Indeed, it's riveting to find out that you can take charge of your finances and live well!

I'll have to re-read the book first before I summarize in detail, so thank you for your patience.

In the meantime, upon doing some preliminary number-crunching, I'd say this book can work if you make $10/hour at 20K (though I will have to do more research and work the math so I may have to revise these estimates), if and only if you can somehow manage to live with your parents or friends to obtain "cheap" rent.

The average American income is around $25,000, according to the Census Bureau. The numbers could be as high 47K on average, though billionaires can be skewing the curve.

After taxes, let's say your income goes to $20,000 for easier math.

Ideally, the place you live should cost 1/3 of your net income, per All Your Worth. Indeed, research has shown that people tend not to fall into debt as readily if their rent/mortgage is 1/3 or less. Americans have a tendency to "buy more house" than they can afford to "keep up with the Joneses".

At any rate, 1/3 of 20K is $6666. Divided by 12 months, the rent should only come to $555.50, or let's say $500. In Philadelphia, you can get a "cheap" apartment for $800, so let's say $1000.  We're left with $20K minus $12K or a mere $8000.

In NYC, rent would be at least $3000/month (this is a "cheap" apartment) at $24K/year which is above the entire income.

Those who live in NYC, and you're making $25K, you can see why you can't live on your own, and you must live with your parents or friend(s) or other roomies. Hopefully that leaves you with a rent of "merely" $500/month.

As for those who live in more "reasonable" cities, we are down to $8K with the rent being on average $1000/month. Food is $400/month, if you pinch the pennies, coming out to $4800. We're now down to $4200 (8K - 4.8K dollars).

That leaves $350/month (4.8K/12). Utilities run $200/month at best so we're now at $150/month. Gas costs, say, $20/week (I live in New Jersey, so can buy relatively cheap gas for the Eastern Seaboard), so $80/month down to $70/month.

For internet/phone bill, that cone out to over $70/month, so no streaming for you!

With at best $70/month left over, what if, among the potential emergencies, your car breaks down, which you might need to get to work. Then you're wiped out completely and in crippling credit card debt (if you can charge auto repairs on your credit card). With the compounding 20% annual interest, you may have to declare bankruptcy or go homeless.

I know I'm being dire here, but I think this is the reality for a lot of Americans.

In other words, to be more financially sound, you'll have to live with your parents or friends or otherwise share living space.

The intent of this post is to argue against the snide dismissal of the phrase, "he probably lives in his mother's basement", and recognize the realities of life today in the US. 

A lot of hard-working people shouldn't be ashamed when they have to move back in with their parents given the rising living costs, to prevent crippling debt, bankruptcy and/or  homelessness.

What do you think? Should we make fun of those who have to live with their parents, or understand that with the realities of drastically rising cost of living with stagnating wages, that we should be more understanding and have more compassion?

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