Earning a stipend doesn’t mean suffering financially
These rocky financial times call everyone’s attention to government spending, and cause those in public service to wonder how the nonprofit sector will survive the turmoil on Wall Street — which affects the ability of foundations and donors to contribute financially.
The mess we are in also calls us to pay more heed to our own financial circumstances.
What does that look like for a member or stipended volunteer in a service corps?
Depending on the program, and on a member’s spending needs, a service corps stipend can be challenging to live on.
For service corps members facing challenges, the term of service is a great time to get schooled in personal financial management. If you are working with clients who have low incomes, the lessons you learn can also benefit them.
Do no harm
While most financial advice will tell you how to save and invest wisely, Corps members may not have any extra money to save. The priority for you, then, is to do no harm:
1. Get Your credit report free annually, know your FICO score (which doesn’t come with your free annual credit report), and learn how to protect and increase your score.
2. Track your money—all your money. Save receipts or take notes for a week. It helps to see it in black and white. That way you can spend according to priority not habit, and find cheaper alternatives.
For example, you might spend a lot on buying coffee at coffee shops, where you could make coffee at home or the office. That change would allow you to choose organic produce if that’s important to you.
A big expense that can build up unexpectedly are ATM fees. If you withdraw money from another bank’s automated teller machine, not only that bank but your own bank can deduct fees from your account. Imagine losing $4 every time you withdraw $20. And you may not see the fees till you get your monthly statement.
As part of tracking your money, list withdrawals and deposits in an account ledger like the kind you get for free with your bank account. Overdrawing your account can cost a lot of money.
3. Make a budget. Allow yourself to spend a maximum amount on a certain category each week or pay period. Some people like to put cash in envelopes at the start of the week, and when the cash runs out, so does the spending.
One envelope may be for food, and could include groceries and eating out. Another could be for gas, a third for entertainment, etc. You don’t need a fancy worksheet, all you need is to list your living expenses (rent, groceries, childcare, credit card, utilities, transportation), their due dates and their monthly costs. Make adjustments where you see waste as mentioned in Tip #2.
4. Be responsible with credit cards. Avoid running up credit card debt, as well as carrying a credit card balance from month to month.
Paying just the minimum payment fee on your monthly statement or paying the fee late can incur costly fees, and damage your credit score.
Also be careful about the due date in your monthly credit card statement. Those companies switch the date around like a fickle fiance, and they win if you pay too late.
If you are serving in Peace Corps or another international service program and are taking credit card debt with you, you can do a few things to help yourself out: sell off your car, books, and other valuables to pay off as much as you can before you go. If you won’t have enough cash to pay off your credit card that way, you can instead use the money to pay the minimum fee (or a set amount above that fee) monthly through an automatic bill pay that you set up through your checking account at home. It’s a very expensive solution.
Choose a credit card wisely, and understand the true cost of using credit cards. Use this calculator to figure out how much you really owe. Check out Frontline’s The Secret History of the Credit Card for understanding the fine print of your credit card agreement and more.
5. Live simply. Here are some of the biggies: live with roommates; borrow books and movies from the library; ride a bike whenever possible — going car free saves a lot of money; cook at home and have friends over for pot-luck dinners; forgo internet access and cable television at home; shop at thrift stores and swap clothes with friends; cut down on expensive drinks like beer; reuse, reduce, recycle.
6. If at all possible, save. Similarly, avoid spending your savings you came into the Corps with. Even $5 a week adds up.
7. Know your financial goals. In the next five years do you want to enroll in school, buy a house, buy a car, pay down student loans, start a family, retire?
You may not be able to put a lot of money towards these investments this year, but can educate yourself about the financial needs you will have. Knowing what lies ahead for you may motivate you to watch your pennies now. You can also take workshops on these topics as you see them offered in your community. Sometimes they come with free pizza!
The National Endowment for Financial Education (NEFE) offers an array of resources to help people think about money strategically, begin with Smart With Money’s Taking the First Step. Also check out this resource on Life Events and Financial Decisions.
Partnering with Idealist.org, NEFE published Making a Difference: A Guide to Personal Profit in a Nonprofit World especially for young people looking at a career in the nonprofit sector.
Service corps members are often eligible for programs that benefit all people with low incomes (such as housing for people with low incomes, Food Assistance and individual development accounts).
Another resource to check out regularly is Michelle Singletary’s Color of Money column in the Washington Post and NPR podcast.
Finally, keep an eye on the blogs in the Money Life Network.
For prospective corps members
If you haven’t yet joined a corps, have confidence that hundreds of thousands of people have participated in service corps and made it financially.
That said, do take a hard look at the numbers and make sure you can afford to live on a stipend. Take into consideration student loans (qualified loans can be deferred or put into forbearance during the term), child care expenses, rent/mortgage payments, car payments, etc. Service Corps programs, local nonprofits and government agencies may be able to offer help with certain expenses, so be sure to ask. It’s not impossible to thrive on the stipend, but a term of service isn’t worth ruining your credit history or incurring deep debt.
Also note that not all Corps are the same in terms of stipends. Peace Corps Volunteers don’t get rich, but typically earn enough to cover all their expenses (including housing, utilities, food, even medical expenses are taken care of), and sock a bit away for extras. AmeriCorps*VISTAs on the other hand, who work to end poverty, earn 105 percent of whatever is poverty-level income in their area—which can be a struggle!—and aren’t allowed to take on side jobs. Teach For America Corps members earn the starting teacher’s salary for their school district, while AmeriCorps*NCCC members earn $400 a month but have all their basic needs taken care of for their ten-month term. The terms of every program are different, so be sure to ask.
Do you know of other personal finance tips, or resources, useful to service Corps members? Are you a service Corps member or Alum? What have you done to be successful financial through your term?
Great post. I think sometime we get excited about service, which is great, but forget about practical side of things. Thanks for the links and resources.
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Take advantage of your term of service as a time where scrimping and saving is completely expected of you – you don’t even technically have a “job” (unemployment insurance – nope! COBRA – nope!).
Build up your emergency fund – $500 in a Certificate of Deposit (earns more interest than if it’s in a savings account, but if you access it before it matures you lose the interest – make sure to read the fine print). Having emergency fund money is also good for your well-being: http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/WhyYouNeed500InTheBank.aspx
Watch Suze Orman and realize how important it is to sock away a few bucks every week, even when you are making poverty wages. Remember, if you’re in Gen Y…we are at the perfect time in our lives to set aside a few bucks to let it GROW. Don’t wait to set aside money for retirement until you “have a real job.” (Also see her website for helpful calculators.)
Entertainment: Use Netflix (way cheaper than renting or going to movies in the theater), Hulu, your local library (Inter-Library Loan is GENIUS). Keep up on free admission days – some museums offer free admission on certain days of the month. Look into memberships for places you go to often – if you like to go with a partner, go in on a joint membership together. My partner and I are members at the local science museum and get to see IMAX movies for free and can see exhibits at reduced admission rates, because we’re members (something we take advantage of A LOT!). We’re also members at the local zoo and get to go there whenever we want for free (it was about $70 to join for a year – it’s $14 for one person’s admission).
Don’t buy things you can get for free – like bottled water (use a Brita filter and a re-usable bottle or cup). Don’t buy disposable items (it’s also green) – paper plates, napkins, etc. Take advantage of the Sunday newspaper coupons and ads. Comparison shop. Don’t buy traditional cleaning items – I’ve been using a recipe for vinegar and water for window cleaning. Stock up on items when they’re on sale and/or buy in bulk with roommates.
Have someone do your taxes for you FOR FREE – don’t pay someone! There are VITA sites all over the U.S. – they’ll do e-file for you! See the IRS site for locations near you. And since they’ll do e-file, you’ll get your money faster (you’ll get money because you’re poor)!
I’ve been socking away money since I started VISTA (a year ago) and have $2600 (plus interest) in a CD. How on earth did I do that? It’s easy to use the “I’m a poor VISTA” excuse when passing something over. I also immediately put my tax refund and other “unexpected” money into the CD (gift money, April and October’s extra checks, etc). I also commiserate with my other “poor VISTAs” and try to avoid talking about money with my soon-to-be-making-$60k-straight-out-of-college friends… But I am relieved to know that the skills and sacrifices I’m making now will help me when I do “have a real job.” I think I’ll be better off in the long-run, having learned these personal finance skills early on.
Marissa, you are amazing!! I am so impressed that you have been able to save so much as a VISTA. Thanks for these ideas.