Minimum wage is the state and federal standard by which employees must be paid. It’s where many who are making a start in the workforce begin, whether they are young and newly entering or are reentering the workforce after a time away. No matter one’s circumstances, navigating life with a minimum wage budget is hard work.
Living on minimum wage can be immensely challenging. In the United States, the minimum wage doesn’t always equate with a living wage, either, and balancing bills while acquiring the skills to better your future can often feel impossible.
With the right knowledge, skills, and mindset, however, you can budget towards a better future. It’s important to think of minimum wage as a rung on a ladder; one you can begin climbing today.
Navigating the Minimum Wage Landscape
The minimum wage in the United States is set at a base threshold by the federal government but can be higher depending on the state or even the city in which you live. You won’t find any reputable employer paying you less than the federal minimum wage with the exception of positions in which tips are expected to supplement income or positions exempt from the Federal Fair Labor Standards Act (FLSA). A server, for example, can be paid as little as $2.13 an hour by their employer if tips reliably make up the difference to meet at least minimum wage requirements.
So What is Minimum Wage?
Federally, the minimum wage is $7.25 per hour. Translated into a typical yearly salary for a full-time, 40-hours-per-week job, that’s about $15,080 per year. If you live in a single-person household, that keeps you above the poverty line, federally set at $12,670 for yearly income.
Each state has its own, set minimum wage, however. In Georgia and Wyoming, the official state minimum wage is below the federal wage at $5.15 per hour, meaning that work falling with federal exemptions can legally pay that amount. In Washington D.C., the minimum wage is nearly double the federal minimum at $14 an hour. Even within states, the minimum wage can vary. For example, in New York City, large employers must pay $15 an hour, while the state minimum wage is only $11.80.
So, who exactly is making minimum wage?
The Demographics of Minimum Wage
Those earning the minimum wage generally fall into certain age groups and industries. A significant portion tends to be young service workers working in the leisure and hospitality industries. Minimum wage is more prevalent in part-time work. 6% of part-time workers make minimum wage or less, compared to 1% of full-time workers.
The U.S. Bureau of Labor and Statistics found that nearly half of workers making minimum wage were under the age of 25. This shows that often the workers accepting minimum wage positions are just starting out with little to no experience.
Lack of experience doesn’t have to make for a long future of hardship ahead. By budgeting for success and maintaining a mindset of growth, minimum wage workers can set themselves on the path for a comfortable future.
For a chart depicting minimum wage by state, click here.
Minimum Wage By State
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Budgeting for Success on Minimum Wage
Living on a minimum wage is difficult. With the demands of bills, transportation, and healthcare, budgeting can feel like fighting against gravity. Success comes through intentional and deliberate spending while preparing for a better future.
Here are steps you can take towards budgeting and wealth building for the life you want.
Step 1: Use free budget calculator tools
Creating and implementing a budget that works sounds easier than it is. Often, we forget all the little costs of day-to-day life and end up with a discrepancy that can offset even the most thorough budget. By using online apps and tools that help you track your budget, however, you can prepare your monthly spending deliberately and efficiently.
Plan out each cost, taking into careful consideration the monthly price of every bill, and estimate how much you can spend on clothing, entertainment, and any other needs. With a carefully laid-out budget, you will best be able to reserve money for emergency use and protect the future growth of your wealth.
Budget goals for a monthly minimum wage salary ($1,160):
- Rent + utilities ( > $600)
- Food (> $75)
- Internet (> $30)
- Phone (> $30)
- Transportation (car/insurance/gas/bus) (> $50)
- Healthcare (> $100)
- Entertainment (> $50)
- Miscellaneous needs (> $50)
For additional information on minimum wage budgeting goals, see here.
While everyone’s situation will create different cost needs, you want to strive for a budget that balances all of these costs of day-to-day life into manageable components. While this is much easier said than done, you aren’t fully alone in managing these expenses.
Step 2: Research available public assistance
If you are an adult making minimum wage and working full-time, there is a good chance you might qualify for public assistance programs that can help you on your path to financial independence. While every state has different programs, you may be eligible to receive help in one or more of the following areas:
- Healthcare (through Medicaid, Medicare, or Obamacare tax credits)
- Cash assistance
- Section 8 housing vouchers
- Childcare programs
- Supplemental Nutrition Assistance Program (otherwise known as Food Stamps)
The savings and stress-reduction inherent in these programs (should you qualify) are invaluable tools for moving towards a better financial future. There is no shame in receiving assistance while working towards your goals, and these programs can help. Determine your eligibility and factor in the potential savings in your budget plan.
Step 3: Cut down on cost of living
To maintain a comfortable and wealth-growing lifestyle on minimum wage, sacrifices have to be made. While no one can be expected to realistically remove all excess forms of entertainment and luxuries from their life, a level of thriftiness must be cultivated if you’re to pay all your bills on time without worrying about having nothing left over.
The first cost you want to reduce if possible is your rent. Consider moving to a town where rent is affordable, ideally $600 a month or less. This will allow you to more comfortably plan a budget that considers future savings and continued growth investments like a college education. If you are young and able, continuing to live with parents or family at zero or low rent is a great option for building wealth while making minimum wage. Alternatively, finding a roommate for an apartment can help reduce your monthly rate to manageable levels.
Secondly, cutting your transportation costs down to as near zero as possible is nearly essential for anyone making minimum wage. If your town has public transportation options that can cheaply get you where you need to go, you may want to consider selling your car. Investing in a bicycle can also be a great way to save money on a tight budget. If you can make your commute on a bike, you’ll save money while also getting fresh air and exercise.
Third, reduce the money you’re spending on your phone, streaming services, gaming, and eating out. You can still budget for these things on minimum wage, but you want to cut costs wherever possible and stick to a solid plan for spending. For example, you might limit yourself to no more than $100 a month for entertainment, and find creative and free ways to enjoy your free time. Go for walks, hang out with friends at home, read, or learn new skills on YouTube. There are many fun things you can do without spending much money, so take stock of what interests you and research what your local area has to offer in terms of free entertainment.
Step 4: Create an avenue for saving
Living on a minimum wage makes it hard to pay all the bills and have much if anything left over. However, staying out of debt and preparing for a better future means building savings.
Start by opening up a savings account and adjusting your direct deposit information with your employer to automatically put an amount into savings each paycheck. This could be as little as $10 from each check. Over time, however, that money will add up and you’ll have an emergency fund that will transform into an effective, interest-building investment.
Creating wealth off a minimum wage salary is difficult, but it isn’t impossible. By making a habit of saving and deliberately budgeting your expenses, you can set yourself up for a future of financial independence.
Step 5: Maintain a growth mindset
Alongside with saving, the key to managing a minimum wage lifestyle is to maintain a growth mindset. This is a state of mind in which you’re ready and able to learn from failures and keep moving forward, pursuing goals and rising up to challenges. It’s all about living to your full potential. Minimum wage is just a step at the beginning of a ladder to your goals, so keep climbing and working hard.
Marketable skills, vocational training, and higher education are all ways you can invest in a future beyond minimum wage, but before you can make it where you want to be, you need to develop the growth mindset and emotional intelligence to control your emotions, push forward, and make beneficial decisions.
Emotional and cultural intelligence is the ability to control and express emotions in productive ways through self- and social-awareness. This is a central leadership skill and a component of the growth mindset that enables employees to climb the ranks, earn promotions, and achieve more. You can practice these skills in the hours outside of your minimum wage job. Consider using any extra time to develop skills, monetize talents, or pick up side hustles to make extra money and to build your available budget.
Here are some side jobs for practicing a growth mindset and increasing your income:
- Dog walking
- House sitting
- Selling crafts online
- Delivery or Uber driving
- Selling plasma
Step 6: Analyze and reassess your time and budget
Every month, you should be re-assessing your budget and time for new ways to grow and improve, understanding your mistakes, and moving past them to better and more deliberately spend and save. These are skills that will translate to the workplace, giving you more opportunities for advancement and growth.
Not only living but thriving on a minimum wage budget is possible. By following these tips for budgeting, saving, and building a growth mindset, you can set yourself on the path for higher-paying opportunities down the line. With the right strategies, you won’t be making minimum wage for long.