Greene County Daily World

What It Costs To Live In Greene County: Part Two

Posted Thursday, September 27, 2007, at 12:28 PM
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A short while ago, I embarked on a pretty complex and ambitious project to attempt to answer the question, "What does it really cost the "average" person in Greene County to live?" Never having done payroll, I've had to do a little research, but I think I've gotten it pretty close.

As I said in Part One (http://gcdailyworld.com/blogs/chriswathen/entry/13401/), it became apparent rather quickly that there's a lot to think about when defining "average" because it's not as simple as it first seems. It really boils down to the fact that assumptions must be made. So, here goes:

We'll assume the household includes two people, but how the income is split among the two doesn't really matter. It could be that both make $9.98 per hour and work a forty-hour workweek throughout the year, it could be that only one of them brings in $19.98 per hour, or some other combination thereof. The main point is two people live in the household, and the annual household brings in $41,523 -- well, actually, I calculated these hourly salaries of $9.98 each will bring in $41,517, but close enough.

Another assumption will be that there are no children in the household. Yes, I know, it's not likely -- or maybe even "average" -- but kids will complicate this way too much. Their ages alone can greatly sway things; for example, will we be buying diapers or prom dresses? So, let's just argue that they're clearly more expensive and leave it at that. (Some studies have stated it costs more than two hundred thousand dollars to raise the "average" child from cradle through college, so I'll just leave it to those experts to come up with the figures on raising kids.)

We'll also assume that the employer of this "average" couple offers a 401(k) retirement plan and will match 50% of their contributions up to 6% of their pay. This average couple takes advantage of this benefit by contributing 6% of their pay. The employer will also offer health, life, and disability insurance for an assumed rate of $100 per pay period.

Now, back to the calculations:

To start the calculations, the median family income in Greene County in 1999, which was the most current U.S. Census information found, was $41,523. From this, we calculate that if each earns $9.98 per hour, they will earn a combined $41,517 for the year. Like I said before, there's some rounding error here, but it is close enough. Dividing this by the twenty-six two-week pay periods in the year, this amounts to gross combined compensation of $1,596.80 per two-week pay period.

If 6% is contributed to the employees' 401(k) retirement account, a total of $95.81 per pay is removed from this amount before income taxes. Combining this amount with an $8,000 IRA contribution each year (this will be talked about in another part of the series), the retirement deduction for tax purposes should be $10,491.06. On the couple's 2007 tax return, taxable income is further reduced by the standard deduction of $10,700 and personal exemptions of $6,800; therefore, taxable income will be $13,526 for the year. Taxed at the 2007 percentage of 10% for this tax bracket (up to $15,600 per year for those married & filing jointly), total federal income tax should be $1,353 or $52.02 per pay period. The employees' share of Social Security will be 6.2% or $99 per pay. Medicare is 1.45% or $23.15 per pay. Of course, the Governor will want his share, too, which amounts to 3.4% for the State of Indiana or $17.69. The county will get 1.1%, or $5.72, as well.

This leaves $1,203.41 net per pay period, which was calculated as summarized below:

$1,596.80	Gross Pay ($41,517 / 26 pay periods per year)
<95.81>	401(k) Deduction
<52.02>	Federal Income Tax
<17.69>	State Income Tax
<99.00>	Social Security
<23.15>	Medicare
<5.72>	County Tax
<100.00>	Estimated Employer Health, Life, & Disability Insurance

$1,203

Net "Take-Home" Pay (Rounded)

Yearly, of course, this amounts to $31,288.52 "brought home" to spend as needed -- or $2,607.38 per month.

So, now that we've estimated what will be brought home, we'll look at "average" monthly expenses next in Part Three…

Comments
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"...kids will complicate this way too much." You obviously have no kids of your own. How do I know? If you did, you wouldn't have this much time to think about all of this babble. If you did, you would know that this entire article means nothing.

I suspect that you are either an economist by trade or obsessed with money. Not that it makes any difference either way, that is your choice, but I sure can't imagine filling my mind with these gross assumptions and then thinking that what is left means anything.

I sure hope you take some time to smell the roses and don't think about money all the time.

"No matter how rich you become, how famous or powerful, when you die the size of your funeral will still pretty much depend on the weather." Michael Pritchard

-- Posted by simmons on Thu, Sep 27, 2007, at 4:55 PM

No need for a part 3. My head is spinning from part 2. Not because I don't understand but because I don't care.

Simmons~ your right on.

People do what they can do with what they have. Who doesn't have kids? You? Your not calcualting what it costs for anyone in Greene County to live on. "The average person" does have children. Even the kids that are moved out still cost the parents money. What is the point of this?

"If you want to see what God thinks of money, just look at all the people he gave it to." -Dorthy Parker

-- Posted by LoveLinton on Thu, Sep 27, 2007, at 5:37 PM

simmons, from what I know, Mr. Wathen is a highly educated man who is taking his own time to share his knowledge with the community at large. While his writings may not mean anything to you, I very much enjoy reading them and learning about finance from someone who knows much more about it than I do.

Sometimes the better part of valor is that if you have a negative thought, that you keep it to yourself. There is nothing that says you have to share every thought you have with the world at large. It is your right to not care about finance and it is Mr. Wathen's right to think, share, and write as he does. No harm. No foul.

-- Posted by Greenee on Thu, Sep 27, 2007, at 5:54 PM

Chris,

I appreciate your analysis and research. Now, back to the headline...expenses are the costs of living in Greene County. This is the category that makes Greene County so attractive, financially to raise a family.

We had many choices in our early child-rearing years to live anywhere in the United States or Europe. Our occupations, family proximity, and personal choice also played a part in our decision to live and raise our family here. The financial benefit to living here, as will be pointed out in part three, allows hard-working entrepreneurs, single and dual income parents the opportunity to save substantially, pay off debt more rapidly and live more comfortably than most of America.

This, along with a high church to tavern ratio, low crime statistics and great Southern Indiana Hospitality are all great incentives to calling Greene County Home.

-- Posted by Greene County Patriot on Fri, Sep 28, 2007, at 12:17 AM

Greenee, I'm not attacking the person, just the validity of his article. I see way too many examples of these types of thought processes and I'm not sure what anyone could possibly learn from them. You cannot write off an assumption of not having kids in an evaluation of this type and then describe in excrutiating detail, petty costs like Medicare ($23.15), Federal ($52.02), State ($17.69) and County ($5.72) Taxes, the total of all four, just being a drop in the bucket each pay compared to what it costs to raise kids. Many other holes exist in this argument because of gross assumptions.

Mr. Wathen may be very educated, but I cannot see what could possibly be gained by reading this article. He has written some good stuff in the past that has had some meaning, but not this. What did you learn from this article?

-- Posted by simmons on Fri, Sep 28, 2007, at 3:42 AM

Simmons, for a person who has a comment and historical quote for every blog posting on this website maybe you should volunteer to write a blog on history, historical quotes, and an occasional editorial piece, although I will guarantee you that you will get people with derogatory comments on your blog too because they don't like what they read for *FREE* on this site. The entitlement some people have these days simply amazes me…

-- Posted by The Raven on Fri, Sep 28, 2007, at 7:55 AM

I also appreciate what Chris is doing. It may be too late (and way to much work!) but I think it would be helpful to do the same thing with a "big-city" county like Vigo, Monroe, or Marion. With data from one of these counties, meaningful comparisons can be drawn and analyzed. How about it Chris? Did you keep templates or cheat-sheets from the work you have done so far? Could a side-by-side comparison be done to show how good or bad we have it by calling this area our home?

-- Posted by RDK on Fri, Sep 28, 2007, at 10:13 AM

Thanks for all of your comments, good and bad.

First, let me say that I receive no compensation from this, so please take it easy, as I don't profess to be a writer nor a journalist.

For those that may not know me, my education is in the areas of finance and business administration -- actually a biology major, too, but that's another story. I worked as a broker for a couple years then went into the banking profession shortly thereafter. What I share here is really no different than a chef sharing recipes or a gardener discussing plants, although any discussion of money is often taboo it seems. Certainly, none of this blog is meant to be preachy or holier-than-thou. Personally, I'd like to see someone volunteer to blog about car maintenance and repair because that's something practical that I think everyone could use -- myself included -- but I digress…

Please re-read the comment about no children being part of the calculations, as it was not meant to imply that this is "average" by any means. It's simply too difficult to calculate I think, so I'm "throwing my hands up" in defeat. As I said, a child's age alone would seem to cause expenses to sway greatly. For example, as an infant, they may require babysitting, diapers, and more trips to the doctor. Later, there may be prom dresses, sports gear, and college tuition to pay for. It's simply not something that can be calculated in Excel, nor should it.

I'm trying to keep this series on "What It Costs to Live" as simple as possible, but let me tell you it's been a much bigger project than I first thought. Everyone is different, so you'll have to adapt this series to your own needs and views. Everyone being different is something that greatly complicates a series like this, too, as we all make assumptions that may or may not be correct. RDK, I'll look into releasing the template I created for these calculations, but I need to figure out some of the logistics of doing so first. Although it may not be the most fun of things to do, after all, most of us work a lifetime to make money, so it only seems appropriate to spend at least a little time to understand where it all goes.

When Chris Pruett (he has a great first name, doesn't he?) approached me about writing a blog for the newspaper, he wanted to promote community discussion. Chris, I think that's finally begun! If anyone has any specific topics they want addressed within the personal finance or small business areas, please let me know and I'll see what I can do.

-- Posted by chriswathen on Fri, Sep 28, 2007, at 12:34 PM

I had no idea you had not majored in journalism. Your blogs are very good reading and had me fooled. To clarify my earlier post, I didn't mean that I wanted the template personally. I thought it would be interesting for YOU to do the comparison as a service to all your readers! This way we could see in black and white that our choice to live here in this happy valley is a fiscally wise one. Conversely, you may come up with data that suggests living near a larger city is easier on the pocketbook. Do we actually have to pay more to live in this Mayberry-type area or does our dollar go further in comparison to childless couples? In either case, it should provide some interesting postings.

PS No compensation for this??!! At least make the boss take you to lunch every once in a while!

-- Posted by RDK on Fri, Sep 28, 2007, at 1:13 PM

I have conceded and will not argue this any further. It is evident from these posts that no one was understanding my argument, which is my fault for not presenting in a more effective manner. I had no idea that anyone was deriving any benefit from Mr. Wathen's article because no one had said anything about it until I presented an opposing view. So I won't beat a dead horse. Adios.

-- Posted by simmons on Sat, Sep 29, 2007, at 2:49 PM

Ok here is my two cents on this topic. In my opinion.

Greene Co. is a highly deprived area when it comes to jobs and households that hold jobs on the average. I would have to say that if this report says that is the average income of a household in Greene Co. that they need to really look at those numbers again. How many jobs have you truly seen in or around this area that pay almost 10.00 an hour. Not many I can assure you, I know many people who are looking for work and just as many who work harder at working the government so that they don't have to go to work.

We fortunately are lucky enough to both hold jobs that do pay this well or better but, that has just recently happened and we have been married for almost 20 years and our kids are almost grown.

Greene Co. is a fairly cheap area to live in compared to the surrounding counties. This article should have had comparisons in rent, real estate, tuition costs for children, gas prices, property taxes...... the title didn't do the article justice.

I would love to see an article on what it costs to live in one township in Greene Co. compared to another.

I like the blogs keep them coming.

-- Posted by gccitizen on Sun, Sep 30, 2007, at 2:18 PM

simmons: are you against peanutbutter and mothers milk also?

-- Posted by onebyone on Fri, Oct 5, 2007, at 3:06 PM