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McDonald’s sample budget forgets debt

Kelly Dilworth

Could you live on $1,160 per month? That’s roughly the amount that workers who earn minimum wage and work 40 hours per week make in a typical month.

To make ends meet, many people take on a second job. But the now infamous McDonald’s sample budget — which was designed to help fast food workers better manage their cash — inadvertently showed, the extra income is often still not enough to pay for basic expenses.McDonald's sample budget forgets debt

Earlier this week, ThinkProgress linked to the financial planning website that McDonald’s and Visa recently set up to hawk the PaychekPLUS Elite Visa Payroll card — and share some “practical money” tips with workers who are living on the financial edge. (Tip No. 1 that Visa and McDonald’s forgot to include with their advice: Linking your paycheck to a prepaid debit card that charges you between $1.75 and $3.50 to withdraw extra cash is generally not a good deal.)

Since Monday, the reaction to the fast food chain’s financial planning website — and in particular, its mock budget to show workers how to draw one up — has been fierce. Many have derided the fast-food chain for tacitly admitting that workers can’t live on minimum wage, since the budget includes income from a second job.

Others have pointed out that the McDonald’s budget is fairly realistic — if a worker lives in the Midwest or South or in a small town, where the cost of living is generally much lower than in big cities on the coasts. It just forgets to include some important basics, such as food and gas (both to heat a home and drive a car) and understates the costs of other items (most notably, health insurance).

That’s not the only problem with McDonald’s sample budget. It neglects to include debt payments. After all, if you consider the extras that the sample budget doesn’t account for — such as college tuition and childcare — it’s also easy to see what drives many people into debt: They aren’t making nearly enough income to get by.

CNN Money, for example recently interviewed several McDonald’s workers who shared their real-life budgets with the site. Among all four men who were interviewed, each had monthly expenses that far exceeded their income.

One employee spent a hefty chunk of his income on tuition for his associate’s degree. Another spent a large portion on his two kids and on prescription medication (which set him back $100 per month just for the meds). For “other expenses” not listed in the McDonald’s budget, the employee estimated that he spent about $815 per month — a substantial sum, considering that he only brings in about $1,000.

The article didn’t say what these men did to make up for the monthly gap in income. However, far too often, people do so by putting the expenses on credit cards — then paying just the minimum amount due — or, worse, by taking out a payday loan or other high-cost form of credit.

That’s one of the real problems with such low wages. For many, the only way to deal with the relatively high cost of everyday life is to take out a loan and hope that you’ll eventually scrape out some way to pay it back.

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