Minimum wage is not a working wage. If you worked 40 hours a week for 50 weeks a year (assuming unpaid time off) you’d only earn $14,500. That’s gross salary, not net. So, it’s no wonder that when McDonald’s, who recently launched a website* that includes a sample budget and tips for managing money, has a sample budget that includes a second job.
The website is a joint effort between McDonald’s and Visa. The goal seems to be not only teaching money skills to their workforce, but to encourage signups of a prepaid Visa card. While I think these can be a good solution for a variety of reasons, there is no information about the fees involved on the website, something that should be heavily considered before giving up a traditional paycheck and bank account.
The website contains a sample budget, videos, calculators, as well as financial games. In addition to the content on the website there are links to videos on Khan Academy, links to a variety of guides (such as a car buying guide), and more. There is also a page dedicated to explaining some of the employee benefits that McDonald’s offers.
However, what I’m really interested in their budget suggestions. Let’s look at their suggestions.* (you can download the Budget Journal and read their suggestions here)
To start the journal wants you to understand the basics-what are expenses, setting up a budget and daily spending allowance, and learning to track your money.
Their tips for “being good with money” include;
- spend less than you earn,
- look for ways to save money (such as carpooling),
- set up direct deposit of your paycheck,
- open a savings account,
- and discuss financial goals with a friend.
These are all great concepts when it comes to basic personal finance, but given the number of fast food and minimum wage workers in the US, this is very beginner stuff. It doesn’t cover getting out of debt, how to budget for school, how to budget for families, or even basics like emergency funds.
In the best scenario this budget and advice is unrealistic and at worst it’s setting up employees for failure on a large scale.
Let’s look at their sample budget, so you can see what I mean.
McDonald’s Sample Budget
Let’s break it down. You need a second job (for a total of 74 hours a week) to make this budget work. Not only would it be tough to find two jobs, but to keep them both would be challenging. There would be no time for your family or furthering your education, much less money to spend on either.
Additionally, the expenses seem extremely low on average. There may be pockets of the country where this budget makes sense, but in most cases, unless you already live there it would be a challenge to make this work.
Rent/Mortgage
Average rent in most areas exceeds $600 for an efficiency or one bedroom apartment, and in many areas rent rates are increasing rapidly. You’d have to come up with a deposit on most apartments which generally equals 1-2 months rent. If we assume it’s a mortgage that means you not only have a good credit history but that your property costs between $100,000-$150,000 depending on the size of your downpayment. In many areas buying a home would be out of the question. Also let’s not forget maintenance costs of owning a home which can add up quickly.
Car Payment
Again, you’d need a downpayment or a hefty savings account to afford a car outright and avoid payments. To get a car loan, you’ll need credit-something that’s tough to build when your income is so meager. If you can secure a loan the interest rate is likely going to be higher due to a lack of or poor credit score. In some areas you won’t need a car, but transportation costs (and time spent on transportation) may equal $150/month or more.
Car and Home Insurance
A necessity for sure, but the rates seem low. Once again, the amount you pay is based on your credit history/score. You’ll also need to have an emergency fund to cover the deductibles on your policies. If you want a low deductible, you’ll pay more for your policy.
Health Insurance
Assuming you’re single, this wouldn’t even buy you healthcare from McDonald’s. If they are assuming it’s deducted and part of the $1,105 net pay that’s listed, $20 still seems low. I’m not familiar with their health plan details, but even with really good insurance we pay $15 per visit to our doctors and specialists. Also let’s not forget dental and vision insurance which can easily add up to more than $20/month.
Heating and Electric categories
It’s an odd that they broke these up into separate categories. Most people either pay their energy bill (gas and electric) or it’s included in the cost of rent. I suppose it depends on where you live, whether you have/need AC, and how careful you are about electricity usage. Note that the $50/month for heating was changed from $0/month after there was some criticism from websites and news outlets.
Cable/Phone
Arguably the closest to what you could pay, $100 could cover the cost of a basic cable/phone/internet package, or cover the cost of a monthly cell phone plan. Not both.
Other/Spending
Now you’re left with $850. That’s meant to cover food, gas, maintenance, clothing, and anything else you need. While this seems adequate when you consider that most of the other expenses are way off, it’s unlikely you’ll be left with so much each month. Considering things like having children, the need for a computer, maybe classes at a local college to get a degree, or even holidays, and it’s hard to imagine this budget working. Especially considering the number of hours this sample expects you to work.
Savings
Lastly, let’s talk savings. While it’s the first item on the list-the concept being to pay yourself first-that $100/month is hard to come by. You may be able to save $100/month (on two minimum wage jobs) if you already have no debt, and don’t need any type of downpayment, but it’s still short sighted. What about retirement? Emergencies? Health issues? Job loss? If you face any small issue it could set you back years. I think about things like the $1,000 we had to spend on a new water heater recently. No way a minimum wage earner could afford that easily. It would create a situation where you’re overworked, underpaid, and most likely in debt. Is it any wonder our savings rates have fallen?
Simply put minimum wage earners and those stuck in a cycle of poverty are having a harder and harder time getting out of that cycle. For many people who eke out a middle wage income they are also seeing costs on everything increase while their income remains relatively stagnant. There are no easy answers here. It’s no wonder that more and more Americans struggle (much like my own family has) with getting out of debt and creating long-term savings. While the Centsible Life is about learning smart spending strategies I know first-hand it’s not always easy. My own financial life is always a work in progress. Unfortunately there is no magic wand you can wave that makes your debt disappear, income increase, and your savings grow. It takes time, a lot of effort, and hard work.
Here’s an informative and funny take on the suggested budget from one of my favorite shows, The Colbert Report.
What do you think of McDonald’s sample budget? What are your thoughts on minimum wage? Share with me in the comments.
Read about how to budget here, and download my free budget printable and debt tracker. Have questions about budgeting? Share in the comments, and I’ll respond.
Kelly
*Screenshot and information came from the PracticalMoneySkills.com/McDonalds.
