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March 11, 2005

The Edge of Finances

Here's a fun exercise for you to consider: What is the least amount of money you need to get by -- and by "get by" I mean, not have to move from your current place, can pay bills without having to forgo food, and not have to file for government assistance in some form. Basically, the bare-bones version of your life as you know it today -- the knife edge below which lies the abyss. What do you need to barely scrape by?

The question popped into my head recently as we (and by we I mean Krissy) ran some numbers to help our accountant prepare our taxes, and for the first time I got a clear sense of what we made for 2004. Our overall household income was up, which was good, but my own income was down slightly; I was doing more book writing and less corporate writing last year, and irony of ironies, full-sized books don't pay as well as shilling for The Man (to give you an idea: I was paid exactly the same for a one-month corporate project, in which I ended up writing about 1500 words total, as I got paid for Old Man's War).

This next year I am likely to give over even more of my time to book writing, and consequently, my income is likely to recede a bit again as well. This is not the start of a screed in which I gripe about book-writing being financially underappreciated in our time, and I should note the diminutions of my fortunes are a strictly relative thing; overall I'm doing fine, thanks, and well enough that I can choose to devote more time to book-writing without getting twitchy about whether it means I can feed the family. But even so, noting the possible cut in income does make me wonder how low I could theoretically go.

What I've discovered is that in fact we can go pretty low, primarily because we have some basic economic advantages, which are thus:

1. We have almost no commercial (i.e., credit card) debt; Krissy and I decided long ago that if we couldn't pay cash for things, then that was God's way of telling us we couldn't have those things yet. We use an American Express, which is a charge card (meaning you pay it off at the end of the month) for most card-based purchases, and we have a Visa card for when we can't use the Amex (we also generally pay off the Visa at the end of the month). Now, as it happens we use the Amex a lot: I use it to keep track of business purchases, and we collect membership points so we can make a couple free flights a year for places we want to go. But we use it as a matter of choice, not necessity.

1a. Our other debt is also reasonably reined in. Our mortgage (reasonably low monthly outlay) and one car payment (also reasonably low) are our only true debt, and they are fixed costs -- inflation works for us, not against us, with these. I've paid off my student loans; Krissy's work is paying for her college education. Our other bills -- phone, gas, electricity -- are not extravagant.

2. We live in an area with a low cost of living. $31,000 buys you that same general standard of living in Piqua (one town over from us) that would cost you $100,000 in Manhattan (according to this calculator), and it's slightly cheaper to live in my town than in Piqua. Even noting that this is truly an "apple & oranges" comparison -- as I've mentioned before, it takes me an hour to get to the closest Thai joint near me, whereas in Manhattan there's usually Thai food no less than 50 feet from anywhere you would choose to stand -- it illustrates the basic point a dollar goes further here than in other places.

2a. An intangible here, but one worth noting: Living in a blue-collar, rural town as we do, there's no need to "keep up with the Joneses." Everyone around here shops at places like Wal-Mart and K-Mart because that's what out here; nobody worries about whether the neighbors are looking at your crappy car because they often have crappy cars too. Not needing to keep up appearances is a genuine money-saver.

3. Our family is physically healthy, with no disabilities or medical restrictions of any sort. We have health and dental through Krissy's work.

4. Our "physical plant" is in fine shape: Our house is less than ten years old, our cars also, and most of our electronic/mechanical possessions are also in good shape. This means that by and large we don't have to worry about our house or our cars falling apart on us.

5. I work from home, which means no child care costs, and also trims down other expenses (gas & wear and tear on car, eating out, business wardrobe, etc).

6. Unlike the vast majority of Americans, we have several months' income worth of savings (not including retirement accounts/401(k)s, etc) to tide of over in case of employment emergency (note to self: thank Krissy).

When all is said and done, I suspect that if we had to, we could get by on about $40K a year. This would not be fun, or even particularly comfortable, but it would be doable. I would additionally note that since I strongly suspect that if a time ever came when Krissy and I could not jointly make $40,000 a year, if we got to that point we wouldn't be the only ones in a world of pain and misery, and indeed the entire US economy would probably be flushed and swirly. And then we could pick up extra money renting out space on lawn for a tent city. We can't lose!

While it's a generally depressing exercise to try to determine the least amount you could get on with without entirely crashing and burning, it is useful, as it gives you an idea how close to the edge you are at the moment, and given the fact that Chapter 7 bankruptcy is about to get a whole lot harder to pull off, folks who are near the edge and (probably not coincidentally) have a stagger-load of credit card debt will suddenly have a whole lot to think about.

We are indeed fortunate that we don't live close to our financial edge, and that we know how far we need to fall to get to it. And alternately and more positively, how much space we have to work on work that genuinely interests us before we have to worry about how much it impacts the true bottom line. I'm glad I can focus on books a bit more, and having that knowledge is a good thing.

Posted by john at March 11, 2005 05:34 PM

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» Where are you from, and where are you going? from mythago
I always get a little flustered when someone asks me "Where are you from?" I'm not sure whether they are asking where I grew up, or why I talk [Read More]

Tracked on March 12, 2005 02:41 PM


Erika | March 11, 2005 10:09 PM

Let's see... 10 thousand dollars a year and I'd be golden. Of course, I'm a college student.

Ian Mathers | March 11, 2005 10:18 PM

Once I get out of university (i.e. April) and the student loans start coming due, I'd need to make about $15,000 a year to stay solvent. Canadian, mind you. But I've got a cheap, nice apartment, no car, and no family to support.

Paul | March 11, 2005 10:29 PM

The thing about book writing, hopefully, is that it continues to pay long after the work is done.

John Scalzi | March 11, 2005 10:32 PM

Indeed, Paul, although for sanity's sake one should proceed on the notion that what you get up front is the last money you'll see out of the book.

Laura | March 11, 2005 11:11 PM

Good on you, John & Krissy! Shows real maturity when it comes to money management.

I'm one year into the starting over with really less income (separated) and I sincerely hope I can keep my clean credit record. For example, I'm still not paying any credit card interest. So far, so good.

Chris Byrne | March 11, 2005 11:12 PM

Well, if I stopped helping my mom out, I'd be able to get by pretty cheaply, but still about 3.5 times the minimum wage (assuming I keep doing the job I do now).

I'm single with no kids, I own my car outright, I have 0 debt, and I primarily work from home, or while traveling on the clients dime.

So breaking it out:

1. Rent - $650 (2 bed condo in scottsdale)
2. Food and beverages - $200 (minimum, I spend more like $400 now)
3. Insurance - $140
4. Cable, phone, internet (1 bill) - $175
5. Gas - $160
6. Electric - $100
7. Cell - $50
8. Assorted small bills - $150

So my monthlies end up a bit over $1600 x 12 = $19200. Add three months worth of expenses (for emergencies) at $4800 to bring it up to $24,000 and then multiply by 1.4 for the governments cut (I'm self employed, no kids, no mortgage), and I come out with $33,600 gross, so let's call it $35k, or $27k without any reserves.

Of course looking at what two people make at minimum wage, assuming a 1940 hour work year (standard average work year), it works out to about $20k. The'y wont be paying any taxes in most states, but you'll still have to take 12% off that for the various social insurance programs, leaving a bit under $17,600. Add EITC, of $800 (assuming no kids), and you have a total of $18,400.

That's pretty tight.

Chris Byrne | March 11, 2005 11:15 PM

Ever have a typo you have NO IDEA where it came from?

"The'y wont" ????? I mean I'm severely dyslexic, but 5 spaces?

Anyway it should have been "They won't"

Lawrence | March 11, 2005 11:46 PM

One of the reasons I moved abroad was that I could live comfortably on what I earned as a writer.

It did help that I was single, without children, and can theoretically write from anywhere (plus I had enough momentum and contacts from my already-published books that I could leave without losing all of that).

With the Euro being so strong lately, and Madrid getting more expensive (even though my writing income is more or less the same), I've definitely been feeling the pinch.

Lisa | March 12, 2005 12:00 AM

I live on $24K a year. Single, two children, no debt, no car payment, cheap rent to live in home owned by father ($600/month.) Pay a lot for health insurance for the three of us. Recieve WIC vouchers for the kids. I can't go much under this comfortably at all. I should note that part of this is income from a 35 hr/wk. job (at $9.05/hr.) and part is from Social Security Disability as I am blind and hearing impaired. So maybe I don't fit your rules. The cheapest I've ever lived was $368 a month in the midwest sans children. I had $11 left after the essential bills each month.

I have always noted that my quality of life has never seemed too bad because of low income. Kids and I live in a nice house, are fed and clothed, get around by public transportation, and have a bit left over for some fun stuff, but not a lot for travel or extravagance. Of course, compared to most of the world we are rich beyond belief. I've never found it hard to be lower income, I've just found it hard to be lower income amongst other higher income folks. The kids are dressed in handmedowns and garage sale clothes. Target clothes are a treat. I'm sure they will be pissed in high school when everyone else is in old navy and abercrombie or whatever is the brand de juer at the time.

Anonymous | March 12, 2005 01:39 AM

Hubs and I are bringing down in the vicinity of 15,000 this year. Not much, but we live with granny (no rent or utilities, and gran gets to feel like she's doing her job to support the family while we keep the old lady from living alone in her dotage - it's sort of an emotional manipulation fair trade agreement) :-)

Both of us are fairly healthy, although hubs smokes and I have a tricky, although essentially harmlessly so, ticker for which I pay for my own cheap meds. 15,000 won't stretch to $400+/month health insurance - that's a third of our income and I'm ballparking on the low end, and a year's worth of premiums would be well over what we've spent in medical bills in the past decade.

We have lived on our own on this amount, so it can be done. No kids, no car payment and no other big bills (at this immediate point in time), although we do have pets (which, as the Scalz has pointed out, could serve as a sort of an ambulatory backup food storage device for the non-vegetarian in the family). Savings is small but growing, and 10% every month's gross goes into a tithe account, from which we have the exceedingly exquisite pleasure of scattering checks of joy upon whatever good cause we care to favor without worrying about pinching the family budget. I can tell you that that's a ton of fun come Christmas, what with all the Toys for Tots shopping, Adopt-a-Family collections and whatnot. I go all Dickensian all over during the holidays, and since setting this little system up I can indulge myself in it without a twinge of guilt or money worries :-D

Our biggest outlay is a more or less slowly declining $7000 in credit card debt. But all things considered it's neither onerous nor resented, and our interest rate isn't bad. We tend to do things that leave us with lifetime memories, rather than buy things that have to be dusted and then disposed of, and we put those experiences on the card for ease and convenience, to be paid off between trips or activities. We always pay above the minimum and are very careful about late payments and the like. It works for us, and we don't have to worry about keeping track of cash and it's problems while we're enjoying ourselves. Plus it makes tracking business expenses easier (we are both self-employed). Our second biggest expense is eating out. See above, re: experiences - eating out and fine dining is one of our greatest enjoyments in life and we've decided that we'll willingly scrimp on lots of other stuff like shiny cars and fancy clothes in order to continue enjoying that as often as we can. However, unless we're traveling food is cash or check-card only. I don't pay interest on anything that's gone before the transaction clears. :-) (And, of course, in truly short circumstances we'll sit at home and eat Ramen noodles (him) and veggies (me) if need be - we're wine-loving epicures, not Rome-burning hedonists.)

If you want to see just how lucky you are, financially speaking, check out the Global Rich List, at the link below: (not hotlinked, cause I'm not sure if I can do that in the comments - you'll have to cut-n-paste)


Anyway, you enter your annual income in the box provided. Use round numbers (35000, rather than 35,000.00) and don't forget to tag the currency box to reflect your moola flavor of choice.

Wanna feel really slimy? Enter your monthly income as annual and see how far down you don't drop in relationship to most of the world. Ouchie.

Of course, the cost of living in the US is higher than other places, too, and a lot of infrastructure is provided for us via taxes that we take for granted (paved streets and reasonably effective law enforcement, for example), but in many cases extreme poverty is the result of violence and war. And when you live on a few hundred a year on a good year, rebels are trolling your streets for your women and the local dictator for life just made your ethnicity illegal, it doesn't really matter how cheap the toilet paper is - you ain't getting any.

Global Rich List spoiler alert: Hubs and I top out at around 15,000 this year, and we're still among the top 12% of the world for income. Using our monthly income still puts us in the top 23% for annual income. It's amazing what kind of perspective that gives you when you feel pinched between the easily available mass quantities of groceries that you could easily do without half of, or buying gas for your attractive, safe and reliable late-model car that runs you to your never-goes-below-a-set-minimum-wage and safety-audited job.

Soni | March 12, 2005 01:40 AM

Oops. That was me, above. Forgot to log in.

Scott | March 12, 2005 08:20 AM

Well, for a while I was making around $32K, when the bad-news came down the pipe that my hours were being cut from 32-35/week to 20/week (same hourly wage)

I survived for 5ish months like that... in Los Angeles (high cost of living... not quite Manhattan though). Of course, strictly speaking, I wasn't actually getting by, since I was racking up around $100-$150 in debt every month, and it started iirc 3 days after I paid 6mo of auto-insurance (so I didn't end up ever calculating for auto-insurance in my monthly debt accumulation).

The relieving thing was that after -1- month at normal hours, I repaid all of the credit-card debt, which was a rather empowering moment in my life. 5 months of stomach churning misery scribbled out in a flourish of poorly formed ink on a check (my handwriting is atrocious).

In my seemingly never ending quest to make my own life difficult, I just took a second job... at dramatically lower pay... and am working the second job about 2.5x as much as the old (better paying) job. And don't think I didn't do some math to figure out whether and how I could live more or less equally before and after taking my pay-cut.

Scott | March 12, 2005 08:23 AM

Ahh the last thing I failed to mention about whether or not I was 'getting by' was that my diet consisted of 90% or more: Ramen, white rice, pasta w/o sauce (sometimes a little grated cheese, butter, and/or basil)

I think after about a year of that my insides would have gladly walked the plank.

Douglas Anders | March 12, 2005 08:36 AM

We linve in Toledo, so our costs of living are low too.

One difference: our house is from 1917. So is the furnace. Huge and inefficient as hell, but -- and I love this part -- no moving parts,nothing to break. It doesn't even use filters.

It's nice to have thermodynamics working for me.

Tom | March 12, 2005 08:57 AM

Bare bones without saving anything -- but not really forgoing any of my current extravagant and wasteful nights out would be.... carry the 2 ... about 15,612 a year (net) .. This would exclude big ticket purchases and Christmas presents. A low number if I’ve ever seen one. I’m fortunate enough to make about 4 times that (when you include the god awful amount of overtime I work), which made it possible for me to kill the 15 thousand I had outstanding in Credit Card debt from the time I was unemployed (viva la tech wreck). It’s likely I would spend a good deal more than this if I

A. Didn’t work third shift and could function as a normal human being

B. Had real nights off (wow, Sunday and Monday, I can hardly contain myself)

C. Didn’t work for a communications company and get all of my TV, Phone and internet for free

The rich list was interesting – I can’t say it was surprising, but I enjoyed it

As for the rest of my salary, I save about a third of the gross and most of the rest goes to either


My parents Church

Habitat for Humanity http://www.habitat.org/

And buying all of John’s books for Christmas Gifts – It’s like a convenient Scalzi Gift pack!!

Gluon | March 12, 2005 12:02 PM

I live on about $800/month. $500 is spent on the rent. The rest is food and gas for the car to get me to class/work, and anything else, like pet food.

Of course, I'm a grad student and about to dive into working for nothing for local agencies, as those going into social services always end up doing for their degree. After December, I shall likely start out in the mid-20k salary range, at which point paying back student loans commences, and then I'll probably be living on around $1200/month since I also have to pay back my retirement fund.

In my previous line of work, I made 22k/year, and could not buy a car, nor could I buy a house/condo, nor could I manage to save up the money for an apartment deposit to move. "Stuff" kept happening that required spending money in huge chunks. And if I had continued to work as an admin assistant, the trend of not getting raises beyond "cost of living" (some years we didn't get that either) would have put me in the poorhouse. I would have ended up like those folks in Silicon Valley, living in homeless shelters while working at $10-15/hour jobs.

I don't require a lot to live on, or I wouldn't have been able to go to grad school in the first place. I do not get financial aid - there is nothing for "white divorced female," only student loans. But the rents are skyrocketing (went up an average of $200 within a year, I went from paying 425 to 575 in a not-so-good part of town and had to move in with a friend) all over the Central Valley (California) and while rent here is that much lower than rent in SF that people actually commute from here to there, when you also work here, you can't afford to live on your own anymore. The standard of living is rising far faster than the wages they pay you.

On top of that, I would never have been an admin assistant in the first place if I could have actually used my undergraduate degree somehow. Like so many people I have a nice white collar diploma and have been forced to resort to blue collar work. The latter being perfectly respectable, of course, but it rankles to pay back a six-digit student loan by typing letters for The Man, especially if The Man can't spell and wears away the linoleum in the hall dragging his knuckles to the lunch room, where he eats his take-out sushi, chewing open-mouthed across the table from me as I eat my peanut butter sandwich.

I'm sorry. I guess I'm still bitter.

In any case, I work for different Men now, and while they have college degrees and nicer cars, they don't flaunt it quite so blatantly, and my first round of loans is gone, and the next round will be easier once I'm working again, as I chose a less expensive school and dedicated myself to the monastic order of Ramen and extra-crunchy Skippy. So while I won't be rich, I expect this future will be more promising.

mythago | March 12, 2005 02:28 PM

We have health and dental through Krissy's work.

The impact this has on one's self-sufficiency is really enormous. A significant chunk of our income goes to paying off old debt from having catatstrophe-level-only health insurance, PLUS the heightened costs of health problems that got worse--for example, a cavity you can't afford to fix ending up as a $1400 root canal.

Another shocker is to plug in not only your income, but your cost of living. The housing-price costs in my area are four times the national average. We spent about 40% of our income on rent. (A mortgage would be worse.)

stella | March 12, 2005 04:16 PM

Ah, Piqua.

The relative cost increase (in 1997) from Ada, OH, where I was paying $160-$210 for a fairly nice off-campus 1-BR apartment, and Columbus, where I teamed up with a friend to get a 2-BR in a dubious area near the university (we paid $575/month) nearly broke me.

By the time it came time to move out of Ohio, I was married, pregnant, and living in a 2-BR townhouse with central air + garage for $660/month in a slightly less dubious area near the university.

Then we found a place in Saint Paul. The cost came damn near breaking us: with the kid, we wanted to live somewhere reasonably safe (someplace where, say, UPS could deliver our packages to our door instead of nailing up a delivery notice and running the hell away when they heard gunfire) with approximately the same amount of room.


As things stand, between my licensing and board examination fees (over 3 grand, and the only thing we've ever used the credit card for), we've got about 2 grand on a credit card that's slowly being paid off, and about $250K in medical school debt that's being held over my head to the tune of $600/month (on the thirty-year repayment plan).

We're at our limit, without moving, at least for this city, living paycheck to paycheck with me moonlighting to try to cut down the credit card debt.

Place is frickin' expensive, man.

PiscusFiche | March 13, 2005 08:03 PM

Lee and I just bought a haus, which admittedly has more room than we need, and now we are forsaking it for a two bedroom apartment. (We are still keeping the haus, because we are moving to California from North Carolina, and we will never be able to afford a haus in CA, so we might as well be land barons in NC.)

I've lived off approximately 24K CDN (which will get you about 18,000 US depending on exchange rates that day) with a boyfriend (ex), an apartment, food, internet, computer upgrades, the occasional movie or video rental, and occasional gas money. I had about 600 dollars in medical expenses during this time, and only went shopping for clothes twice in the two year period this takes place in. We still had our luxuries, although truth be told, the internet was necessary for our jobs as we both worked from home and housed the work server in our apartment. (Wheee for Electric included in rent.)

A few years later, and I've become accustomed to my slightly larger salary which enables my crack-fiend-book-buying habit (just got OMW!) and clothes and eating out whenever I want. Lee is proposing that once we move to SF, that we live on his salary alone and that we sock all mine away into savings. Which we could easily do, as his salary is twice mine. We're approaching Fairly Comfortably Off as our financial tax bracket though, and we'd like to stay that way as long as possible. So we do exercise a modicum of frugality. We always ask ourselves if something is as cool as the money we'll be paying for it: Is that lamp really 200 dollars worth of cool? (Probably not.) Is that laptop 1800 cool? (That one, yes. This other brand, no?) We don't see every movie that comes out, we don't hit the music store more than once a month, we limit ourselves to things we REALLY want...although of course, I have been getting contracters to pay me in Barnes and Noble gift cards to satiate the hungry beast within. Some people would view our lives as incredibly luxury rich, others would think it pale.

Chris | March 14, 2005 02:41 AM

Hi, got here from another blog.
I just happened to have redone my budget today. (as I am trying to increase my emergency fund). The smallest I could live would be $1,218 a month or 14,616 a year. That's rent a modest but not really small amount for food, bills and public transit(I don't own a car, so no payments) But it would not be much fun.

Harry | March 14, 2005 10:13 AM

According to the CoL calculator, a $40K lifestyle in Piqua would cost you $67K+ in Seattle.

But we live on half that. A big reason for this is the lack of a car. Urban living gives you a lot of transit options, even in a place as screwed up as this one.

That said, we have big, big debt from family emergencies and job loss, and we currently have no health insurance.

Not exactly an optimal situation.

Emma Goldman | March 14, 2005 02:30 PM

We're discussing related topics over at War on Error last week and this; this is fascinating. I live in a major city, so some things (food, rent, parking) are much higher. I could probably scrape by on about $30k (take-home); throw in the significant other and his need for a car to get to work and pick up his son, and it's probably about $45k for the two of us plus his son part of the time. We don't have any consumer debt. I've paid off all my student loans (though I'm about to incur more so I can become a pastry chef--which will be an income drop for sure), but we do like to go out to dinner and have new clothes once in awhile and so on. We figured it out (I haven't been getting paid at my job for awhile) and we could just barely scrape by on his salary alone, but it wouldn't be all that much fun.

Tripp | March 14, 2005 04:11 PM

Oh, to be without child. I've got 4 sprogs, two in college.

16000 - house
1800 - utilities
7000 - food
4000 - clothing
4000 - car insurance
16000 - state college
16000 - other state college

About 65K. Yeah, that looks about right. For the most part I'm at the fat end of the child-rearing curve.

John Edwards | March 14, 2005 04:38 PM

I greatly admire all of you thrifty folks, including you, John. My wife and I are fortunate enough to make a very good living, but we still feel awfully stretched. We pay our nanny almost $40,000 a year, pretty much the going rate around here (suburban New York) for an experienced person. We wouldn't skimp on our kids' care, of course, but it's still a large chunk of change. And our mortgage and escrow (including an assessment for insufficient escrow amounts last year, given our skyrocketing property taxes) comes to $3,368 a month, which we can barely afford. I can't complain--we don't lack for any comfort--but the situation does sometimes feel a bit precarious.

Dave | March 14, 2005 05:20 PM

$262.50/mo rent
$320/mo gas
$100/month utilities
$100/month food


I pay too much in gas. Time to buy a hybrid.

Anonymous | March 14, 2005 05:41 PM

"16000 - state college
16000 - other state college"

Wow! Time to move to a new state!

Tripp | March 15, 2005 08:41 AM

Wow! Time to move to a new state!

I should have itemized that 16K/year includes tuition, books, and room and board. The tuition portion is about 8K/year.

Gluon | March 15, 2005 10:50 AM

16K/year includes tuition, books, and room and board.

It depends on what state, and what state college. Here in CA you can avoid tuition by being a native and attending the nearest University of California - you just pay the fees, which have risen 20% or so over the past three years. The fees are not what's putting me in the poorhouse - it's the living expenses. Most of my classmates who are also 30+ years old are working, but have spouses to help them out. The one exception is a single mother who is being forced to choose between supporting her kids and continuing the program - she can't give up paid hours to do fieldwork. She gets a grant that paid all her fees, but not anything to help her feed the family.

In my last application for student aid, there was a section where you could list all your volunteer work and achievements and so forth. I listed what I felt were accomplishments - making it through grad school while working full time, managing to pay off divorce-related debt, etc. - and then said something to the effect of "If I had received any help that would have made it possible for me not to work so many hours, I probably would have happily volunteered for worthy causes. But they always tell you on airplanes to take measures to save yourself before you try to help others. You can't help others when you're suffocating."

I hope at some point more folks realize how much they are being suffocated and by whom, and actually register to vote.

Trish Wilson | March 31, 2005 10:59 AM

One reason my husband and I are going to move out of Massachusetts after my son graduates from high school (aside of the COLD weather) is the high rent/mortgage rates. I won't say what we pay, but I will say that the area north of Boston is famous for being an incredibly expensive place to live. Once we move to a place where the rent/mortgage doesn't take such a bite out of our paychecks, we'll breathe easier.