Can ERE Be Useful to Low Income Individuals?

[Arbo]

Hi all, I am wondering if ERE philosophy can essentially 'free' people who are at the bottom of the income bracket -- I would say that probably 90% or more of the users on this forum seem to be college educated, professional people who have good jobs, and very few would be minimum wage workers/people who don't bring home much money from their jobs, and that + some other things, is making me wonder how good ERE is for Low Wagers

I guess I'm wondering, can ERE offer hope for someone in a very low paying job? It seems to me that the major flaw with ERE/Most money saving strategies, is that you have to have excess money left over after your rent's paid, to really start to implement some of the strategies(ie, to be able to buy a trailer, you have to have saved up enough money to buy it. To choose to live near your work, you have to have enough money to be able to move, etc)

I guess I have the feeling that being 'well off' and doing ERE things kind of gets a pass(socially), but when being poor and doing these things, it can give you a stigma and make people not want to hire you, etc. "Tiny house movement" vs living in a shack, or a trailer, etc

my philosophy could be very screwed up, but gaming addiction and some other problems/detours, have left me in a bad, bad situation money wise, but getting a job at a place where my mom works($300 per week about), I'm not sure if that's adequate or livable, after you pay rent, there just isnt much left

I still do believe ERE is genius, no hate upon it, but I think it may be more applicable to higher income people -- But I respect the non-conformist and out of the box approach that this forum/community/Jacob have, so who knows, maybe ERE can somehow take very low income situations and make it from a 'loss' to a 'win'

[steveo73]

I would forget about ERE and focus on living within your means. If you change it to that then yes low income individuals can benefit from it.

I earn a decent income and my wife probably a low to middle income but the house we live in is excessively expensive (the whole market is) and we have 3 kids. ERE is simply not going to work with us if you consider if a quick run to retirement and living off lentils in a RV. If you consider the philosophy or system behind ERE as what we align ourselves to on our own terms than it works great.

This idea though has been around for a long time. Epicurus had very similar ideas. Minimise your wants. Save your money and become financially independent.

[Arbo]

I guess what I'm worried about, is that rent/transportation make up the bulk of expense for low income people, and I think as you get lower in income, the more the bulk of the expense they make up, so that all of the other saving money tips that are really talked about here on the blog, are really about how to manage that $300 that's left over after making rent and paying for the essentials

IE, cutting down a food budget by $100, but still having to pay $800 in 'essentials', does not seem like a very substantial savings. It would take eight months of that to even be able to support yourself on your savings for one month(nine months actually, since on top of the 800 essentials, you still need 100 on food)

So I like saving on food, I really do, I have 45lbs of flour, 40lbs of rice, etc, that I bought in bulk online to try cut down on my food expenses(and because I have a weirdo brain that likes to think I could survive if everything went wrong), but I'm just wondering how effective saving on food really is -- If it's a valid strategy for the low incomers

(I notice that I haven't heard anything on this forum about increasing income/increasing money, nor on the Blog. What do you do if you have very little qualifications, bad work history, bad transportation situation, etc? there is clearly some income where you can't enact the ERE plan, since it takes money to buy the trailer, etc)

And I was surprised to learn that trailer parks have lot fees, etc. I still think that ERE is genius, but it seems that everyone on here is making decent money(above poverty level)

[Ego]

(I notice that I haven't heard anything on this forum about increasing income/increasing money, nor on the Blog. What do you do if you have very little qualifications, bad work history, bad transportation situation, etc? there is clearly some income where you can't enact the ERE plan, since it takes money to buy the trailer, etc)

I think you've got your to-do list right there. Start working on those items. Get a job or volunteer to get some experience. Take classes to get some certifications. With your low income they should be free or very inexpensive. Cultivate good references. Figure out transport options.

You can also get creative. For instance, If you want to live in a trailer, put a wanted ad in the RV section of craigslist explaining your situation. You'd be surprised how many people have an old trailer on their property that they'd happily be rid of.

The first step to early retirement is not necessarily a $100k per year job. The first step might be as simple as to correct past mistakes. Once that's done you might start to see the vague outlines of a path through what right now seems to be impenetrable forest.

[henrik]

I guess what I'm worried about, is that rent/transportation make up the bulk of expense for low income people, and I think as you get lower in income, the more the bulk of the expense they make up, so that all of the other saving money tips that are really talked about here on the blog, are really about how to manage that $300 that's left over after making rent and paying for the essentials

"Rent and essentials" are not a god-given constant. They can be worked on just as the rest of it. In fact, the bigger the proportion they take up, the more there is to potentially win in that area!

[jennypenny]

I agree with Henrik. You could live right near work and give up the car. Also, don't make assumptions about how to lower rent (like trailer parks). There are other options: rent a room in someone's house, live with your mom a while (is this possible?), find a job that comes with lodging, share an apartment with others. If you found roommates, you could offer to be the cleaning person for the apartment in exchange for reduced rent. Look for alternative arrangements. An older woman I know has a twenty-something guy living in the apartment over her garage. He has a regular full-time job, but he also does what she calls "husband" stuff for her on the weekend-- cuts the grass, rakes the leaves, cleans the gutters -- in exchange for the free apartment. And I think she feels safer with a guy nearby.

I agree that there are a lot of high wage earners on the forum, but not all of us started out that way. When DH and I were first married, we lived in a falling down rowhouse in Philly that was the cheapest thing we could find (falling down as in the 2nd floor bathtub fell through the floor right after we moved in). We slowly worked on fixing up the house with hand-me-down and trash-picked construction materials, commuted by bus, lived without extras like a car or cable tv, and learned to cook ramen noodles 37 different ways. To that end, we figured out how to grow tons of veggies and herbs in our postage stamp backyard by hanging them from everything. Once a week, we treated ourselves to a beer at a place that had free appetizers we could make a meal out of. You don't have to live that way forever, but you can do it longer than you think. We didn't move to suburbia until we were in our mid-thirties and parents of two kids.

I only said all of that so you'll realize that not everyone here started out flush with cash. Besides, you need to learn not to compare yourself to others and just start wherever you are. Once you can do that, ERE will be a lot easier. I agree that with a lower income, you'll have to substitute creativity for cash more than higher earning EREs, but it can be done. On the income side, you could try finding a job with a 20yr pension plan. It's not the 'extreme' way to ERE, but you won't have to save as much either. And assuming you're under 30, you'll still retire earlier than most people with more financial security.

Ask more questions. Specific questions. There are some really creative people here who can help you. Don't be afraid to spell out your current situation to get better advice. No one will judge.

[bradley]

As a systems-theory-based principle, ERE can apply because, as steveo said, it's mostly about the idea of living below your means.

One of the major points of ERE is that you learn to do things for yourself which you would otherwise (as a consumer) pay someone else to do. Those things bring you savings. You have to get creative and kiss goodbye to the ideas and junk that get other people in debt or otherwise tied to a job.

ERE can help when you have a low income, but you need to live somewhere with low costs of living to match (or modify the situation so that, for you at least, costs of living are low). If you're making $7/hour, then living somewhere that costs you $800/month is a bad idea. You just cannot do that. Research lower cost places/areas, and move there. Yes there's initial costs, but even those you can hack/lower through your own ingenuity.

jacob wrote a post on this blog about this, too. It's titled "How to get wealthy on minimum wage"

[IlliniDave]

I suppose it would depend on what you mean by free? It's been astutely pointed out above that living below your means as much as possible will at least be helpful. But if a person really wants to achieve ER"E" and make passive income a major component of it, they will almost certainly have to invest a substantial effort towards the income side of the equation. That is more true if a person has a certain amount of inflexibility (wants their "own" place to live in a specific location, wants to own a car, to have cable TV, personal high-speed internet access, etc.). If you are very efficient, flexible, and creative, you can probably pull it off, but the timeframe will approach that of a standard retirement. If you make $14K/year and can save/invest $7K (not an easy feat by any stretch), it'll be a slow climb, probably on the order of 20 years to have a nest egg that will produce $7K/year for multiple decades, but you can get there.

The other option would be to go the subsistence lifestyle route, which would generally be an agrarian-based self employment. It's difficult to actually "retire" from that lifestyle, but it is a way to achieve autonomy.

[George the original one]

$300/wk ~ $15k/yr. That's jacobs budget for two people, so it's certainly liveable and leaves room for ERE provided you hold costs down. For yourself, you've identified the areas to work on: income, housing, & transportation. As noted above, $800/mo rent blows the budget, so it should be your priority to reduce.

[7Wannabe5]

One thing I would suggest is actually reading Jacob's book, if you haven't already. Most people on this forum are constructing just one of the successful models possible given the Tinkertoys assortment of parts and tools offered up in the book. For instance, my POV is totally different than most people in this group because I found Jacob's book after having already stained my dog-eared copy of the "Tightwad Gazette" with universal muffin mix batter more than 20 years ago, being slacker self-employed for over 10 years, creating my yearly goal lists based on a combination of the practices suggested in "The Renaissance Soul" and "The Art of Noncomformity" and becoming obsessed with the philosophy and practices of permaculture for around 5 years. The purpose the book and this forum serves for low-spending, low-income, dilettante ENTP me is to help me "try" to increase my liquid savings level and achieve more mastery and completion. Also, at the time I joined this forum, I was engaged in a heated argument with my wealthy moderately-high-income retired BF about whether it was possible to survive on $8000/year. This was an important and infuriating debate because the answer determined in good part whether or not he was "keeping" me. So, this group lent some back-bone beyond the facts of my obvious-survival-prior-to-moving-in-with-BF to my case. Of course, now that I've left him for good, that's not so important, except for the fact that I still sometimes date rich/wealthy, middle-aged men who do things like try to convince me to buy a used Honda on our third date or use the phrase "there will be a price to be paid for that" when I tell them the reason why I am usually pretty happy is that I mostly do what I want to do ,"Oooh, spank me, Daddy, I am so turned on now." ,NOT!!!.

Anyways, my main point here being that I never had any intention of taking on full-time-employment-by-other at any wage rate, and I'm not particularly interested in stock market investing (might maybe like to achieve 5-10%-ish of my needed income through that means), but a tool like the S-Curve or a model like the one that shows the different quadrants occupied by the Renaissance man vs. the Salary man vs. the Business man vs. the Working man or a decent recipe for lentil soup is just as useful for me or you as anybody else on this forum. Also, outside of the conventional employment-by-other market, you may be able to find opportunities for work that will profit you more on an hourly basis. For instance, I can't bookscout for 40 hours/wk. because there simply aren't that many rare books to "harvest" in my scouting range, but to the extent that I do scout, I make a quite high hourly wage. You probably couldn't or wouldn't want to mow lawns, weed gardens, rake leaves or shovel snow for 40 hours week, but in most regions of the country, I believe you could charge quite a bit more than hourly wage for providing those kinds of services. You are obviously literate and intelligent, so tutoring might be another option for higher wage work at the margin.

[almostthere]

Well with a screen name that contains Erasmus, you must have a higher than normal IQ. That's extremely helpful.
First, I want to reiterate the point that you have already well pointed out, rent and transport are the bulk of your budget. As others have stated, figuring out the creative solution for those is critical.
Second, read Your Money or Your Life and start tracking every single cent that comes in and goes out. This one works for everyone.
Third, as you may have already experienced, bad choices effect you more than they effect the middle and upper class. You may have less of safety net. If middle class kid gets into trouble, someone has $10k to bail them out. You may not have that. However, in a sense you are lucky, you will see more clearly how bad choices affect you. SOmeone who always get bailed out may never escape that cycle.
Fourth, be careful with what you fill your mind with, you become whatever you think about most often. Now is a good time to start reading every book in the library on financial planning, investing, and other ERE topics. It does not matter if you do not have the money to do anything. Two or three years of steady reading will teach you the basics, so when the time comes you will be ready.
Fifth, know that even few thousand dollars in the bank is critical to creating a safety net for yourself. For me the first $10,000 was the hardest. It's been downhill since then
Finally, stick to this forum, if you want to be successful, start with hanging out with successful people. I think you will find a caring community here who will advise you well over time. If I had this forum at young age, I'd would have avoided some mistakes and been even better off than I am today.

[Molly]

I'm a low earner(compared to others on this website). I don't make minimum wage by any means, but its only been this year that I started bringing in $42000(before taxes) and my husband doesn't have a job right now so...you could say both of our effective wages are around $21,000. Even when he did, it was as an CNA which makes about $9 hour. It isn't easy, but it is doable. We've gotten my student loans paid off, paid off a car (that buying was a mistake btw), we saved up enough to put a 20% down payment on a small house and this month we'll be paying it off for good. I don't know how old you are, but if I had to do it over again, I would get my training through the military instead of paying for it myself. Its not good for a lot of jobs, but for jobs in healthcare (I'm a clinical laboratory scientist) it seems to work pretty well. You sound smart, you'll just have to substitute that creative capital for real capital for a little while. Truthfully, the other posters are right. Starting, it just seems like peanuts and its kind of painful (at least for me) but it snowballs pretty quickly. Having just a few thousand dollars in the bank will open up a ton of options. Do you have a journal? I would love to follow your journey

[GandK]

Yes. Maybe.

I think the more good income opportunities you can identify, the better chance you'll have, and the more ways of spending less you can identify, the better chance you'll have. It won't be easy, though, which is why so many don't do it.

For income, Ego has the right ideas. Don't hesitate to work with a job recruiter until you get your career turned around. They'll give you good advice on getting hired, and they don't get paid unless you do. And see if Habitat for Humanity is doing a build in your area. Hang out where other people are volunteering and put out the word that you're doing volunteer work while you look for regular work. Most of the people I've seen on these builds are middle- and upper-middle-class folks who are relatively well connected. If they can personally see you working well, looking good, being polite, etc. and they know of a job you could do, they will recommend you for it. Any big well-organized charity or community organization would be a good place to volunteer to make those helpful connections as well as build your resume.

For spending less, I second the suggestions to read Jacob's book, "Early Retirement Extreme," as well as Robin & Dominguez's "Your Money or Your Life" which really helped me focus. And if you have questions on how to save money in a specific situation, look for that information here. If you can't find it, post a new question.

[Gilberto de Piento]

Maybe this was already said, there's a lot of text above, but isn't Jacob an example of ERE by a relatively low income individual? I think he got started in grad school or during a post-doc and wasn't earning that much.

There might be a long shot opportunity here for someone. Start a blog about FIRE or just getting ahead and write for people who are in urban areas and have few opportunities. Help readers to solve the unique problems they have that aren't being addressed by existing blogs.

MMM and ERE would be a good playbook for how to do this. Sell them something that helps them on their journey if you want to, maybe a book or just link to recommended products like MMM.

Blogs like this might already exist, it's just an idea. Or maybe your target market doesn't read blogs and you'll have to approach them another way.

[jacob]

When I first started, I was in grad school making about $20k/year. That's about $400/week. I lived in a room in a dorm sharing facilities (toilets, shower, kitchen) with 18 other people. Rent, health insurance, and food (very simple stuff as detailed in the blog) were my only recurring "need"-expenses. I did spend about $1000/year on train tickets to see my GF and I also spent about $100 per year, mainly on books and thrift store items.

It only took me a few months to save enough to buy a used car in cash had I wanted to. After a year, I could buy three.
http://earlyretirementextreme.com/on-ho ... money.html

To move, I only needed to pick up my suitcase.

While $20k/year isn't exactly low income to me even if it is by software-engineer standards, it was and is still almost 4 times as much as I spent and spend thus allowing for plenty of savings and indeed a rapid accumulation of capital.

Being in academia, there was no pressure to display fine threads or the newest iPhone or "live on the right side of the tracks". And being in grad school, it was perfectly acceptable to not join in on the party/restaurant culture. I've frankly never felt such pressures regardless of which business I've been in. Perhaps I'm just oblivious to it.

Oh yeah, this was in another country too, so it wasn't like I was relying on home-support either. Basically, I arrived with a suitcase. (I already had the position before arriving which admittedly did make it easier.)

High-income just means playing the game on easy-mode. Someone making $50k or $100k or $150k or worse get to screw up much more than someone making less without adverse consequences. However, that doesn't mean that ERE is impossible for someone making $10k or $15k or $20k. In particular, it means that anyone who makes six-figures could FIRE in two years if they acquired some hard skills. Main thing I've never done (since starting ERE anyway) is unproductive addictions or destructive problems and detours ... but avoiding such is part of the ERE-strategy. If you're playing the ERE-game on hard-mode, you can't win by running around and shooting yourself in the foot. You have to be good.

[BeyondtheWrap]

I guess what I'm worried about, is that rent/transportation make up the bulk of expense for low income people, and I think as you get lower in income, the more the bulk of the expense they make up,

They make the bulk of the expense for higher income people, too. People tend to just buy a bigger house if they get more money. They still make up the bulk of the expense for ERE people because once you get to a certain point it's hard to cut those down any further. Look at the ERE journals in the forum and you'll generally see that the largest expense is rent, no matter how high the income.

It sounds to me like you're using the words "expense" and "income" interchangeably. Yes, it is true that low-income people spend most of their income on rent, and that higher-income people with a goal of ERE will spend a smaller portion of their income on rent. But when your income increases, you really can't think of income and expense as being the same. Spending all your money is what the majority of people do, even when their income increases, and they won't get to ERE.

so that all of the other saving money tips that are really talked about here on the blog, are really about how to manage that $300 that's left over after making rent and paying for the essentials

I don't get this impression from ERE at all; in fact, this is one thing that separates ERE from other personal finance blogs. There are plenty of ERE blog posts mentioning that the bulk of expenses are "housing, transportation, and food" and that the best strategy is to focus on these than on the little things. Unconventional housing choices have been discussed a lot on the blog and on the forums, and the blog is pretty adamant on cycling as a way to reduce transportation costs. Maybe it seems that housing and transportation are given less attention is because they are simpler to resolve once you know what to do (although figuring out the solution can be difficult). Once you move to a cheaper place that's close to work, you're basically done working on those categories (at least until your rent goes up). Meanwhile food can be a continuing struggle because of the discretionary and variable nature of the costs.

What do you do if you have very little qualifications, bad work history, bad transportation situation, etc? there is clearly some income where you can't enact the ERE plan, since it takes money to buy the trailer, etc)

That is definitely a challenge, yes, and the solution will probably take a lot of time and changes. I don't have any good advice for this situation, unfortunately.

[JamesR]

I think it's pretty doable to reduce your total cost of living to less than $600/mo, regardless of where you live. Get the rent below $300 and the food below $100 and you're sitting pretty.

[Arbo]

I think it's pretty doable to reduce your total cost of living to less than $600/mo, regardless of where you live. Get the rent below $300 and the food below $100 and you're sitting pretty.

I'm not sure it's possible to get rent that low At my old house, the mortgage payment/'rent' was very, very cheap, $300 or so per month, or maybe 400, but when all things were added up, it cost basically $800 per month to just stay in the house, possibly a bit more

Now here, at my apartments, we have $800, 700, and 600 per month options for rent -- ALL apartments seem to be on a similar level sadly. I haven't seen any option for renting an apartment for below 600 per month

And as far as buying homes to eliminate the rent payment, well, again, someone who's at the poverty level cannot do that

I really want to reduce rent, but I don't see it as possible

(I do think I can drop cost of food to $100 though)

(sorry for not responding to the other posts, I'm basically thinking about them)

[Arbo]

When I first started, I was in grad school making about $20k/year. That's about $400/week. I lived in a room in a dorm sharing facilities (toilets, shower, kitchen) with 18 other people. Rent, health insurance, and food (very simple stuff as detailed in the blog) were my only recurring "need"-expenses. I did spend about $1000/year on train tickets to see my GF and I also spent about $100 per year, mainly on books and thrift store items.

It only took me a few months to save enough to buy a used car in cash had I wanted to. After a year, I could buy three.
http://earlyretirementextreme.com/on-ho ... money.html

To move, I only needed to pick up my suitcase.

While $20k/year isn't exactly low income to me even if it is by software-engineer standards, it was and is still almost 4 times as much as I spent and spend thus allowing for plenty of savings and indeed a rapid accumulation of capital.

Being in academia, there was no pressure to display fine threads or the newest iPhone or "live on the right side of the tracks". And being in grad school, it was perfectly acceptable to not join in on the party/restaurant culture. I've frankly never felt such pressures regardless of which business I've been in. Perhaps I'm just oblivious to it.

Oh yeah, this was in another country too, so it wasn't like I was relying on home-support either. Basically, I arrived with a suitcase. (I already had the position before arriving which admittedly did make it easier.)

High-income just means playing the game on easy-mode. Someone making $50k or $100k or $150k or worse get to screw up much more than someone making less without adverse consequences. However, that doesn't mean that ERE is impossible for someone making $10k or $15k or $20k. In particular, it means that anyone who makes six-figures could FIRE in two years if they acquired some hard skills. Main thing I've never done (since starting ERE anyway) is unproductive addictions or destructive problems and detours ... but avoiding such is part of the ERE-strategy. If you're playing the ERE-game on hard-mode, you can't win by running around and shooting yourself in the foot. You have to be good.

Good points, I will try to see what I can do

[Arbo]

I think you've got your to-do list right there. Start working on those items. Get a job or volunteer to get some experience. Take classes to get some certifications. With your low income they should be free or very inexpensive. Cultivate good references. Figure out transport options.

You can also get creative. For instance, If you want to live in a trailer, put a wanted ad in the RV section of craigslist explaining your situation. You'd be surprised how many people have an old trailer on their property that they'd happily be rid of.

Yes, I should actually be clear and say I'm not really concerned with the ERE 'end game', I guess I'm more concerned with his ideas about living very low expense. That is the part I am wondering about, so more 'live on $7k per year to retire early' to just 'live on $7k a year to survive as a low income person'

Now good points, and yes , That would be my to do list