If You Can’t Live on $40,000 Per Year, It’s Your Own Fault

A couple of weeks ago I shared with you ten characteristics of debt-free people of modest means.

In that article I specifically asked my readers to consider this question:

“Why is it that there are families out there with household incomes under $40,000 comfortably making ends meet and saving for retirement with no debt on the books — or at worst, a single mortgage payment — while others who make millions per year like Sinbad, Ed McMahon, Mike Tyson, and Stephen Baldwin have trouble keeping their financial heads above water?”

While my list of ten traits was met with general acceptance, I did manage to start up a minor debate between the readers as to whether or not it was really possible for the majority of folks here in the good ol’ United States of America to make ends meet on $40,000* per year.

How can I make such a claim?

Well, I live in Southern California, one of the most expensive places to live in the United States. In its 2009 list of the most expensive cities, Forbes listed Los Angeles second; only New York City had a higher cost of living.

Even so, I know many people living here right now that are making ends meet on $40,000 or less.

I know if I had to, I could make it here too on that amount of money – and if I can live on an annual income of $40,000 here in Southern California, I am certain I could make it most everywhere else in America.

So how do I know for sure?

Well, if you’re a regular reader here at Len Penzo dot Com you know I have been meticulously tracking every penny I’ve earned and spent for over a dozen years now.

Although I have a much more detailed breakdown, here is a top-level summary of just my key household expenses in 2009:


Keep in mind, most of these expenses should be considered conservative. Why? Because if I was making only $40,000 per year I would certainly work much harder to cut some of those costs down.

For example, you can bet I would be much more vigilant about limiting our gasoline and utility bills. Likewise for the retail purchases. But without a doubt, the biggest area where I know I can really cut corners if need be is the family grocery bill; although we do plan our dinner menus in advance to save money, we do a poor job of taking advantage of coupons and special sales.

In addition, we currently eat lots of steak and other expensive cuts of beef which considerably raises our food costs. I am quite certain that, if I had to, I can easily cut our grocery bill by at least 25 percent.

But, Len, what about the mortgage?

Well, my mortgage payment is a bit less than $640. And although I bought my home almost 13 years ago, with almost zero effort I found on the Internet a 3-bedroom, 2-bath, 1400 sq. ft. single family home within 10 miles of where I live currently renting for only $895 per month, or $10,740 annually.

So add it all up, and those basic expenses come to just over $36,000 per year.

Yes, I realize I still haven’t accounted for federal, state and social security taxes. But I am certain I could offset whatever taxes would be deducted from my paycheck with the savings I’d get by reducing costs on my grocery, utility and other bills.

Would my family be living like kings and queens? No.

But here’s how we would be living: in a respectable and comfortable home in Southern California, with two insured cars in the garage, and presentable clothes on our backs. We’d also go to bed each night with full bellies. On top of that I’d still have a little money left over to put away toward my retirement nest egg each week, a few bucks to put toward an emergency fund in case my water heater broke, and even a little something to take the family out to dinner once every month or two.

I admit, it’s not ideal. Clearly, it is a no-frills lifestyle; but despite what you might think, it’s certainly not anything close to poverty either. It’s just not.

So if you and your family are blessed with good health, but you find yourself still having trouble making ends meet on $40,000 per year – and are truly serious about living within your means — I strongly suggest you reassess your situation and see where you can cut back on your expenses.

Otherwise, you’ve really got nobody to blame but yourself.

* Considering that this post was originally written in 2010, after adjusting for inflation, that’s equivalent to approximately $42,200 in 2013.


  1. 1

    mdb says

    First thing to do, if you do make that much, should be to move some place cheaper. I want to move to cheaper location – I would take about 25% pay cut, but that would be more than offset in lower taxes and bills. Alas, my wife’s career right now makes that impossible.

    Someday I will leave Boston…

    • 2

      Eleanor says

      Meeeh, I disagree. Established family/social/business networks are worth the premium.
      Would rather be poor but surrounded by culture/family/good weather than living in a McMansion in a town where the cultural center is Wal-Mart.
      I have lived in both such places. The latter was soul-sucking and required a car to get everywhere, the former has made my day-to-day life joyful by comparison.
      I think kids might switch the equation, but if you’re single and your living in the middle of nowhere in the prime of your life, you’re a fool

  2. 3

    Sheila says

    I absolutely agree with you 100%, but I’m also afraid that I couldn’t. :) One thing about it though, we pay a significant amount of money in taxes, and we also aren’t eligible for any of the services or discounts that many people at this income level do. We have often wondered if we would be better off to make less money, which is a sad thing to ponder in a capitalistic society.

    • 4

      Len Penzo says

      I think – check that – I *know* you could make it on $40,000 per year if you had to.

      We should never ever have to wonder in this country if it might be better if we should make *less* money. Once that thought process starts to pervade our society, we become beholden to the politicians – not the other way around!

      • 5

        Katie says

        You forgot daycare. I have two small kids and no family close by. I pay close to 22K in daycare for them. I’m lucky I’m taking them to a daycare where I work (admittedly in the boonies), because I’d be paying about $150 a WEEK more if I had to take them to a daycare where I live. I don’t want to wish their childhood away, but I’ll breathe much easier financially once they go to school.

  3. 6

    Olivia says

    I haven’t been following you long but I suspect you’re not including a freelancer’s scenario. Freelancers pay both halves of Social Security, plus federal, state and local taxes. So a $40,000 income would knock off about $8040 in our locale. Netting $31,960. It’s low enough income to avoid federal taxes once you do all the deductions and exemptions. As one though, you’d also have to cover individual health insurance and retirement, totally out of pocket.

    In our case we’re hiring the kids out, if only to cover their food costs. Both are older boys in athletics, if you know what I mean. Maybe they’ll marry young…(Just kidding. Sort of.)

    • 7

      Bret @ Hope to Prosper says

      Olivia, this cracks me up. My son is an athlete in college and he eats half the food in our house. The good news is that he got a job at the grocery store, so he has his own insurcance and brings home food. It’s awesome.

    • 8

      Len Penzo says

      Great point. You’re right, I didn’t consider freelancers. A serious health issue will most certainly upset the apple cart, which is why I included the caveat about being in good health. There are options such as getting a catastrophic health insurance policy.

      Even so, my example did include over $3000 in health care expenses. :-)

      • 9

        TIm says

        $3000 a year is very very cheap for healthcare for a family of 4 unless you have a substantial employer subsidy for healthcare – I pay $2400 a year for health insurance for a single healthy 24-year old. You can certainly go a bit cheaper if you are single and healthy, but the coverage starts getting patchy, and if you can’t get decent coverage through your employer and have children or are in a higher risk category… most bets are off on what you’ll be paying for health care.

        Not to say that families couldn’t live a basic lifestyle on $30000 or $40000 a year without a nice health plan provided, but it starts looking a lot riskier and it does start to involve more difficult choices than giving up a fourth bedroom, granite countertops or a new car.

      • 10

        Len Penzo says

        Absolutely, Tim. If I had to do it over again as a single guy in my 20s – assuming I did not have employer coverage – I would roll the dice and go with a catastrophic plan. I would get a catastrophic plan (I am fairly certain they can be had for $100/month, if you are a healthy young adult). I would then allocate another $100 per month into a savings account for non-catastrophic medical “pop-ups.” That’s just me.

    • 11

      Lisa says

      It can definitly be done. My husband and I take care of our family of five on less than 40,000. Of course I am blessed my husband can fix anything and I bake everything. No frills. But we are always full and don’t have a dish on our house like we are waiting for aliens to reply :) oh. no offense. It is all about choices. our mortage will pay off next year and then we can relax and live a little. I am 37. husband 42. we are self employed so we know all about the taxes! In our area we have apparently high local and state taxes too. We still live on less than 40,000 in 2010 it was 35,000

  4. 13

    Kevin says

    I agree as well. If you can’t live on $40000 it’s because you don’t want to. People want what people on tv have and what their friends have or do what their friends do. It’s not always possible because everyone makes a different amount and has different circumstances. Maybe your friend buys what they buy because thay have 10 credit cards maxed out. Or maybe they cut back in other areas of their life. The point is you don’t know but it doesn’t matter because you should be providing the necessities for you and your family and not extravagance.

    • 14

      Len Penzo says

      I think you make a good point, Kevin. Television has incorrectly raised many people’s expectations beyond what is realistic to have on typical middle class incomes.

  5. 15

    Bret @ Hope to Prosper says

    In the early ’90s, I was floating a family of three on $21,000 per year, in very expensive San Clemente, CA. That was about the equivalent of $40,000 in today’s dollars. During that time, I saved up a down-payment for a house and started college funds for my kids.

    Having done it, I can say that it’s definitely possible, but not desirable. I wish I had of concentrated on college and earned a higher wage when I was young. It’s much more pleasant for my family to live in our house, have multiple cars and be able to afford entertainment. Barely scraping by is no way to live.

  6. 16

    Paul Williams says

    Len, I bet you could cut your food bill by 50% if you really wanted to – even without coupons! I’m not sure how food prices in PA compare to Los Angeles, but we spend about half as much per person on food as you do. The key for us is avoiding convenience foods and limiting meat intake (though we still eat a good bit).

    I also have to agree with you, because if you can live in LA on $40k/year you can live just about anywhere on that. But people are too stubborn to realize that many of their “needs” are just wants. If you’re going to live on less, you’ve got to learn the real difference between what you need and want.

    • 17

      Len Penzo says

      Well, Paul, I have a teenage son, so he might throw a monkey wrench into any plans I had to cut my food bill by 50 percent! But you’re right. We don’t eat a lot of convenience foods – I cook most of my meals from scratch using lots of recipes – but we do eat a lot of meat though. We could definitely cut back significantly in that area if we had to.

      • 18

        Paul Williams says

        Hmmm, rations for the teenager?

        Just kidding! :) I know it can be more difficult with teenage boys. I was one once, you know. I remember rummaging through the cabinets and fridge looking for food all the time.

        But meat really is a killer on a food budget, especially the expensive cuts. But with a little know-how and some help from Alton Brown, you can turn some cheap cuts into really good eats. We do that often to get our meat fix.

        We also rotate a few key dishes (cheap ones) into our menu every couple of weeks. I’m talking beans and rice type of things here. But they’re easy to vary by adding different chopped veggies and with the right seasoning they’ll taste great.

    • 19

      Len Penzo says

      Have you made Alton Brown’s mac and cheese yet? It is really good! (Not as good as my stove top recipe – hey, people, don’t knock it ’til you tried it! – but very good!)

    • 21

      Paul says

      Sorry but 40,000 isn’t realistic living in some areas. I agree with the original poster however he has the luxury of living in a safe area. I live in Chicago. There isn’t a single apartment that cost 500-600. In fact most apartments in Chicago are 900+. Can I find cheaper places? Yes but they are also in the most dangerous areas too. So I can live within my means trying to avoid gangbangers and drug dealers on a regular basis or I can live in a safe area barely making it lol. Also I don’t know what california
      S taxes are, but I can assure you chicago has one of the highest taxes in te nation. Our tax is 10%.

      So again can one live off 40,000? Oh definitely if you live in the a state like Georgia, North Carolina, South Dakota. But where I’m from buddy it doesn’t work.

      • 22

        Paul says

        Forgot to add where I’m from middle class is virtually non existent. You either live in a nice safe area(which is expensive) or a dangerous area (which is affordable).

        Also I was thinking if 40,000 was the amount given with taxes and all that jazz taken out then yes one should be able to live anywhere on there own. I know my salary is about 38k and when you take out Illinois and chicagos stupid taxes I’m at about 25k or so.

      • 23

        Len Penzo says

        I bet you can even live in the suburbs outside of Chicago for $40,000. ;-)

        My sister lives outside Chicago, in NW Indiana, and it’s extremely affordable.

        I think we’re essentially in agreement, Paul — although I’ll argue most people can easily get by in 99% of the country’s land area for $40,000.

      • 24

        Nuku says

        I agree and disagree simultaneously.

        People live way beyond their means these days. You have a very frugal way of living that I agree with.

        However, I have some crippling issues that cause my budget to overflow a bit:

        Gas: My commute is LONG, not by choice, but because I work in a rural area. My 35mpg car still results in 8400$ in gas annually! Also, my car maintenance is a solid 840 a year (I do my own everything as far as cars go), not including tires (I have ones I expect will last a while).

        Car insurance is 180$ for a single male at 24. That’s another $2160 a year.

        Car payment is 360$ (fortunately I have an interest free loan). Another 4320$ annually.

        Student loans bite me for 480$/month. 5760$ annually.

        So an extra 20640$ a year just due to cars and debt. Ouch.

        These are all things that ‘somewhat’ in my control. I have a good job that will allow me to advance. However, it IS costly to commmute, and there are no carpool options. I did choose to go to college, which left me with debt – but that is hardly a ‘poor’ choice if you ask me.

      • 25

        tokenadult says

        I had to reply because I’ve heard that tired old saw about “decent” neighborhoods in Chicago going for 900 plus. I live in one of the most (having had the greatest increase in real estate prices and homes going for 700 grand plus) neighborhoods in chicago. Yet, my friends living in one-bedrooms? None of us pays 900. I’ve never paid more than 800 and that was for two bedrooms.
        The issue again, is just like the point of this blog. You have to be willing to think differently. Here, if you want a good rent, NEVER answer craigslist, or go to an apartment finder, or really answer an ad of any kind. Walk around the neighborhood you like and call the manager listed on the side of buildings you are interested in. It is strange, I guess, but the way it is done here. I currently pay 550 for a smallish one bedroom, but very nice building with on site management and great tenants. One of my friends just got here from L.A. and with only looking at two apartments, found an enormous one bedroom with den and dining room for 850. My last apartment was 750 with two decks, walk in closets and parking included. And all have included utilities. If paying 900 for one bedroom, well… must be a more hipsterish neighborhood, cause I don’t even see them on Craigslist going that high for a one bedroom.

  7. 28

    Samurai says

    With no mortgage, and no car expenses it would be a breeze to live on 40k for one or two people wanywhere in America except Manhattan! Even Sf is doable at that salary!
    Minimum wage on he otherhand, no way.

    • 29

      Robert says

      I believe dual income at minimum wage will hit close to 40k. And 40k should put a family in the range of gov help with housing.

      I know my wife and I are doing quite well on 55k a year (one income) while putting around 20k into our school loans.

      • 30

        Eyes says

        Minimum wage = $7.25 nationally. Most minimum wage jobs I’ve heard of don’t give a paid lunch or paid vacation, so people end up working less than 40 hours a week, 52 weeks a year. (Usually only 35ish).

        For the sake of argument though, I used those maximum numbers.
        $7.25hr x 40 hrs a week x 52 weeks = $15,080 per year.

        That’s only $30,000 a year with two incomes. Not counting state and city taxes, Medicare tax, SSI, etc. which no one gets back, unpaid sick time, holiday closures, etc.

        The waiting list for help with housing in Philadelphia for example is almost 10 years and priority goes to people with no incomes way before this hypothetical couple. They also don’t qualify for any food stamp support with a monthly income of $2,320 (the cutoff is $2,069 for their household size, using PA again as an example).

        The budgeting advice in this article is great, and I’m glad you (Robert) and your wife are doing well, but you make almost double the income of a two worker minimum wage family. Please don’t go around spreading inaccurate information.

        • 31

          Eyes says

          Wow, I just realized that the author used his budget from 2009, when the minimum wage was still $5.15. That means the couple would have only made $10,712 a year without missing a day of work, or $21,424 combined!

  8. 32

    Money Obedience says

    We have grown so accustomed to thinking that we need more of everything, but you clearly show that this is not true. I don’t think that the challenge is to make more money to solve your money problems. The challenge is to live with the money you make. There are plenty of high income people ($100,000+ p.a.) who are struggling financially.

  9. 33

    Daniel says

    It wouldn’t make it impossible to survive, but it would make it pretty difficult to save. If I made $40,000 and spent the way I did this past year, I would not have been able to save much for future goals. Take wife and kids into account and it becomes nearly impossible.

  10. 34

    Jamie says

    Amen!! I am a new reader of the blog, and so far I am in love! I’m reading this post as I eat my homemade sausage, kale and carrot soup (which is delicious by the way), and I am part of one of those families earning less than $40K/yr and living comfortably.
    It takes some ingenuity (hence referencing my lunch above), but it can definitely be done. I’ve noticed on other PFBs that many write “make more than you spend”, but I agree with Money Obedience, our focus shouldn’t be on MAKING more (b/c that usually just enables you to spend more), but it should be on spending LESS than you earn.

  11. 35

    Jenna says

    What about travel? I have family all over the world. I’d hate to cut them out of my life because I can’t afford a plane ticket…

    • 36

      me says

      So let them come visit you for a change. What, are their reasons for not travelling somehow more valid than yours?

  12. 37

    Wojo says

    I completely agree about the challenging nature of the grocery budget. We used to spend $500-$700 per month as a family of two. We now spend anywhere between $200 and $250 as a family of three, and we’re far from “starving” ourselves. It’s just a little pre-planning and a lot of buy-one-get-ones. :)

  13. 38

    everyday tips says

    Love this post. I wrote a post last week about a family of four living off 111,000, and many people were aghast because they didn’t think it was possible in California or New York. I love that you showed empirical proof that it could be done.

  14. 39

    everyday tips says

    As an addendum to my previous comment, it wasn’t so much on my site that people were aghast about the 111,000. It was over at Funny About Money when they wrote a post based on my post about 111,000. They were much more in defense of needing more based on where you live.

  15. 40

    Money Reasons says

    Great point, I always wondered if it would be possible to live in a big city on less than $50,000. I think what big city folk consider are needs is different than someone that lives in a satellite city like myself…

  16. 43

    Jennifer Barry says

    I noticed you don’t have any house maintenance charges in the budget. When I owned a house that cost thousands each year, which I skip now that I rent.

    If I made $40K in LA I would definitely move someplace cheaper rather than scrape by like I did when I lived in Boston.

    • 44

      Len Penzo says

      I left home maintenance off the list because, for my example, I assumed most folks earning $40,000 or less in LA would rent a home. But you are right, home maintenance can be a real killer – especially if you have an older home. Lucky for me, my home maintenance costs in 2009 were very modest: only $1,153.73.

  17. 45

    Len Penzo says

    @Bret: I agree that it is not desirable. Thanks for backing me up and showing us its possible by sharing your own experience.
    @Sam: …and after reading this article, I hope any teenagers out there will realize that for people earning a minimum wage it will be virtually impossible to support a family.
    @MoneyO: “The challenge is to live with the money you make.” Absolutely! To do that we need to have a good handle on wants versus needs.
    @Daniel: To be honest, even though I could make it on a salary of $40,000 per year, I wouldn’t “settle.” I’d get a second part-time job to give me a little more breathing room.
    @Jamie: I love new readers! Welcome aboard! The soup sounds delicious, by the way. I am a HUGE soup fan!
    @Jenna: But wouldn’t a second part-time job take care of that? :-)
    @Wojo: Just wait until you have teenagers, my friend! LOL Our family could save so much money if the Honeybee and I spent 15 more minutes every other week, going through the coupons and looking for special one-day only food sales.
    @Everyday: I’m probably going to tick off a few people, but it won’t be the first time here. Most folks who say living on $40k can’t be done (or $110k for that matter), either haven’t really tried – or have trouble differentiating wants from needs. (Duck. Here come the rotten tomatoes… LOL)
    @Money: You may be right.
    @Barb: Thanks, Barb!
    @WorkingPoor: Yes, but if we are being honest with ourselves, most people in the US confuse real poverty with simply having a lack of discretionary spending.

  18. 46

    The Saved Quarter says

    We’re living on $24k right now in the San Francisco Bay Area and it is a very, very tight budget, even factoring in that we are receiving public assistance while our business is building back up after the economic downturn. I think that we would be quite comfortable making $40k a year; we could, at that point, get off of public assistance and be self sufficient, a goal we’re striving toward.

    The poster above who posted whether a family of four could live on $111k? I guess that family has a much more expensive lifestyle than us, but also, they’re not making the most of their resources if they’re not sure they could make it on that. We’re making it on less than a quarter of that and everyone in my family is alive, healthy, and usually pretty happy.

    • 47

      Len Penzo says

      Wow! Making it on $24k in SF is really an achievement. Congratulations! I hope your business gets up to speed real soon.

      Gross mismanagement of funds is the only way I can justify not being able to survive on $111k per year – regardless of where somebody lived. (Duck! Here comes another rotten tomato!)

  19. 48

    Olivia says

    Never fear Len. At our house we don’t toss rotten tomatoes at people, they go into the compost pile. (Which is why we have a six footer merrily growing in our raspberry patch.)

  20. 49

    chubbuni13 says

    Where in Socal can you find a 3 bed 2 bath for $895 a month, Len? I’m thinking you live in the South Bay, given your engineer credentials… The only area I can see being that cheap is Compton or some really rough areas of Lomita.

    If not, care to share where you found this rental listing?

  21. 50

    Susan Tiner says

    Provocative post and so true. We cut back severely in 2009 and it was fun making it work. It’s a good idea to do a reset once in awhile and see how little you really need to spend to live comfortably. We don’t have cable — get by on netflix. I know cable is a tough frill for people to give up but we don’t miss it.

  22. 52

    Len Penzo says

    @Olivia: Good for you!
    @Chubbuni: I sent you the link showing the home, via email.
    @Susan: The cable would be one of the first things to go at my house, Susan. Netflix is a terrific low-cost substitute.
    @Jenna: That would come out of what was left over! As I mentioned, it isn’t huge, but there would be enough available to contribute some small amount. :-)

  23. 53

    Monevator says

    $40,000 is about £25,000 in the UK — which is the national average wage! As long as you don’t need to try and buy a house, you could easily live on that here, and our standard of living is much higher.

    I know it, because I did for years taking into account I earned much more but saved it all (and more!) And that was in London, the sometimes top 3 most expensive city in the world (though currently much cheaper due to currency effects).

    Len also has the benefit he can turn to catwalk modelling if he needs to make ends meet, remember.

  24. 55

    Mrs. Accountability says

    Great post! We’re making it just fine on less than $40K a year and we eat a lot of meat here. But we NEVER buy meat unless it’s on sale. The most we ever pay per pound is $4 and that’s only on for a special occasion like ribeye steak for say, the fourth of July or a birthday or New Year’s, and those cuts are nearly always on sale on those days.

  25. 57

    Red says

    I definitely agree with this! If you can make it on $40k in SoCal, you can make it anywhere on $40k. In our area – East Tennessee – $40k would put you in a very comfortable lifestyle. I don’t have children, but I spend $600 each month on necessities – gas, groceries, rent, utilities, Internet, and cable. I’m also able to set aside $100 for “entertainment” – i.e. going to the movies or out for dinner.

    People who complain about not being able to make it on $40k after cutting expenses need to really consider changing locations. Who cares if you live in SoCal when you can’t afford to enjoy it?

  26. 58

    Mommathrifty says

    We’re a midwestern family of 5, living on less than $40K per year. We pay cash for everything, have virtually no debt, but our budget is increasingly tight with 3 growing children. Luckily, we have health insurance, 401K’s, and no car payment (paid cash for our one and only vehicle). My yearly food budget has gone down to less than $4500 per year, including eating out, which we rarely do. We live in a modest 1300 sq ft 3 bedroom home, very large yard, and 3 dogs. It can be done.

  27. 59

    Suba @ Wealth Informatics says

    Great Post Len!

    First we live in the SF Valley. Where did you find that $900 house, for a 575sf 1bed we are paying $1200. I would love to know.

    Second, we are one of those folks that can’t live on $40,000, no we don’t have cable or netflix, we cook at home every single day and our grocery bill is less than 300 a month. BUT I am including our retirement savings as a need and giving as a need. We need a LOT more than $40000 if I include those 2 in the equation.

    But for basic necessities/survival I totally agree, we can manage with less than $40000.

    • 60

      Len Penzo says

      @Monevator: Yes, Investor, catwalk modeling is still in the cards for me, isn’t it? LOL With $168 cheese sandwiches it’s no wonder London is the third most expensive city in the world! I guess cheese sarnies are even more expensive in at least two other cities in the world. ;-)
      @Out of Debt Again: Pass the peace pipe, Mrs. A! LOL
      @Red: I have a relative (by marriage) in Mississippi, and the cost of living there is even lower than Tennessee. I could retire tomorrow (at 46 years old) if I moved there!
      @Momma: Good for you! Keep it up! :-)
      @Suba: It does go to show, if people who are making more than $40k per year really wanted to, they could build their retirement savings up very quickly!

  28. 61

    jazzjune says

    The issue with this blanket statement is that everyone has varying financial situations. Some people have massive medical bills, student loans, car payments, etc. And, these debts are not a choice.

    Now, once most bills have been paid off, I can see a family of 4 living on such an income. But, don’t forget, Len, that most Southern Californians don’t have to really heat their homes often. My winter gas bill is anywhere from $135-$200 per month.

    I also want to know whether or not your children played sports, joined band, took dance lessons, or any other school-based activity? How about daycare and after-school care for those who have no other option. Len, just remember that not everyone shares the same circumstance. I found the cheapest house I could find on the market (foreclosure)without having to go in and make major repairs. Sure, I could have moved to a $50,000 house in the worst of neighborhoods and have subjected both myself and my children to violent crime and unsuccessful outcomes, but let’s get real. The only other choice I had was a $114,000 foreclosure and a mortgage of $878. I purchased this last year (not 13 years ago). Even my insurance company was impressed with this deal.

    I am a single (separated) mom with an ex that contributes at random. Please Len, if you have the time, could you show us an itemized list of how you do it. Please at least factor in child care, student loans, heating, and a car payment so that I can see how I can stretch $40,000 a year for a family of 4.

    I see that you are out of the woods for a lot of these debts, so you feel secure. But, most of us have to have these debts at some point until we can pay them off.

  29. 62

    Len Penzo says

    Hi Jazzjune, thanks for the dissenting opinion.

    As I noted in my article, I specifically excluded bad luck due to massive medical bills.

    Let me first say that my position is that student loans and car payments ARE a choice.

    For example, people can avoid car loans by saving their money to buy very modestly priced used cars. As for college, in California at least, people can go to community colleges and get all of their general ed classes out of the way for a fraction of the cost of big universities. In the meantime, they can work and save up for a reasonably priced college. I got an electrical engineering degree exactly that way with no student loans.

    Even so, lets say I just graduated from college with student loans and a job in So. Cal. that paid me a $40000 salary. I could still make it on that salary – easily! I would find a small apartment or rent a room in a home with other people for $500 per month. For example, my office mate is currently renting three rooms in his house in Long Beach to three tenants for exactly that price.

    What I wouldn’t be doing is buying a house. And if I got married, I’d probably delay having kids until I could afford to buy a home.

    “Please Len, if you have the time, could you show us an itemized list of how you do it.”

    But I showed you an itemized list of how I do it – including heating – with a family of four, no less! I also said it would be no frills – just the necessities, of course. (You must not live in Southern California. It gets cold here too in the winter! “Cold” is all relative, of course, but, for example, our winter gas bills were $137 and $112 last December and January.)

    “Please at least factor in child care, student loans, heating, and a car payment so that I can see how I can stretch $40,000 a year for a family of 4.”

    Respectfully, the decision to have children is a choice. Therefore, child care is a a de facto choice.

    As I mentioned, my utilities WERE included.

    The car payment is a red herring. I’ve already explained why it is a choice.

    Student loans are also avoidable – and even if they aren’t people just graduating with them can still live on $40,000 per year very easily – assuming they make the right choices.

    “I see that you are out of the woods for a lot of these debts, so you feel secure. But, most of us have to have these debts at some point until we can pay them off.”

    Exactly! I agree with you that people who have made a series of incorrect decisions in life – for example, trying to get too much way too soon – may have a difficult time living on $40,000 per year.

    But that’s on them.

    The most important message here for people just starting out, is that it CAN be done – as long as they make smart choices.

    • 63

      ani says

      You might duck a few more rotten tomatoes with your response to Jazzjune because a lot of people reading your column and comments ARE those people who made the “mistakes” of going to school(even community college requires student loans these days)with student loans, buying a car to get to work (many not-so-rural areas have lousy transit systems) and end up with children before they are financially solvent. All she wanted was some guidance to get out of this path that she “chose”. That’s why we read these columns- for help.

      • 64

        Ginger says

        Well said, @Ani. I thought the reason to read these posts/articles was to get some guidance not to be berated for not having all of your proverbial ducks in a row. I can understand that he’s not in a position to have made those “mistakes” but the same can’t be said for everyone.
        With comments like “well that’s on them…” what is the point in reading these types of articles?

        • 65

          Eyes says

          Exactly! I really don’t see how, “don’t have done that” shows how something is currently possible. People can’t change the past and are looking for information about how it is possible to live on that income in their current situations. Most people under 35 have student loans, many have kids and/or medical expenses and many need cars to commute and keep their jobs.

          I was a lot more impressed with this article before his argument broke down in a different family situation and he decided the best route was to continue to blame people for not going back in time and making the “choices” that they did- to get sick, go to school, or have kids. It’s a very narrow-minded view to say “my life is like this, therefore everyone’s lives should be like this.” The truth is, most people’s lives are not, and instead of using this as an opportunity to show people how to be more conservative with spending, the author chose to dismiss the average circumstance with blame.

  30. 66

    Laura says

    My husband and I have lived, and saved, on $40,000 and are now making $60,000, but ironically, not saving much more. We moved to a state with an astronomically high sales tax, which has eaten up a good chunk of what seems to be a huge difference, but the real deal-breaker for us has been health insurance. Keep in mind that people working at low-wage jobs don’t necessarily have access to good health benefits. My husband is able to get insurance through his workplace, but it’s even more expensive than paying for private insurance, which we do. To keep costs down, we’ve both opted for high deductible plans, which means that we pay for virtually all of our health, dental, and vision care out of pocket. The premiums alone, for the two of us, are about $350, much more than our monthly grocery bill, and that excludes all dental and vision care. We’ve always been quite frugal, and it took us awhile to figure out where all the “extra” money we though we’d have was going, but that’s what we finally determined. We don’t want to scrimp on health care just to save money, so we’ve made the choice to continue getting two dental cleanings a year, going to the doctor if one of us is having strange symptoms, etc., but all that really adds up. Rent alone, but that way, eats up about a third of our take-home pay. I’m not saying it’s impossible to make it on $40,000 a year, or even $60,000 in our case since we are still saving money, but having lived on $40,000 before, I can’t imagine trying to cover the extra expenses of living in this state (WA) on that small a salary, and we were already living in a trailer on $40,000. I guess I was just bothered by your casual assumption that you could squeeze thousands of extra dollars a year out of a budget by simply reducing grocery and utility bills, etc. I’ve been juggling the household budget six ways to Sunday since my marriage, and I can promise you that it’s not quite as easy as it looks. Anyway, that’s just my kind of rambling two cents. I just wouldn’t be quite so blase about how easy it is to get by on a small income.

    • 67

      Len Penzo says

      Thanks for your thoughtful post, Laura. You weren’t rambling. I ramble. A lot. Like right now. ;-)

      Seriously though, keep in mind I didn’t say living on $40,000 was easy. Here’s what I said:

      “I admit, it’s not ideal. Clearly, it is a no-frills lifestyle. But despite what you might think, it’s certainly not anything close to poverty either. It’s just not.”

      As I told Jazzjune, it’s easier to live on $40,000 per year when we make the right decisions early in life. I consider where we choose to live to also be one of those choices. :-)

      Tea Party commercial time: I live in a high tax burden state (ranked 15th according to the retirement housing guide at http://www.e50plus.com/public/202.cfm ) as you do (WA was ranked 13th). If we could elect politicians in these states that were for smaller government and lower taxes, there would be more money in our pockets to help us live on $40,000 per year – and help pay for things like our health insurance, for example. :-)

  31. 68

    Nick Nakorn says


    A great article. I have lived on less for many years both in London and (more easily) in Devon (rural S.W. England). On this topic you might like some of the ideas I have put forward in The Sirisuk Declaration.

    Best wishes

    • 69

      Len Penzo says

      Thanks, Nick. I am categorically opposed to the premise behind the The Sirisuk Declaration. I find it to favor redistribution of wealth, and opposed to capitalism and economic growth – and those policies have been proven time and again to be a failure for the world’s societies.

      • 70

        Olivia says

        Following the side issue. What we fail to consider when we determine what type of government to have, is that someone will always want to be in control and have more than others. No system can be better than it’s creators. Since our motives can never be perfect, every system will have flaws. The best governments take that into consideration and put checks and balances in place.

        Then there’s the standard for what is fair and equitable. How can that be determined, and who will enforce it on others, and how will the enforcer keep from becoming a dictator?

  32. 71

    130 says

    I grew up in a three-person family that lived on less than $20,000 a year in Los Angeles. (I’m in my mid-20s.) We had less than most of the people I ended up meeting in college but by all means we didn’t have a difficult life in terms of material possessions — our family still had enough to eat, had a car, had two TVs, had a computer, etc.

    I think the most difficult thing was moreso dealing with people who expected us to have more than we did, possibly simply because they had expectations for us to be at an average income level. It was more of an annoyance rather than an issue of survival.

    I think the whole idea of having to have over $40,000 a year is all just social expectations. If you can’t live on $40,000 a year, there’s probably a lot that you think you need, but you really don’t — it’s just what people expect you to have.

    I would like to note however, that my mom is only a few years from retirement and has less than $50k saved up. However, with Social Security and low-income senior housing, she already has a plan to live frugally despite the small retirement savings.

  33. 72

    Nick Nakorn says

    it is absolutely true that the Sirisuk Declaration is redistributive and thus ‘left’ in traditional terms but it is also ‘libertarian’ because it is voluntary and does not involve the state. What I am suggesting goes beyond ‘left and right’. Interestingly, I have received some criticisms assuming the project is part of a centralising socialist agenda and some assuming the project is part of a right wing movement. In fact it is neither. Polituical parties of all colours have to know how they are going to address the confluence of limited resources and expanding economies.

  34. 73

    Lessa says

    For the one who was asking where to find such cheap housing… There are a lot of cheap places to live along the 15 south of Camp Pendleton. I’ve seen one bedrooms for $400 a month thereabouts.

    Oh hi, new reader, just found you tonight. I’m really enjoying what I see though.

    • 74

      Len Penzo says

      Awww, thanks, Lessa! :-) I appreciate it. I just hope you’ll like this little ol’ blog enough to become a regular over here. (And thanks for the housing example too!)

  35. 75

    Amber at Blonde and Balanced says

    Wowzer, great post! I completely agree. My post today is about people who just don’t get it when it comes to personal finance. They claim they’ll never get into a good financial situation because “they don’t make enough” or “they have kids” or “their house payment is too large”. ANYONE, and I mean ANYONE, can claw their way out of a bad financial situation if they really want to and your article totally makes that point. Woohoo! Go, Len Penzo!

  36. 77

    Sabrina says

    What about having a savings account? I have been determined to save money ($410/month), but it’s also making living hard. We make $42,000/year, but have a ton of bills. Rent is $900/ month, car payment is $237.38/month (the car is required for my husband’s job), another car that I barely use except to drop my daughter off at school, $315 for preschool (which is one of the cheapest ones), about $2,000 in credit card debt (which is no ones fault but our own), $120 (minimum) for gas (my husband has to drive 60+ miles to work in Denver and once a month across the state. Colorado is a big state…), $111 in cell phone bills (we’re locked in a contract), $70 for internet and TV (will be getting rid of the TV in a few weeks once Mad Men is over with. Yes, my priorities are slightly off on that one), $97 for prescriptions, $150 or so in utilities, $400/month on groceries (mainly produce and meat), and $104/month for car insurance. The student loan payments haven’t started yet… We’re living on one income because I’m a full time student and honestly, no matter how many places I apply to, I rarely ever get a call back (including Wal-Mart). We don’t do anything. Never go out, don’t get take out, make things at home. It’s just been really frustrating, because no matter how much we make, it feels like we always have no money. Any advice would be much appreciated, but please no one yell at me :-(

    • 78

      Olivia says


      I’m assuming the $42,000 is pre-tax income and the credit card amount is the total owed.

      This is a season in your life. It will not last forever. So don’t feel yelled at. You are learning.

      Meantime, you should be able to shave a little something off the food bill, even in Denver. And once your internet obligations are over, shop around. We have DSL for about $20 a month after dickering. Try borrowing DVD’s from the library to watch as a substitute for TV if your reception is that bad. Is that the best cell phone plan out there? How does tracphone work in your area? Once your contract is over you’ll be able to evaluate. Those ideas should help some. (Don’t feel obligated to do them, they’re just ideas.) Even if you put aside $30-$50 a month in a “do not touch” envelope from your savings on these few things, that will help ease your mind a bit.

      One thing that takes the ouch out of eating in is making ethnic foods. They can be quite cheap and a lot of fun. There are plenty of frugal hacks out there once you get started, but go slow, try one or two at a time and eventually they’ll feel more natural and less like deprivation.

      • 79

        Paul Williams says

        I’ll second Olivia’s suggestion on trying ethnic foods to spice up your home cooked meals. They often focus around low cost and healthy ingredients (like beans and rice) and can be fun. You don’t need to splurge on the expensive imported products either – you just have to learn good substitutions. In the end, it’s mostly about using different combinations of spices (which don’t cost much when you spread them out over many meals).

        This is something my wife and I enjoy doing, and I think it really makes the meals fun. We just need to figure out how to do Ethiopian food now! We both love it but haven’t tried to cook it yet.

    • 80

      Len Penzo says

      I know. It is a lot tougher when you have things like credit cards to pay off. What I would in your situation is sit down and list all of your expenses. And I mean EVERYTHING – even the little things like cash purchases that may have come from your ATM withdrawals.

      Once I did that I would get really serious and evaluate what expenses were “wants” and which ones were “needs” and then start cutting.

      From what you told me, the one payment that really sticks out in my mind is that $315 per month for your daughter’s pre-school. I understand that pre-school is important. But I would use that money to pay off that credit card bill as fast as I could first. Once that was done, then I would build up some savings. Only after I had a sufficient emergency fund established would I send my daughter to pre-school. I know a lot of people would probably disagree with me on that one, but that is just my opinion. :-)

      I realize these are really tough decisions. It sounds like you are determined, so I know you can do it, Sabrina! Determination is half the battle. Hang in there.

      • 81

        Holly says

        Hi, Len! If I read correctly, Sabrina is a full-time student. So I am guessing that her daughter is in pre-school while Sabrina goes to school. She may not have the option of sending the daughter to Grandma’s for the day so this is not an expense that she can eliminate.

  37. 83

    Will says

    I think that the key to being able to live on as little as possible is to establish a very strong budget and prune down your spending. This is usually a painful process, especially in the US where we have a culture of consumption, and consequently most people don’t want to do it. The price they pay is that they consume 90% of their paychecks, regardless of how much they make.

    • 84

      Len Penzo says

      Well said, Will. Living on $40,000 per year definitely requires some very tough choices. It’s a lot easier to do though when those correct choices are made earlier in life.

      • 85

        Kaylen says

        I like how you say that, as if we could go back in time and change the decisions we made. You can’t change the past, so there’s no point in stating the obvious.

        You may not be aware of this but you come across as pretentious with this one.

        • 86

          Len Penzo says

          Hi Kaylen. I realize we can’t change the decisions we make in the past. But it’s never too late to start making the right decisions! The more correct decisions we make from here on out, the sooner we can start to undo any poor decisions we made in the past.

          My hope with this post was not to sound pretentious — although I completely understand that it does come off that way — but to help younger readers who are just starting out will see the impacts current decisions have on our futures.

  38. 87

    Mary says

    Your post reminded me that NJ really is tops when it comes to auto insurance. Sigh. And if you have a young adult male in your house – fuggedaboutit! Rates for this category of insured drivers are through the roof.

    NJ also leads the nation in property taxes. I can’t figure out where on your chart you have property taxes listed. We are spending very close to $10,000 a year. We could move to spend less in property taxes, but I’m not sure where in NJ would be less. What I’ve noticed is that the towns with ‘cheaper’ houses often have surprisingly high taxes while the town with very nice, pricey homes have lower taxes. We live in a ‘mid-range’ town. Our home is paid for. High property taxes here have forced many of our senior citizens to move from their homes. It’s very sad.

    My husband is an independent consultant so we pay for our own benefits. Oh how I wish we only spent what you are spending for medical and dental. We are spending about a $1000 a month for medical with no dental. Our rates have gone up every year despite the fact that we are healthy. Those who do not have to purchase medical benefits entirely on their own are fortunate indeed.

    Interesting article. Good fodder for discussion.

  39. 88

    The Latter-day Saver says

    If I made $111,000 per year I would be able to save about $70,000 per year on top of what we save currently. Sweet!

    Good post. I agree that it can be done. We are a family of 5 and are currently in debt (slowly digging our way out, though) and we are doing it!

  40. 90

    Paul says

    We live quite well as a family of four on a little over $40,000 a year. According to Turbo Tax, we’re pretty close to the median income for the nation. We both have Master’s degrees, but I decided to be an at-home-parent when our first child was born, and we feel it’s been a great decision. (She turns eleven today). I’m always curious about other people’s finances, but don’t ask. What do other professional couples make? We identify ourselves as mid-Middle Class. The only time we get into a financial muddle are times when we act upper-Middle Class. We’re paying off a little bit of zero-interest credit card debt because of a recent one-month trip to India, but we’re scheduled to pay it off before the zero-interest period expires.

    We own a house that is worth more than we owe on it, and our retirement fund is poised to pass the amount we owe on our home. The only thing I wish we had was a bigger emergency fund. We live in Santa Fe, NM, and that’s generally considered to be an expensive area, but I don’t find it so. We have been in our home for a while, so our mortgage payment is about half of what rent would be for a similar home now.

    Basically, living well around the $40,000 a year mark means just a little more vigilance about your spending.

    • 91

      Len Penzo says

      Great job, Paul! Thanks for giving us another example that proves living on $40,000 per year is possible! And Santa Fe is a beautiful part of the country, to be sure! :-)

  41. 92

    Jerry says

    I agree with you. While insurance takes a big chunk out of our salary, we still manage to live well below our means and save. This definitely leads to peace of mind and we are a family of 4.

  42. 93

    2million says

    Great post! So true a family of four should be able to live off $40k a year – if your making more and live with that mindset thats a big step towards financial freedom.

    As mentioned previously healthcare is the biggest wildcard for me – I have my employer health plan, but if I didn’t there is no way we could survive on $40k or even $50k /year.

  43. 94

    Misty says

    Here’s my situation: I’m a 26-year-old single woman, no kids, but I do have a cat. My brother lives with me, and has a part-time job to cover any minor expenses that pop up while he goes to school, but doesn’t contribute much in the way of bills or groceries. I make about $17,000 a year, and have student loans and debt payments that add up to around $500 a month. I get by just fine, and I even have a little extra to go out to eat on special occasions. My car is paid for, but I could easily get by without it if I had to, and inevitably I will have to if it breaks down, though in my former life I was smart enough to pick a car that you can pretty much drive until the tires fall off with very little maintenance costs.

    A year and a half ago, I was barely making ends meet, thinking it was impossible to live on my salary and still pay all my debts. My brother was working full time at WalMart to pay his half of the bills, and was miserable. I nearly crashed and burned, and certainly trashed my credit report. Then the day came where I didn’t have enough left over to buy groceries. Literally, I had paid my rent, electricity, water, and student loans, and had about $5 in the bank left to stretch the two weeks until my next paycheck.

    Something had to give. So what did I do? The first thing I did was to take my $5 and buy a bunch of beans and rice. Problem of eating solved, I started looking into what I could do to change my situation. I quickly realized that my biggest problem was living in a two-bedroom that I couldn’t afford. I was poor, so I was going to have to live like I was poor. I had to figure out a way to move, and how was I going to do that when I could barely make ends meet as it was?

    First, I called each and every one of the student loans, and told them the situation. All of them were willing to put me on some kind of hardship deferment, even if only for a few months while I fixed my situation. That meant more interest in the long run, but in the short run it created some cash flow that I could work with to get out of the jam I had created. I lived with a friend for about 3 weeks at one point, but I was able to pick up some extra hours at my job that way, which created a small extra boost of income. I got rid of most of of the things that wouldn’t fit in a significantly smaller apartment, rented a truck to pack the rest of it, and moved myself to Dallas on the weekend. All told, I think I missed one day of work in the process of moving. (I was lucky in that I was working from home at the time, and was moving so to be closer to the home office. I didn’t have to try and find a new job in a less expensive area, though I don’t doubt that there are plenty of jobs to be had paying $17,000 a year. Ha!) I loaded and unloaded the truck with the help of one person at the old apartment, and one person at the new, both of whom were volunteers. Let me tell you, you learn who your friends are when you are desperately in need of help to move and no one shows up. It was not easy, but I got it done.

    Now, I live in a one-bedroom apartment of about 500 sq ft, within biking distance of my job. I expected to have to live in a slum, given my budget, but it’s actually a very nice apartment in a gated community, even if it’s pretty small for two people. Luckily, my brother and I are very close, so we don’t drive each other crazy. I won’t be buying a new car for awhile, and I can’t really afford to pay for the gas for my paid-for car, so I’m getting used to the carless lifestyle and actually loving it. I’ve paid off all of my debt except the student loans, a small loan from a friend, and the cost of breaking the old lease. By the end of the year, I will have a $1000 emergency fund, and hopefully a little left over from my tax refund that will allow me to purchase health insurance for the coming year.

    I am by no means comfortable. But I am surviving, and I even have a little extra to spend on fun now and then. I’m just saying… If I can be doing this well on $17,000, what’s wrong with you people who can’t manage to feel comfortable on $40,000 a year? Or for goodness’ sake, the ones that can’t live on $111K a year. I don’t care how many kids you have, I know a lot of poor people with kids who would be ashamed of you.

    $40,000 a year is an embarrassment of riches for a single person or a couple with no kids. I can’t see how it would be /un/comfortable for people with kids. Suggesting that it’s impossible to live on less and using that to justify racking up credit card debt is disrespectful to yourself, and downright rude to those of us who are successful getting by with less.

    Take it from someone who has done her laundry in the bathtub because she couldn’t afford the laundromat: You CAN do without more than you think you can. You just choose not to. So stop whining, put on your big-boy pants or big-girl panties, and take responsibility for your life choices.

    • 95

      Len Penzo says

      What a fantastic story! Great job, Misty! Thanks for sharing your experience and perspective on how and why it can be done! :-)

  44. 98

    smart money says

    The biggest hoohah lately in Syd/Aust is not being able to survive on a family income of $150,000 and still NEEDING welfare subsidies…


    All of us take a lot of luxuries for granted: watching tv, airconditioning, cars, dining out etc when at the end of the day many of us actually don’t NEED all those and if you’re not earning enough, you can really do without those things.

  45. 99

    Really? says

    Well Len. Unless you have or currently do live on $40,000 per year, you should not speak about how easy it is. You are an idiot, plain and simple

    • 100

      Len Penzo says

      If you say so, Einstein. What’s funny is I just showed you how it can be done — in Southern California, no less — and yet you still want to make excuses. Why am I not surprised you don’t get it.

  46. 101

    Kerry says

    I came across your blog and very much enjoy reading it. I will say this about making it on $40,000…it is possible if you have good health. There by the grace of God go you. My husband and I have a severely autistic boy and the cost of his care and therapies have cost us no less than $20,000 per year. Actually, most years it has cost anywhere between $50,000 and $75,000. While we are blessed to be able to afford his care, most families cannot and struggle to provide care for their disabled children. They have to chose between financial stability, or depending on a public system that usually barely provides the minimum care needed for these children…which has been made worse by cutbacks due to the great recession. Unfortunately, charities usually only provide for the most needy…so a family making $40,000 would see no assistance nor have the money to provide the services.
    I also agree that you must be lucky having healthcare cost only $3000 for your family. We pay $12,000 per year for three of us, and that does not include our deductible and substantial co-pay amounts.

    • 102

      Len Penzo says

      Thanks for sharing your story, Kerry. You’re absolutely correct: healthcare costs are the big wildcard here. Fortunately, most folks are blessed with relatively good health — especially those of us under 50.

  47. 103

    Terry says

    The itemizations of costs are just *NOT* reflective of reality! Health care and dental for $3,124.80 per year?! What health plan is that, because I’ll sign up for it now if it’s a PPO (I get to choose my own doctors), has no more than a $500 deductible per year, and $20 office visit copays!

    My health care on COBRA costs me $535 per month and it covers ONLY me! Its deductible is $500 per year with $20 office visit copays. I have NO dental coverage because it was more money on top of the $535 per month!

    That is why we need nationalized health care. Each person in this country that is middle class (is there still a middle class left?!) and lower on the economic ladder pays huge amounts of money in taxes in relation to what they earn. That is billions into our government’s coffers, yet we don’t get a return on our investment (tax dollars that we pay). It all goes to benefit the rich, the chronies of the elected officials, and corporate USA (corporations that do nothing more than ship out our jobs overseas, thus leaving us with no jobs, and as a result of not having a job, we have no employer-sponsored health insurance). It’s about time that our tax dollars were spent on *we the people* instead of on wars, aid to foreign countries that ends up in the hands of dictators and corrupt government officials, and that perhaps makes its way back under the table from those foreign governments as kickbacks to our elected officials!

    • 104

      Len Penzo says

      If those costs aren’t reflective of reality, Terry, then I guess I am living in fantasy land because those were/are my costs.

      Not to get off topic here, but since you brought it up, the government does nothing more efficiently than the private sector. You may think some government bureaucrat can make smarter decisions concerning your personal healthcare and what procedures you need (and when you can get them, if ever) better than you and your doctor can, but I don’t.

      National healthcare is less efficient and as a result it’s costlier for everyone — well, except for the 10 percent or so who didn’t have coverage to begin with.

      By the way, the only two areas of healthcare that aren’t insured to some degree by the government — lasik eye surgery and plastic surgery — have continued to see declining costs year after year. I think there is a valuable lesson there for everyone who thinks more government intervention in our healthcare system is the panacea.

      • 106

        Kat F says

        Len, no undo disrespect, but you’re incorrect on your facts about health care, and you really need to do a little more research before posting such things.
        You need to check your number of uninsured. It’s not 10%- conservative numbers put it at between 16% and 17% (US Census). When you get into the lower age brackets, it jumps. According to a study done by Families USA in 2009, some 86.7 million had been without insurance in the past two years. That’s about 29% of the population.

        Oh, and before you decry the uninsured, let me remind you that quite a few would prefer to be insured. We’re just not allowed to. I’m a 30 year old woman in reasonably good health. 5 years ago I had a reaction to a medication I was given in the hospital- it shut down my kidneys for 5 days. No major medical insurance would touch me. I got on the waiting list for the CA program MRMIP. It was going to take a while, and for coverage of just me, that was severely limited (10,000 out of pocket max), had high copays (60 per visit), and a limit on how much they would spend on me (750,000), the average major medical insurance option was going to want well over 700 a month. Thanks to the National Health Care Act, PCIP insurance was made available- it’s a public health insurance option for people like me. The copays are reasonable, there’s no cap, and it covers me for basic health care (15 dollar office visits)- the preventative care that saves us so much. It’s under 400 dollars.

        In addition, there are many things not covered by health insurance- many plans for lower income households don’t cover vision and dental. In addition, dental insurance really doesn’t cover much- if you have a tooth go bad on you, or you have weak teeth, you can expect to pay a lot on top of your insurance. Glasses are expensive, especially if you want ones that will last, and need to be replaced every 2 years (every year if you happen to be under 35, when eyes can be prone to dramatic shifts).

        Not having people have access to basic health care- including affordable dental and vision… FAR more expensive than getting everyone insured. Your teeth are a big part of your health, and not getting them dealt with can lead to serious (i.e. EXPENSIVE) health problems. Eye strain can contribute to migraines- which put you at much higher risk for neuro problems, including stroke (an expensive problem to have). The lack of basic health care in this country drives up costs through E.R. visits, costly corrective medicine instead of cheap preventative care, and the spread of disease- which causes missed work, and other financial hardship.

        In addition, being dismissive of the increasing need for internet (a basic requirement of job searches)- especially in a time when libraries are severely limiting hours, and reducing access to the net.

      • 107

        Kirstyloo says

        I disagree with your statement about health care. One driver of higher health care costs is caring for the uninsured and increased intervention at the end of life (most health care is consumed during the last 12 months of life). Plastic surgery and lasik eye surgery do not fit into either cost driver. Patients need to pay upfront for care and it has a defined end point. So yes, the costs are going down. I guess that I’d add fertility treatment to the mix. The cost of standard procedures have remained constant; however, the overall cost for care goes up as there are more tests and treatments available.

  48. 108

    Linda says

    We are a family of 4, with me leaving full time employment last year with the birth of our youngest. I work nights/weekends when shifts are available but it’s really only 1-2 days per week. My husband’s work is in construction and at times can be great but there are many times throughout the year when he doesn’t get enough hours to cover our expenses. Because of the sporadic nature of his work it makes it hard to plan for me to work, etc. He has been trying to get a steady 40 hr/wk job but to no avail. I am currently taking online courses and hope to find a new job in the next few months now that our oldest started kindergarten and we can afford to send the baby to daycare if I’m working full time. Below is a snapshot of what we have done over the last few years to combat low income:

    We certainly know a thing or two about wants and needs. Over the last two years we have cut back considerably. No cable TV, DSL Internet at the slowest speed available, not using the second vehicle (nothing special and was a gift from a family member- but has required too much maintenance) we now share the car and carpool with others as needed- yes it takes a little more planning. We don’t go out to eat, we don’t go to concerts and movie theaters and professional sporting events. We only buy new clothes when the old ones wear out. We are pretty much bare bones right now- rent, bills, food and gas. Is it ideal? No. Is it stressful? Absolutely. Whenever we get larger paychecks we end up playing catch up from the previous months. There is never an extra penny in our wallets.

    I am hopeful to get a full time position soon which will really take care of a lot of these problems, but I have to say, once we have a larger income, we will most likely stick with the way we are living becuase we like it, we’ll just be able to sleep better at night because we know we can put food on the table in the morning. However, we might bump our Internet up one notch because it is dreadfully slow.

    • 109

      Len Penzo says

      Linda, as long as you commit to spending less than you earn, you will be fine. It sounds like you have very little or no debt. Hang in there! It sounds like you are doing really really well despite your circumstances because you are very disciplined — so congratulations! That is something to be very proud of!

      If you can maintain that discipline once you get full-time position you’ll be in great shape because you’ll be able to focus on building up your emergency funds, retirement nest egg and other important cushions without building up additional debt. Hopefully you’ll be bringing in enough extra money to set aside enough for a nice (paid for) summer vacay every year too. Best of luck to you!

  49. 110

    Fred says

    Where in Southern California do you find a 3+2 house rental for $895, in a neighborhood that doesn’t require Kevlar fashion or a gas mask?

    • 111

      Len Penzo says

      When this was written, I found a home in Chino, California for that very price. It was in a decent neighborhood too.

  50. 112

    Aaron says

    I dont agree with your math. I make 38,000 per year. I live in a 670 sq foot house with a tiny mortgage. After taxes and health insurance are taken out of my pay I get $479 per week. 52 weeks a year that comes out to about 25,000 per year.
    I spend slightly less than you on the items on your chart. However my job as a cop requires a cell phone, I also have internet/cable. Vet fees for the 2 dogs. Mortgage and home repair and diapers for two but me up around 30,000 per year. Oh yea Im also going to grad school (yikes, more debt) The way I cope is to work part time jobs, do construction jobs for folks, buy and sell a few cars. I probably work way to much. Seems like my kids are growing up w/o daddy. I could cut back a bit more, but we rent out the basement of our house and grow veggies, etc. Im starting to run out of places to cut. I pray everyday the cars dont break down, and I patch em together myself when they do.
    I think you will find that after FICA, Medicare, fed, state and local income tax your numbers dont work.

    • 113

      Len Penzo says

      There are no errors in my math, Aaron. My numbers work fine as long as all those taxes you mention don’t equate to 35 percent of gross income — which they don’t. Not for somebody earning $40k per year. Actually, there is probably quite a bit of pad in my numbers for additional spending.

      Think about it. In your case, payroll taxes are about 10 percent ($3800 on an income of $38k). If you are earning $38k per year, I strongly suspect your Federal and State income taxes are not much more than a couple thousand bucks out of pocket after adjustments and deductions are accounted for. Even if it’s double, that should leave you with more than $30k in your pocket when all is said and done.

      Clearly, you are on the right path and I commend you for working hard to make ends meet! Great job! You’re earning extra money where you can. So you’ve got the extra income portion covered. I think you need to look at where you can cut further.

      The issue I see is on the savings end, with a bit of confusion regarding wants versus needs. For example:

      Internet/cable is a choice (not a necessity). Where we live is up to us. So is a dog. So is owning your own home (which obligates you to pay for home repairs) instead of renting. Kids are a choice too (although none of us can put that genie back in the bottle) — I only bring it up here because other folks just starting out need to seriously understand the financial impacts of kids before having them.

      See where I’m coming from?

      Trust me; you can live on $40k per year in Southern California. Not like a king, but you can live comfortably — and not in poverty, by any stretch. I guarantee you it’s even easier in most of middle America. I’ve got letters from people who do it all the time, including one from a man who has five kids and earns $25,000 annually!

      So, my point is, it can be done — but it all depends on the choices we are willing to make.

  51. 114

    Eileen says

    The only part of this I find shocking is the low housing costs you apparently were able to find. My husband and I also live in a high cost of living area (DC metro) and we hunted and hunted and hunted for one-bedroom apartments and the cheapest rent we could find was $850/mo for a studio apartment. And it had roaches and mice. Once we couldn’t take the roaches anymore we hunted and hunted and hunted again and finally found a one-bedroom basement apartment with one bedroom and a tiny kitchen and tiny living room.
    I know that we’re getting a good deal because everyone I know here is shocked when I tell them how “low ” our rent is. On average, modest one-bedroom here is usually about $1,500. I can’t even imagine what we’re going to do when we have kids and have to think about maybe upgrading to two bedrooms.

    • 115

      Len Penzo says

      Yes, Eileen. That is the toughest part in an area with a higher cost of living — but it is by no means impossible. In my case, it took me about 15 minutes to find the place I described. Sometimes, it may take days or months; it just takes patience and a nose for finding the right deals. I promise you, they are out there for those wanting to do the work required to turn up lots of stones. (That place I found, by the way, was scooped up the very next day.)

  52. 116

    LifeStar says

    Yes, the author is absolutely right!

    Actually, even 20,000.00 or less for one person without kids is also possible for a “comfortable living in a safe location and having nutritious food to eat on a daily basis!”

    It is a matter of financial management and financial wisdom if the individual is willing to think deep, hard, and creative how to create his or her financial system–ethically and honorably–that would work effectively.

    For example, how else a college student do it when he or she is going to school full-time and working part-time; and still be able to live a comfortable lifestyle aside from using money from the school-loans! How else so many people on this blog indicated that they have done it with an income level of $40,000.00!

    The truth is there are so many unnecessary expenses that a person could cut such as TV cable, expensive monthly cell-phone plan, money on clothes, etc.

    The bottom line is the people that are having a hard time making ends meet even with an income of $40,000 or more “really need to find an effective strategy to polish their current financial system,” so, they could and would be able to live comfortably and happily with an income level of $40,000 or less.


    Southern California

  53. 118

    Earning Jack says

    I think you’re completely correct, LP!

    $40,000 a year is more then enough to live on if you’re responsible with your money.

    You’d even have a bit to invest after expenses, if you were particularly careful!


  54. 119

    Struggling Mom says

    I am a single mother of 3 children, 15, 9 (my only son) and 1. My Net pay is about 28000 annually and I receive approximately 4000 in child support. My mortgage payment is 835 monthly, That was the best I could find for what met my family’s needs and it is in what would be considered lowest of the lower middle class. I have no car payment but I do have Ins. and maintenance. I didn’t read every comment so someone may have already mentioned this, but something else that needs to be brought into the equation is School supplies, field trips, pictures, yearbooks, lunches, book fairs and fund raisers. Then there are Birthday parties from Relatives and Friends and class mates. Celebrations at work were everyone brings a food item and sometimes you are assigned what to bring. Forget about vacations. I know it has been said probably 100 times or more in this discussion but yes, everyone’s circumstances are different. The only luxury we have at home is cable TV. With my job I need to have internet so I can work from home if I need to, so I am now shopping around for that and might possibly have to get rid of cable in order to have internet for my job.
    I don’t’ shop at the big name brand Grocery stores I shop at the discount grocery. I would love to be coupon savvy like the people on TV, but quite honestly if I took the time to devote to that I would never have time with my kids.
    My point in all of this is my Gross pay is 40,001.00 plus 4000 in child support. Thank God we are Healthy for the most part, but even without all of the luxuries, and the car payment I am always behind. This month I robbed Peter to pay Paul, and next month I will rob Paul to pay Peter. It’s a never ending cycle. I wish I could find a place to cut monthly expenses. Because I live in a state that is already considered a high Poverty state my income prevents me from qualifying for any kind of financial aid for my family. As a matter of fact I make $47 a year to much. Thanks for the article and for all of the comments that I have read and have yet to read. Hopefully I can find some way of making it on less than 40,000 a year.

  55. 120

    L. McFadden says

    I like this blog site and this article makes a decent theoretical argument. It is a bit oversimplified but give a good blueprint of frugal living. Keep writing the good stuff.

    I still think you are a bit off with your politics.

  56. 122

    Allison says

    I I agree. I live in Southern California. We make less than 40k a year. I have a family of 6. We live very comfortably. We ALWAYS have enough to eat, and never have to worry about making payments. The mortgage is almost payed off and our house is in a good neighborhood. I do understand that it differs from the area where you live, but I’m doing fine. In certain situations, people just can’t let go of their luxuries. It will all pay off in retirement.

    • 124

      Len Penzo says

      $14,000 in taxes? On somebody making $20/hour?

      Assuming a family of four, in 2011 income and payroll taxes on a gross income of $40,000 were roughly:

      Federal: $5150
      FICA: $4800 (or only $2400 if the earner wasn’t self-employed)
      State: $730 (in California, one of the highest tax states in the nation.)

      So we’re looking at total taxes of roughly $10,680 if self-employed, or $8280 if not. So worst case, that person would still get to keep between $29,320 and $31,720. Worst case.

      Remember, that’s before any tax deductions of any kind are accounted for. Adjusted gross income would be less than that, resulting in even lower federal and state taxes for the wage earner — and even more money in his pocket. I suspect the actual figure is closer to $33,000 if self-employed, and $35,000 if not.

  57. 125

    Lizzy says

    “I know if I had to, I could make it here too on that amount of money”

    Why don’t you do it? Why don’t you pretend that you only make $40,000 a year for 2012. See how easy it is to live on $2750 a month and than write a post about it. Stick every single penny above that $2750 in a retirement account so you can’t fall back on it.

  58. 127

    AustinTXPerson says


    I’m a single mom and I make $42,000k/yr. I average 45 hours/week and I am not on salary. I went to college and have some job experience, and as a result work for an *awesome* company. I’d love to get a part time job to boost my income, but child care is a hurdle.

    I’m in the 25% Tax bracket, so $10,500 comes out of my annual salary.

    That leaves me at $31,500/yr.

    Rent in Austin for a 2 bedroom home or apartment can vary. The least expensive place to rent within 15 miles to my work is $750/mo. (2 bedrooms are required as my child is over the maximum age to have a 1bedroom). A recent news article (within the last few weeks) stated rentals are over 95% capacity. Another one said 96%. That’s $9,000/yr.

    Leaves me $22,500/yr. Not too bad.

    Childcare in the area varies from $450-1,200/mo, and that’s including non certified moms who work on the side, not just officially licensed centers. I’m no snob, but I also want someone who is CPR certified and on the books, and also isn’t watching too many children for one person. As such, I found a nice place for $500/mo, but they close at 6PM. So I found another option that’s open until 7PM and I pay $600/mo without having to worry about “late pickup” fees. That’s $7,200/yr.

    I’m at $15,300.

    I’ll continue this scenario as though my car was still paid for (my new one has a small payment).

    Car insurance & rental insurance = $100/mo (this is on a 15+ year excellent driving record with the same company, and yes, I’ve shopped around). Subtracting another $1,200/yr to be legal, plus the annual registration, etc. fees totals $1,325/yr.

    $13,975 left.

    As I make “too much money” I am not eligible for any medical, food, housing, etc. benefit, or WIC. Let’s cover those:

    Health insurance is about $4,000/yr. It’s the least expensive plan. Dental is free and vision, life, etc. is minuscule (just cents or dollars per check), so I rounded the medical insurance up to the even number above. I’m *required* by law to have insurance for my son (as per child custody regulations). He cannot be insured through my work without me being insured, thus, this cost is not something I can cut back on. The insurance is a bit costly, but it’s the same for 1 child or 4. 1 adult, or 2. (There is no “single mom family plan” option).

    $9,975 left.

    Social Security & Medicare subtracted 5.65% (total between the two for 2011) = $2,373.

    $7,602 left.

    In Texas we have horrifically long, hot summers. Last summer the entire summer was above 100 degrees. My landlord is a total slumlord, and I had no AC, thus my bill was MUCH lower than the previous year (I utilized 1 window unit that I purchased and am not including in this calculation, ceiling fans that came with the house, and 3 purchased fans.. once again not including those). My annual bill averaged $100/mo. This is NOT a realistic or normal bill. I’m a “turn off the lights” nazi. I’m rarely home. Let’s call it $1,200 for this case. Once again, with rentals at near-capacity, finding a more electrically efficient and less slummy place to rent is a wish.

    $6,402 remaining.

    Gas is a separate utility, as is water and trash, and “street drainage” fees. I’ll include these together, as I pay the same company. Recycling is free, and as such I use the smallest trash bin. Trash service is required for rentals. Gas varies depending on season. Gas is only used for hot water and heat. We are in Texas, so heat is rare. I wash clothes and dishes with cold/cool water, and I do not cook on the stove, only the microwave. I take short showers, and my son is in the shower with me (he’s only 2) to save time and water. These costs combined average $100/mo, $1,200 annually.

    $5,202 left.

    At this point, I have not addressed the fact that I must drive to work. ONLY going to/from work I’d need 3 oil changes a year @ $40 = $120. (This is WalMarts cost. Jiffy Lube does offer a cheaper $20 special, but daycare does not open in time for me to get to them, and I have had 2 bad experiences with them pre-child. One location stole items out of the car, another location left the plug out of my oil pan and I threw a rod. I do not trust them. But your mileage may vary.)

    Gas ONLY to/from work (not daycare or groceries, both of which are close by, and I get ALL my groceries in 1 trip when possible) is about $900/yr.

    $4,182 left.

    Assuming we eat 3 meals a day, and it costs us a total of $2/meal for two people ($6/day), and we never eat out, our groceries can cost $2,190/yr. Obviously these are very inexpensive meals. We are vegetarian, so we are not buying meat or fish, or cows milk. For a long time, I nursed my son (saved money as well). $2/meal is really just rice, beans, pasta, & veggies. Limited sauces, limited fresh stuff (mostly canned/frozen). Not the healthiest way to eat., but it’s a budget, and it’s less than YOUR estimate (keeping in mind cooking for 4 people is going to average cheaper and get better foods than cooking for 1 or 2 people).

    Down to $1,992.

    I may not make a ton of money, but I work for a great company and there’s tons of opportunity. College helped get me here. My student loans are not large, but they total $250/mo = $3,000/yr. This is paying the minimum, and I’ve recently consolidated loans. These were not large loans or to big expensive schools. They’ll be paid off within the next 3 years, some at the end of this year.

    I’m now -$1,008.

    At this point, we’ve driven nowhere else other than work (we didn’t drive to daycare or groceries, or anyplace fun). We haven’t taken any vacations, spent any $ on entertainment. We have not bought any clothes, or ANYTHING. No Birthday gifts. No Christmas gifts. We have no cable, no Internet, no home phone, no cell phone. Furthermore, we have paid no debt – this is assuming $0 debt to things like credit cards or purchases.

    Fine. We can survive without the ‘extras’, but driving to daycare or the grocery store are not ‘extras’, and we didn’t include that. Eating on $2/meal can absolutely be done (as can 33-cents a meal : http://www.simplelivingforum.net/showthread.php?1108-33-cent-Meals), but obviously this takes more time at the grocery store and more time in the kitchen, meaning less time for my son.

    In todays age, a cell phone is a necessity. I need it in order for daycare to tell me my son is sick or there is an emergency. I did not include it in this example, and I know you can get a free phone and dirt cheap service for $15-20/mo.

    I’m fortunate to live in a city with many fun things to do, I’ve shopped around for insurance rates and cheaper (and better) housing, etc. and I’m still WAY over my budget.

    Ironically, I found a VERY plausible way to live on less than $40k/yr, and it’s to drop out of the work force entirely. I’d qualify for a little over $200/mo in food stamps and be eating better than we are now, and get discounts on my gas & electric. The “transportation usage fee” of $3/mo would no longer apply to my trash bill. I would not be paying daycare. I would not need to pay for car insurance, gas, oil changes, and inspections. I could sell my vehicle and use that money to pay rent and utilities. I’d qualify for a free home phone (no need for a cell phone – I wouldn’t be going anywhere). I could sell my car and survive this, WITHOUT unemployment, for 2 years. WITH unemployment, I’d get 6 months of that without asking for an extension. With extension I could go on like this *easily* for 3 years. I’d have more time with my son, less stress, and be eating better.

    WHY do I not drop out of the work force? Because I’m trying to BETTER my life and make MORE money. So I can set an example for my son. So I can be proud of myself and make my family proud. So I do not waste my brain.

    In summation, $40k/less a year works if you have other options for child care (family members, a husband or wife who is home full time or part time, etc.).

    $42k/yr does NOT work for a single mom in Austin, TX. Sadly.

    Being unemployed does. :(

  59. 128

    AustinTXPerson says

    (I also understand a mortgage would be cheaper than renting… but for my income and student debt alone, I can only be approved for $40-50,000, which does not buy a house here, unfortunately. I could get a new mobile home for about $20-30,000, but would need land, sewage, etc.)

  60. 129

    drummerman says

    i have to admit for most people 40k should be plenty but there are other situations to consider like my self i strech every dime i have as far as i can but i live in illinois one of the higher tax states and i have 6 kids at 40k we just make ends meet but if we have a breakdown or the house needs repair or the kids hit a growth spurt we end up short and then have to struggle to play catch up so while i do agree 40k should be more than enough for most there are some situations where you 40k is just not enough

    • 130

      Len Penzo says

      Illinois’ taxes are insane. I’m sorry to say I live in California and can relate to the high tax burden. Can you move across the river into Iowa or Missouri? Or Indiana?

  61. 131

    weaselspleen says

    Len, while I agree that frugality is a virtue, and conspicuous consumption is a vice, I simply can’t allow you to get away with fallacious reasoning. I’m just going to point out two errors, though there are others.

    The fact that you can find an individual example of low priced housing in a high cost area via web searches is not a valid logical argument, because it’s an example of the fallacy of Anecdotal Evidence. The examples you provided were outliers, which will NOT be available to the majority of people. Modal average (not mean, not median) is what matters when you’re trying to find affordable housing. This ain’t opinion, it’s math.

    The cost of renting is meaningless until you have a signed lease in your hand, and since you did not take it that far, you really don’t know for sure that that deal was even possible. Or that it wasn’t a bait-and-switch scam. I’m not saying there aren’t deals to be had, I’m saying that it’s ridiculous to cherry pick an exceptional deal and then claim that option is available to everyone.

    2. You ignore the fact that many rental companies now require credit checks and background checks before renting. Just because they’re renting doesn’t mean they’re renting to ME. You claim to be targeting young people just starting out, yet those are the very people least likely to qualify for a lease agreement, because they have little or no credit history.

    • 132

      Len Penzo says

      Oh, man! You’re killing me! :-)

      Of course it’s anecdotal. There is no need to do a scientific study to prove my point. If you’re going to talk about reasoning, remember that if we were to take things to the extreme, to make my case, in theory, I only need to find ONE instance where it’s possible.

      Even so, I’ve gone far beyond that requirement.

      I’m not trying to prove that everyone can live in Los Angeles on $40,000 per year. But if I can build a case using Los Angeles — one of the most expensive places in the country to live (and a statistical outlier that actually works against me) — then folks can certainly make it on $40k per year somewhere in the country where prices aren’t as expensive. So even for folks who try and fail to make it on $40k per year in Los Angeles — there are no shortage of places where they certainly can elsewhere (in fact, it’s the vast majority of places). In the end, those who try — but still fail — to live in LA on $40k can move some place where the cost of living is cheaper. If they refuse, whose fault is that? I know it ain’t mine. It ain’t yours either.

      So where are the other “errors” in my logic? :-)

  62. 133

    Tara says

    I think that if you are going to write this article and say repeatedly that “if you can’t live off $40k a year then you aren’t trying” and “I know that if I tried I could” then you should put your money where your mouth is and do it.

    One year, don’t spend more than $40k (you can save the rest, that will be the reward) and then come back and report on it.

    It’s easy for you to sit back and say “sure if I had to I could” but how about you actually do it first.

    You probably don’t know what it’s like to not have but a few dollars in the bank and food and gas to buy.

    Or better yet, why don’t you try living on minimum wage (in CA) for a year ($8/h, 40hr/week, 52 weeks/year comes to about $16,640 a year before taxes)?

    Yeah, you’re full of hot air.
    Another blogger who thinks he’s a big shot and is going to tell the world how it is.

    Well I’m calling your BS, sir. Unless you are going to actually do it, stop pretending like it’s “so easy.”

    • 134

      Len Penzo says

      Gosh, Tara. I do it now. I spend less than $40,000 on essentials to survive — and that’s with a family of four. My finances are an open book, you can see for yourself on this blog.

      And again, you’ve missed the point. Assuming I tried but, for whatever reason, found I couldn’t make ends meet in, say, SoCal on $40,000 per year — I would move to place with a lower cost of living. After all, that would be the responsible thing to do.

      Are you suggesting you would continue to stay where you were and then blame your financial difficulties on someone else? People who refuse to hold themselves accountable and can’t live within their means end up doing exactly that — and I’m calling BS on them. Sorry.

  63. 135

    Claire says

    I found your blog this informative but I need some advice. I have 6,000 in credit card debt and 70,000 in school loans and I will soon start earning 47,000 a year. I am a single woman with no other obligations and normally this salary would be alright but I’m overwhelmed by the astronomical amount that I owe.
    Any advice on how to make the best of this and the best way to erase the loan quickly?

    Thank you,

  64. 136

    Jennifer says

    I know it’s possible to make it on $40,000/ yr. My parents raised 4 kids after losing everything in the soybean industry. We had no public assistance and even had to switch to a private school because of the violence in the only public school available. As a kid I did think we were missing out but now I know my parents did what was best. They worked hard, met our NEEDS, and loved each other through the hard times. Most of the friends I envied have parents who divorced because of the stresses caused by keeping up with the Joneses. My husband and I have been very fortunate but unfortunately are part of this younger generation who wanted things our parents worked thirty years for! We are 34 & 35 and have a large amount of debt because of poor decisions. I am a new reader and have spent way too much time on the Internet today reading old posts! I have been totally inspired to do much better with our finances. Although I have no intention of selling stuff,(since I don’t have to) I plan on challenging myself to cut our discretionary spending as much as possible! One commenter did mention school fees such as field trips, holiday parties, and school supplies. I love our public school in SW Miss but we get asked for money a lot! Just this week I’ve been asked for tshirt money, field trips for both kids, lunch money (cause we don’t qualify for free or reduced). I try to let each home room teacher my kids have know that we are able to help with expenses that some class mates can’t meet. We’ve only been asked once but I always send extra supplies at the beginning of each year. I firmly believe in helping when we can because not everyone can afford all of the extras!! My best friend’s dad was in an accident that left him paralyzed when she was in sixth grade and without community support her family would have lost everything!! Thanks for such an inspiring post! For those who disagree with you I ask them to come to MS and join me for my treat of boiled crabs once or twice a month. As I wait for my order I see LOTS of customers pull up in brand new cars, wearing brand new clothes, fully manicured, fresh hairstyles, with enough jewelry to start a pawn store, come in and pay with their food stamp card!!! It frustrates me to no end cause these are the people in my area who say they can’t make it! My mom had her first manicure at 45 when I treated her to one for Christmas! Redefine what is really wants and needs in your life!!!!

    • 137

      Len Penzo says

      Great post, Jennifer. It’s never too late to start living within your means. Never!

      Next time I’m in Mississippi, maybe I’ll join you for some of those delicious boiled crabs!

  65. 138

    Dana says

    This is hokey. I LIVE in Southern CA. By the way, folks, Chino is NOT a nice area, Chino Hills is. I don’t know of a rental house that large in a GOOD area in Southern CA that rents for that little. Come on. You can’t even get a decent house that size for that price in Bakersfield, and that says quite a bit. So in order to pay that kind of rent for that kind of place here, yes, you would need a German Shepherd and flak suit.

    Furthermore, you don’t list car payments, daycare, or rent/mortgage on your list at all. At $40,000 you are not netting 40,000. WITHOUT state tax figured in, you are netting $35,945.00 as head of household with 3 dependents. State taxes bring that number down considerably. So now how are you going to do this? Even if you add in your “rent” at $850 per month, that adds another $10,200 a year, which brings your calculations to $35,671 and change. That leaves a little over $300 left…and oh, yeah, remember state taxes? Not to mention car payment? Not in Southern California, pal. Doesn’t work unless you are on assistance.

    • 139

      Len Penzo says

      Oh, come on now, Dana. :-)

      There are many nice neighborhoods in Chino. Chino Hills is definitely upscale; if that is your minimum standard, then you are being unrealistic.

      In any case, the point is not that you can live well on $40,000 in SoCal, but it’s that you can make do. Southern Cal is an extreme example; if people want to improve their standard of living on $40k, they need to move to a more affordable location.

      Also remember, this post is now 18 months old, and rents have climbed a bit since then — so you’ll have to move out a bit more now, but so what? A one-minute search of the Internet just popped up a 1500 sq ft rental in San Bernardino for $1000 per month. I’ll bet I could do better if I took a little time. :-)

      As for comment regarding not even being able to get that size house in Bakersfield, I just spent one-minute looking on the Internet and I found a 3 bed 2 bath 1250 sq ft home for $995 per month. :-)

      If you buy a modestly-priced used car, there is no need for car payments.

      Check my reply to Braden regarding taxes: with deductions most folks should net between $33k – $35k after all state, fed, and FICA taxes are paid.

  66. 140

    Kelly A. says

    I’ve just spent hours enjoying many of your articles and have subscribed to your blog. I am looking forward to reading past posts I haven’t got to yet as well as receiving future ones.

    My after tax income is around $44,000 net per year. I have no mortgage, own my home free and clear, my property taxes are extremely low, as are my utility bills (it’s an 1100 s.f. condo so every expense is pretty reasonable), my car is paid for and I put less than 5,000 miles per year on it and I’m religious about maintenance so I am counting on it to last a good long while.

    My “problem,” if you want to call it that, is that because of all of this I have a decent amount of disposable income but am unsure where to park it. I am typically frugal and I have pretty much everything I need so saving vs. spending is not an issue. I only tell you all of this in hopes that you may have written something about investing for retirement? I am under 50 and so far have concentrated more on making my current life secure and, I confess, not done enough for a secure future. I have a bit less than $100,000 in a 401 plan and I know that is nowhere near where I should be at my age. This concerns me. If you have posted something you think might help, I would love to read it.

  67. 141

    Sara says

    I just don’t understand how so many folks seem to be in low-to-mid level jobs, have all kinds of various debts, and then, they have several kids! When it comes to kids, I rarely encounter a couple or single who understands that the overall expenses of children can, and will, push them into poverty! In this day and age, with all the other expenses that people have for even a basic, but decent, existence, it is very foolish to have more than 1 or 2 children at the most!
    People will do research and get the cheapest deals they can on all sorts of major life purchases, but when it comes to kids, they act like they’re free and throw all caution to the wind, and have them regardless! Who do they think is going to pay for these kids and all the increased expenses that come with them!??
    I mean, it’s great to live frugally and simply, but personally, I want more than that out of this short life that we have on this earth. The worst thing to me would be to have a kid I couldn’t afford, which forces that kid (and me) to live in poverty or a low-level life, just because I failed to be a responsible adult and make wise long-term financial choices. I agree with Len that kids are a CHOICE – and many folks on this blog get very defensive when you say that, but it’s true! (And it’s a choice that involves some 9 months + of purposeful action, too – it’s not like you just wake up one day, and WHOOPS! There’s a KID sitting there!)

    I know you can survive, and even live decently, on $40K a year,(I make even less than that currently) but then – I DON’T HAVE KIDS – BECAUSE I CAN’T AFFORD THEM!!! It’s like anything else in life that you pay for – if you can’t afford a car, don’t buy one! If you can’t afford a house, well then, I guess you shouldn’t buy one! If you can’t afford a pet, then don’t have one!If you can’t afford to go shopping every week, then DON’T! But don’t have kids you can’t afford, and then act like everyone should feel sorry for you!
    They are a CHOICE in life, just like everything else. Stop romanticizing, and get real!

  68. 142

    Kiss my A4 says

    This equation would never sail in most SoCal neighborhoods. Two big assumptions:

    1) Mr. Penzo bought his house 13 years ago. Your mortgage amount is pre-boom levels of house pricing and due to Prop 13 your property tax is likely downright cheap versus home valuation. Even with the recent correction, most neighborhoods have returned to 2003 levels. Not 1999 like when Mr. Penzo bought his home.

    2) ‘Within 10 miles (renting scenario)’. This is laughable. 10 miles from my current place, its a downright ghetto neighborhood. I’m sure you would never disclose your actual location Len, but 40K doesn’t make it in SoCal unless you’re willing to split a residence or live in a bad neighborhood that Mr. Penzo would probably never drive through fearing for his life.

    • 143

      Len Penzo says

      First off, let’s go back to the original point of the post: If you can’t live on $40,000/year, it’s your own fault. It’s not “If you can’t live on $40,000/yr in Southern California it’s your own fault.”

      That being said, A4, I used SoCal as an extreme example to make my original point (back in 2010). And I did. When I bought my own home is irrelevant to this argument, A4; I didn’t even include my mortgage payment in this article to make my point. I used my actual expenses — and a housing price based upon a house I found for rent in a decent part of SoCal to boot. Is it the exception? Yes. But it proves my point. Scoff all you want, but it can be done nevertheless.

      On a side note: We can argue all day long on what you consider to be a neighborhood you “wouldn’t drive through.” I say you’re going way over the top with your assessment of certain neighborhoods.

  69. 144

    haverwench says

    How in the *world* do you have a mortgage payment of only $640 in Southern CA? We live in Central NJ (also an expensive area, but not as expensive) and our property taxes *alone* are $500 a month!

  70. 145

    JW says

    I’m with Olivia on this. I’ve struggled with budgeting and run the numbers again and again, and my conclusion? As a freelance writer supporting two kids I realized that whatever it takes for someone in a normal job (with health and retirement benefits not no self-employment tax penalties) I need to tack on $8000 to $10,000 in additional pre-tax income to get to the same starting point in terms of planning my annual expenses. Interestingly, when I run the numbers for myself in my relatively expensive living area I come up again and again with $48,000 pre-tax as my minimum “surviving but not thriving” income. So with that caveat you may have something about anyone being able to support a family on 40K.

  71. 146

    Brent says

    I’m a single, male, 26 year old teacher in the Midwest making $39k a year. I finished my M.A. two years ago, and this is my first job out of school.

    Growing up, my parents had new cars, vacation money, cable TV and money for going out to eat. As an independent person, I have modified MY lifestyle to reflect MY current needs and priorities.

    I was fortunate enough to buy a 3 bedroom house in the suburbs of Kansas City early last year at a great price, and I pay $900/mo on my mortgage. I pay around $250/mo on utilities and another $220/mo on my student loans. Next, I drive a 4-cyl car that is paid off, and I drive smart (avoiding tickets, etc). I live close to my job, so I only pay around $100/mo on gas.

    I switched to a high deductible health plan to help on my health insurance costs, and I participate in my employer’s retirement plan (albeit very modestly). I also save $50/mo for an emergency fund, and put $100/mo towards my ONE credit card bill. Otherwise, I use a debit card for everything.

    I do not have cable, but instead use the internet and Netflix for entertainment. These cost $45/mo total. I also read (which is one of the cheapest forms of entertainment)! My cell phone is basic, and I pay $60/mo for my text and minutes plan.

    I shop at Costco for my major groceries (meat, cheese, toilet paper, pasta, etc). I can make one trip last a month if I supplement with small items from the grocery store. I spend about $250/mo total on these items.

    In short, I have budgeted my income very carefully, even down to dog food and haircuts. Otherwise, I would be in serious trouble. It takes discipline and careful recording of purchases. I tutor kids from time to time to help defray other costs (Christmas presents, car maintenance, etc.)

    Living on $40k a year is not impossible, but it is a bit tiring after a while having to ALWAYS be careful. I may switch to another career in a few years because I have found that my expensive taste does not much up to my salary.

  72. 147

    Denise says

    Well in Seattle, we are really struggling on $40k a year because of health insurance. We pay $500 a month for sons and mom – husband is covered. That’s a catastrophic plan…that doesn’t include Rx, copays, etc…we can’t do it without health insurance being covered through work! So my husband is looking for a job with health insurance so we can live on $40 a year. :) What about retirement? What about when the cars die? We have no debt, gave us our house because the house payment was killing us…we’re very frugal but just can’t seem to do it.

    • 148

      Len Penzo says

      Seattle is one of the highest cost-of-living areas in the nation.

      If I were in your shoes and couldn’t earn enough income to live comfortably there, I’d be looking for a job where the cost of living is cheaper. It seems pretty straightforward to me.

  73. 149

    jon says

    i know someone that makes 42,000 a yearn with benifits ,married and have 2 kids and they are getting WIC and food stamps? should i be worried about my friend?

  74. 152

    blondie says

    You make a lot of great points but there are some things you simply can’t cut back on. For example, I lived just outside NYC making $40,000. I had roommates to offset the cost of the rent. I even bought a cheap car because it is extremely expensive to pay for the train to work. The problem is you can’t avoid high commuting costs here. The train is a few hundred dollars a month and then you have to pay the subway, and it depends on where you live, and then commuting time becomes a factor. You can spend, easily, $500 a month just to get to work. With car payments and gas it was cheaper to drive but then the city hits you with parking and 18% “parking tax”. Tolls, parking, gas, those are things you can’t reduce unless you can carpool but I didn’t have that option. CAr insurance is also much higher in New York and New Jersey as is medical insurance. Many lower costs plans aren’t offered in NY because NY is too expensive. So I did my best by living with roommates and watching the rest of my expenses and making it work But if I was a single mother with two kids I can’t bring in roommates and so now my rent payments are double or triple on top of all the other expenses.

    I do think that living within your means is important but there are some situations where that becomes impossible even if the person cuts every penny. How do you cut train costs? How do you cut insurance costs if you already have the highest deductible? How do you cut housing costs if you have two kids and already live in a one-bedroom?

    I think we should all strive to live within our means but there are situations where that’s not possible. And then people say, well, move somewhere cheaper! But then you increase your commuting time and costs, and who looks after the kids for that extra hour or two per day you have to commute? so there’s the added expense, or maybe it brings you further away from family who babysits.

    I just don’t think one size fits all here and for people who can’t live on 40k, no, in some cases, it’s not their fault.

  75. 153

    Jeannette Harkin says

    WOW, I’ve read several of your articles Len and you’re rather harsh…and kinda a meanie. I don’t think we’d be friends or ever go to lunch (we know you wouldn’t be picking up the tab!)

    • 154

      Len Penzo says

      Sorry you feel that way, Jeannette. My kids think I can be a real meanie sometimes too, but they’ll eventually realize why that’s untrue. :-)

      And talk about being a meanie … I’m not the one making ridiculous accusations about others.

      At least we can agree on one thing: We probably wouldn’t be friends or go out to lunch. (You sound like the type who expects others to pay your tab every time you go out! Just sayin’.)

      • 155

        Not Making It says

        Hi Len,

        I just had to write you. I read your article on 41 reasons why you aren’t lending me any money. I rolled on the floor laughing when I read it! Then I read I aught to be able ot make it on 40,000 and I was not so amused.

        Well I just want you to know I am not “making it” on 40,000.

        I live in DC. I do make more but not much more than 40,000.00. I am independent with no other sorce of income other than my one job. (I don’t think my health will hold up to a second job…belive me I would work it in an instant.) Just because I don’t need a loan does not mean I am making it. I am not making it and I am not under the delusion that I belong to the middle class financially. I don’t care what any finical expert says.

        I can not call myself middle class because I rent, I don’t own. Therefore I will never be rent free. I can’t afford to own here and believe me I would be very happy in a tiny house. My rent eats one paycheck. (Mind you my rent is still less than any of my coworker’s mortguages or rent by about $400.00 to $1000.00. I want you to understand I spent months doing my research before I moved into my building I’ve lived in DC for about 12 years and I am good at finding afordable places that are pest free, safe and in a safe neighborhood. My rent is very reasonable by the local standards and I am very happy here but it is still VERY EXPENSIVE.)

        I am not making it or middle class becuase I do not own a car…. I mostly ride the bike and suplement the bike with the bus and train (the train is the last resort) however… NOT OWNING A CAR IS WHY I LIVE IN THIS BUILDING ROOMATE FREE. Even if I owned a jalope of a car, I would have to PAY RENT FOR THE CAR!

        I am not making it or middle class becase I will not be able to retire. I contribute 5% of my income to my 403B. (NO, I can not contribute more… I already don’t see 40% of what I earn…) I have crunched the numbers and I will never be able to retire on it.

        While it looks like I will get almost all of my debts payed off by the end of the year, just like I do every year…. I am not middle class or making it because I have had event after event happen over the last 10 years all of my savings is now practically nonexistant. BTW Illness can happen to ANYONE and I can guarentee you between medical bills and loss of income you will be a lot poorer, if not outright poor by the time a protracted illness sucks your money away from you.

        And Oh yes vacation… I am not middle class becase I can’t aford to GO on vacation. Don’t get me wong… I am very happy I get time off and I enjoy myself at home But lets face it if you don’t have enough money in the bank to ride out about nine months to one year with no job can you hit your savings or go into debt because you want to go on vacation?

        Really, I have finally thrown in the towel. I have been here for 12 years and yes my salary more than doubled since I have been here…but I am sick and tired of having to save and scrimp and “plan” for things that many people take for granted and just buy. I am looking to relocate, I just don’t know where I am going yet but I am totally sick of this here. Everything about living here is so very expensive.

        Excuse my rant and the no spell check spelling but no matter what I look like superficially, even if I am not asking you for money, really I am TOTALLY NOT MAKING IT and I am not confused on this matter…


        Not Making it….

        • 156

          Not Making It says

          Oh and yes… I do know many of you out there have it so much worse than I do, so once again please exuse the rant.

  76. 157

    Mikey says

    I agree and disagree with most choices people make about their living expenses. I do have a car note, cc debt and little saving. But I believe that if you save everything and do not spend money on something fun, it will leave you unsatisfied later in life. I am not talking about spending every penny, but planned events that make life worth it. Example. Get a pizza for 10-15 bucks and 2 movies from Red Box for less than 20 bucks. Grab a free event somewhere, then go out to eat on a coupon special, or a 2 for 20 deal at placed like Applebees or OCharleys. Take in an early movie on the weekend before going grocery shopping. If you do something like this twice a month, the cost will not blow your budget.

    I was spending way too much, broke, and living paycheck to paycheck. The things I did to help were to get rid of my contract cell phone and switch to track phone. I hate it but it is all I really need. I cut out cable and switched to internet only, roku, netflix and hulu plus. I changed all the lightbulbs in my apt to cfs and I do not heat or cool my apt when I am not at home. I am single and live in the south, I know you cannot do this up north. I remember how expensive it was to semi heat your home. Also I use coupons for food, only buy clothes on sale, and shop around for the best price on goods.

    Now I am saving a little each month, paying down debt, not living paycheck to paycheck, and I still have some fun to kept from going crazy from all work and no play. I think we all need that balance.

  77. 158

    Jon Jon says

    Can everyone live off of 40k a year? Although a large part of this countries families live off of 35k-40k, in some states and regions it will be very difficult with higher taxes,higher gas and electric bills,higher insurance,more tolls,where the best jobs are located,housing cost,horrible public schools and a long list of factors that a lot of us can’t shake. I saw a response that Len gave someone, he said that Illinois has very high taxes and that person should relocate to Iowa or Indiana. Not only are those two states not a choice for someone who lives in Illinois due to lack of jobs and quality of life. Anyone in the Midwest would tell u to get out of Iowa and Indiana. I have had the opportunity to live in several states and in my experience and all I know 50k is the magic number. Thats with using 10k of that for income tax deductions. So living off of 40k is now the reality across the board,3300 a month to wrk with. After reading most of the post this number is a friendly number. Some may feel how do u get 50k job thes days. Well hold on to your seats for this break down. If your family has to working individuals in it, $12 per hr hour job gets u to 50k a year. If your family has one working person u may wanna try Lens approach and use your tax returns wisely or wrk a second job if it’s possible. I really feel that 50k is a across the country number that gets it done.

  78. 159

    Brett says

    Hi, I am from Northern Wisconsin and find myself soon to be going threw a simular situation. I have a good job right now working on the road all over the United States making around $65-$75 thousand on average per year. The only problem is the company I work for does not pay living expences. My girlfriend is pregnant and I am currently in the process of moving home, taking a different job ($40,000/year), and buying a house to be at home with my family. I have about $23,500 saved. The house is pretty cheap at $500/mounth tax and insurance included. I do have a newer truck that I am paying $370/mounth on. I am pretty scared about this new life I am about to start, but realize that if my back is not broke I will find a way to be comfortable. Looking for your feedback!

  79. 160

    Port says

    Try this in northern NJ and fail miserably. Property taxes alone make this futile. My property taxes are more than the author’s mortgage.

    I don’t doubt you could do this in most of the rest of the country but select areas, northern NJ included… no way.

  80. 162

    Chris says

    My wife and I pay $1600 a month in student loans (that is on the lowest repayment option we have). I have a BS in Information Technology, I worked full time while getting my degree, transfered to a cheaper school, and paid for books as well as several semesters out of my own pocket. My wife has a Masters in Social Work, she started at a community college and transfered credits to a state college, she worked part time through most of her schooling. We pay almost $20,000 a year in student loans… We can’t live on 40k a year, maybe we shouldn’t have gone to college.

    • 163

      Len Penzo says

      College is a big rip off these days, unless you plan on getting a science-based degree like engineering, or pre-med. The returns on investment just aren’t there for most other degrees, Chris. I’ve written about that before here.

      Yes, there are exceptions (pre-law, for example) but not many.

  81. 164

    Charles says

    This article is a joke. Yeah you can survive on $40,000/yr if your “mortgage payment is a bit less than $640″.

    Unless you got a hand out from somewhere or live in a very very bad neighborhood anywhere close to a job that pays $40k, it is impossible to find rent for that low a price. I live in NYC. What you are describing doesnt exist where you get a job that pays 40 after taxes. AFTER TAXES.

    • 165

      Len Penzo says

      Then you missed the entire point of the article, Charles. True, you can’t live in NYC for $40k. It’s hard to do it in California anymore. But you CAN do it elsewhere. If you’re making less than $40k, you’ve got nobody to blame but yourself if you are struggling in NYC. In other words: nobody is preventing you from moving someplace where it is cheaper to live. Well, other than yourself.

      • 166

        Awakeinwa says

        It’s apparent you’re wired as a conservative human with absolutist certitudes.

        Really, just move elsewhere for cheaper rent or housing? Like moving doesn’t cost.

        And jobs are where cheap housing are.

        One of the biggest problems today for inner city folk is transportation. Too far from the job especially if you’re poor means no job.

        The role of long commute times in raising unemployment

        In any event, it’s apparent to me that you’re not wired for empathy. And that you seem to live in a rarefied atmosphere composed of a lot of paranoia of a hard life ahead yet in reality have lived a rather nice life only to belittle others that have actually experience hard lives and situations that you never have.

        As a person well versed in economics, I also find your doomsday chatter about a future of [hyper]inflation amusing if not predictable. Even though since 2009 inflation rates’ 1.5-2.5% despite record monetary liquidity. Or that a country like Japan has gone through almost 20 years of deflation due to their impotence driving simultaneous fiscal and monetary stimulus.

        Having been on both sides of the rubicon, where crap happened for many years, and now in a not so crappy situation, I can safely say it’s one thing to academically talk about living through hard times vs. acting frugally according to plan without much dents and warts except those imagined and otherwise.

        • 167

          Len Penzo says

          First off, before you try to pigeon hole me, let’s be clear: I am a libertarian who believes in personal responsibility.

          Instead of making excuses for people, I prefer to tell it like it is: People should be making responsible choices before they get into these tough positions. I’ve written about this here:


          Now … to your liberal-based critiques: If folks don’t have a pot to piss in, then how much does it really cost to pick up stakes and move? I mean, come on.

          The article you link to is absolutely absurd — but I encourage everyone to read it, as sunlight is the best disinfectant. In fact, all it does is come up with more excuses rather than getting to heart of the matter.

          As for the empathy comment: You don’t know anything about me, sir. I grew up in a lower-middle class home where my dad had to work three jobs for awhile just to keep the roof over our head. I’ve been working since I was 16 — I made enough money working as a teen and during college to pay for my own education. I worked hard to get where I am. You, on the other hand, if I had to guess, I strongly suspect you are suffering from psychological projection.

          If I can do it, anybody can. The trouble is, the welfare state — and people like you — love to coddle and make excuses for others. Does that mean I think folks don’t deserve a helping hand? Of course not — but it should be temporary. And if public welfare can be provided by churches and the private sector, as it was successfully for most of this country’s history prior to LBJ’s disastrous failure, the so-called “War on Poverty,” then it should.

          Finally … You may be well-versed in (Keynesian) economics, and you show that you have a grasp of Japan’s economy over the past 20 years, but you seem to be oblivious to the real lynchpin that will determine the ultimate fate of the world’s fiat currencies: a lack of confidence.

          That confidence is now waning, faster with each passing day — and the economic world is showing signs of wobbling on its axis. The increasing volatility in the stock, foreign exchange and the bond markets is truly frightening. Volatility in Japan’s bond market is especially so considering it is the world’s #3 economy.

          It’s a Ponzi scheme and it only works until there are not enough suckers available to keep the game going. Believe it or not, I used to have the utmost faith in the current economic system too, until a few years ago.

          As an engineer, I understand math and complex systems. I’ve done the math, and the current system is completely unsustainable. Like a fast-spinning top, a very large and stable system (like the world’s financial system) will take a lot of abuse before it becomes unstable and ultimately fails. Yes, this could go on for quite awhile longer. Then again, I suspect it won’t, in relative terms. In any case, don’t let 25 years of fiscal mismanagement in Japan lull you into thinking that past performance will guarantee future results. I promise you, it won’t.

  82. 168

    funion says

    I had a job at over six figures. Then my wife left me and two kids without warning. Long story short, I lost my job, house forclose, and many other debts that I am now unable to pay. Six months went by and now I just got a job offer for 70k in Irvine CA but I am worried I won’t be able to get an apartment with my bad credit and I don’t see how I can survive with all my debt. I’m choking in it. Currently, I am going to school to finish my four year degree. I can continue online but I don’t know if accepting the job and moving is a good idea as everything has failed thus far.

  83. 169

    Lie says

    of course you are talking about making $40,000 net of tax which means you are making more than $40,000 a year technically

    • 170

      Len Penzo says

      No, I’m talking about making $40,000 annually. Actually, since I wrote this a couple years ago, make that $42,020 now — assuming you believe the government’s most recent inflation statistics.

  84. 171

    D ell says

    Wow you are full of crap! I make 40,000, live in the cheapest apt.
    In the area, drive a beater car an still have no money. I have a kid
    In daycare and that alone sucks up $600 a month.

    • 172

      Len Penzo says

      Then you’re living in an area that is beyond you’re earning power’s ability to support you and your family, D ell. So move somewhere with a cheaper cost of living. It’s really not rocket science.

  85. 176

    Ricky says

    This Is not possible in Long Island, or NYCs five boroughs , first of all if your single and such, taxes out of your paycheck add up to 25% the LEAST including social security and the other taxes. So already your down to 30,000$ cash at the end of the year. The cheapest studio apartment in any area, I don’t care if its a bad area will be about 900$ monthly, one room, kitchen next to your bed , and one bathroom with a shower. So lets take away the years rent $10,800. Now we are at $19,200. Lets say 60 dollars for food for the week, for ONE person. 60×52 weeks in a year = $3120 …now your down to 16,080. Car payment plus car insurance in the state of NY , the cheapest payment on a low level car is about $250 a month and insurance will run you at least $150 so 400×12 =4,800 , now your down to 11,280 , how in the blah would you support a family of 4 or so on one car for the family , living in a studio apartment , and on 11,000 dollars a year ? Lol, see….it wouldn’t be fun sleeping 4 people in the Same bed. The cheapest mortgage your going to find in a decent area in NY is a house totaling cost of 250,000 which would be at least a 1100 1200 mortgage payment. Plus electric Plus cable Plus oil Plus emergency money. Believe me even households making 200,000 dollars yearly { before taxes are not living a luxurious amazing life. That’s just New York for you .

    • 177

      Len Penzo says

      Agreed. Although not impossible, it’s very hard to do it in a place like Southern California too.

      But where you choose to live is ultimately your decision. People that can’t afford to live in high cost of living locations can make their lives a lot easier by picking up stakes and moving to a place that isn’t so expensive — otherwise, their financial struggles are self-inflicted.

  86. 178

    Nicole says

    I am a 29 year old stay at home mom.I live in rural Mississippi. We are a family of 6(taking care of my ill mother and 1 handicap child) on 1 income of $65,000 with no government assistance. Water bill $27, gas $20 in summer(minimum) $70 in winter(use fireplace). Light bill can get as high as $400 in the summer and $240 in winter.Food $600 monthly. Transportation is a killer. My husband works 150 miles from home. He has an apartment 30 miles from his job. We spend $800 in gas and $550 for rent at his apartment. Our mortgage is $650.Home insurance $1,900/year. Healthcare with his employer $260/week. Car insurance for two vehicles $150/month. Life insurance $250/month.Property taxes $3,000/year on 35 acres.Then theres cell phone, home phone(need one in rural areas due to service) internet, cable(basic cable and internet service is horrible) and student loans. We have my husbands loans paid off but still working on mine and I’m still in school working on my masters degree. Book costs, retirement….It would be difficult, not impossible to live on 40k.

  87. 179

    arsh says

    Wow you totally failed to factor in health insurance and taxes. If you did youd realize that ypu only take home approx 66% of what you earn. Figure a cheap apt at 725 a month plus student loans and a cheap car payment and yes i have 40k and im broke

  88. 180

    Arshagarbon says

    40k post tax and insurance deductions comes out to 26800 per year take home. your calculation left $1329 for the year for RENT. are you kidding me?

    • 181

      Len Penzo says

      A couple points, Arsh. The expenses I gave above were excessive. For example, they’re based on two cars — somebody earning $40k could reduce transportation costs in half by going to one car. My grocery costs were also excessive — lots of steaks and no coupon use. As I mentioned in the article, I could easily chop that total by one-third without much effort.

      As for taxes and insurance, where do you come up with $14,000? That is too high. According to ehealthinsurance.com, a 30-year-old in Southern Cal can get catastrophic healthcare insurance for $86/month. A 50-year old for $144/month. (Of course, those will go up after Obamacare takes effect. Don’t get me started on that.) As for taxes, I already spelled that out in my comment to Branden. Take home pay in California — after taxes — will fall somewhere between $29,320 and $31,720, absolute worst case. The odds are the take home pay will be more than that. (Again, and that is in one of the highest-taxed states in the US.)

  89. 182

    acey says

    As a fellow Southern California resident I second the premise of this post. My family lives in the San Fernando Valley (West Van Nuys/Lake Balboa — a decent area) on less than $28k a year. I *love* our lives. We rent a spacious 2 bed 2 bath apartment with a pool and garage for 1,025/mo. The building has a nice gated courtyard where all the kids play together and parents/big kids take turns keeping an eye on everyone. Most of our neighbors are friendly and frugal immigrants who hand down clothes and toys from older kids to younger kids, and are happy to make childcare a shared communal endeavor. Our car is a 94 Geo metro that gets 40+ mpg, and we walk/bike/etc. Most of our furniture was scavenged from sidewalks and alleys when other people threw it out — solid, decent furniture that looks quite nice after a little cleaning! I rent a 20×12 plot at my local community garden ($120/year) where I grow a huge portion of my family’s food. The rest of the time we eat homecooked vegetarian meals from scratch — lots of beans, whole grains and veggies. We DON’T have cable, a cell phone contract, game system, satellite dish, flatscreen TV, DVR, etc. When we want books, DVDs, music, high speed internet, etc, we go to the library. Weeknights we curl up with books, read to each other, paint, play music. On weekends we play games together. My longtime partner and I are both professional freelance writers and live a healthy laid-back lifestyle, spending lots of time outdoors — walking, gardening, hiking, reading books in the park (we have three big ones in walking distance!). A lot of our friends envy us for our so-called simple lives, but we made a lot of “sacrifices” to live this way! For instance, I have not bought any new clothes in six years — we shop at Goodwill if we really need something. Of course, it’s amazing how little you really need when you don’t care about fashion. We live RICH lives, even if we are possession-poor. I have to laugh when I hear people whine about how they make 250k a year and deny that they are rich. I feel very sorry for such people, who must be quite miserable indeed.

  90. 183

    Nicole says

    Hmm… Interesting! When I first married my husband 9 years Go our combined salery was about 25k, there were weeks that we has 20 $ for food for the week and NO money in the bank, living in Southern California. We now live in monterey county california, with 2 kids I dare you to find a 3 bed apartment ( husband is self employed, he needs an office, kids share a room) for rent under 1600 per month…. As a stay at home mom, I don’t want my kids to be around drug dealers and pot smoking hippies… Most 3 bed apartments, range from 1600-2200, 3 bed houses are 2k-4k easily. How do u save when half your paycheck goes to your rent payment? Yes I could get a job but I only have a hs diploma, what job will pay me well enough to cover day care for an infant and a toddler! Don’t get me wrong, we make a good income now, but it’s still tough at times!

  91. 184

    Awakeinwa says

    A big way to live under budget is volume pricing and buying.

    In other words, Costco membership. You lock in 40% discount right off the bat. And get double the goods.

    Like Mark Cuban says, rule #1 of investing is grokking volume economics.

    Yeah, keep a running calculator on your phone as you put each item in. Don’t buy ‘easter egg’ non-food items. Buy protein twice a month. Eggs, sauces, fruits and vegetables are high quality without need for coupon clipping.

    Since Costco’s business model is selling goods at cost plus 11-14% markup that pays for labor and warehouse, they make their money by new memberships and new store openings.

    If you plan ahead and buy smart at Costco, one can easily feed a family of 3 to 4 on $250 a mo

  92. 185

    Tashena says

    My Husband makes almost exactly 40,000 a year before taxes. We have two children ages 2 and 4 who I stay at home with. And we can afford 200 a month to send our son to preschool. and a 900 for our rent. We sweat in summer and have to wear sweaters in the winter but we are happy. Also my daughter has to go out to Boston about once ever 3 months and we survive that to.

  93. 186

    Jeannie says

    I live in Michigan, and no it is not as expensive as some of the areas of the United States, but quite honestly it amazes me how people think they cannot live on 40,000.00 a year. Where I live many families incomes are not 40,000.00 a year. Where I live, most people live on 18,000.00 a year and they raise families on this. They live quite comfortable on this amount of money. I live in a rural area I actually purchased the home I am living in now for 110,000.00 It is a 4 bedroom, 2 bath, 2 stall garage with 10 acres. Now, over the years I saved enough money to put a large down payment down on my home, making 25,000.00 a year, and for most of those years I did not make that much. I have also been a single mother of 2 children for 20 years. This was not my choice, either. My husband passed away early in our marriage in an automobile accident. Over the years I have made 10,000.00 to 25,000.00 a year. never once receiving any state assistance or help. I am now 40 years old, I own a 10 acre farm , my house payment with insurance is 542.00, utilities 170.00 that is gas and lights, insurance 220.00 a month, cable 120.00 a month, cell phones I have 3 of these because my children are teenagers 132.00, food and gas 700.00. The majority of that 700 dollar budget is for gas and I set aside 100.00 of that a month for auto repairs. I do have 2 vehicles, both are paid for got really good deals on these both had under 15,000 miles on them when purchased.
    The point I am trying to make, is total this comes to 22,608.00 a year. Now I do have medical insurance that comes out of my check for me and my children, so that is not an expense that I have to endure out of pocket. Yet in the same time, I have had cancer for 14 years, in those 14 years I have had major medical expenses and this past bout with cancer was 2 years ago it cost me 28,000.00 out of pocket for radiation and chemo for 12 weeks of treatment.
    I know that my food budget doesn’t seem like a lot, this is what I do to supplement that budget, I have a garden, I grow all my own veg, I planted fruit trees, have strawberries, blackberries, everything out of my garden, I use, can or dehydrate to make certain that I do not have to spend to much on food, come winter time, when my utility bills go up. I have chickens, they give me enough eggs daily to feed the boys and myself. Just recently I have gotten 2 pigs for meat, I purchase a half a beef a year to put in the freezer. I live on 22,000.00 a year. That pays all my bills, I live a wonderful life, I do not live on this amount of money because I have to, Over the years, my income level has raised to over 100k yet, since I was in my late 20′s I have chose to live on 10.00 per hour, regardless of how much money I have made. Not because I had to, but at 26 I was first diagnosed with cancer, I lost everything that I owned after becoming sick, I learned very early, first it took me a long time to clear up my credit, second I wanted my children to be taken care of if something ever happened to me.
    I decided that I would never be in debt again. I am 40+ and this is where I am at today, I still live on 10.00 an hour, making a lot more than that now. I still have the same budget, I had 10 years ago. I have just had to alter where the money was going, Whether it be to rent, to child care, to medical bills, to food, to lights, gas, car repairs, my thinking over the years has not changed. I still to this day, have no credit cards. I pay for everything in cash. If there is something I can do to make my life easier, like canning veg, dehydrating fruits and veg, I do that to help ease financial costs. I shop at resale shops, I have only bought 4 outfits for myself that have been brand new in the past 10 years. I do purchase my shoes new. I do save up all year for Christmas presents, I only purchase clothing 3 times a year for the boys now 15 and 18, school time,spring and Christmas. I only purchase 4 outfits for them at a time, They both have part time jobs to purchase all of their extras that they think they need, I-pads, gaming systems, TV’s for their bedrooms, etc. I purchase their needs, period. They never want for food, shelter, a warm home, and they even have one want, a cell phone. Yet it is not smart phones, it is basic cell phone with unlimited text.
    I guess what I am trying to get at is it is a choice of how we chose to live, we can live in debt, our entire lives or we can live.
    I read a lot of posts on here about being a single mother and not knowing how they can make it on 40,000.00 a year. There were times in my life, when I offered a live in babysitter, to have day care for my children, paid them a little while offering free room and board, I have always tried to raise my own veg, at least what I could, even when I lived in an apartment, I had tomatoes on my balcony, with onion plants, I went to farmers markets and froze fruits and veg when I could afford them, bought meat at 20% discount sales, and froze the rest, canned tomatoes for soups and stews, always carried my lunch to work, never ate out, I purchase many things at dollar stores, from shampoo, conditioner, cleaning supplies, many things.
    The reason I decided to write in, is not because I have to live on 25,000.00 a year, because I chose to, for my financial freedom, and I know with my history of cancer, there may be a day, when I can no longer work, so I had to have the security that I could financially care for me and my boys, and be able to live on my income if my health fails me, and I am no longer able to work.

  94. 188

    Jenny says

    LOL, the amount these people spend a year in gas, My husband and I spend in two months! We have to drive 37 – 70 miles one way for work. Heat? Um, yeah, Heat in the northeast costs me an average year, about $4,000.00 and that’s for a 2000 sq ft home. About $10,000.00 for gas and tolls, maintenance, about $3,000.00 a year, mortgage (on a foreclosure I bought for $70 grand) $1100.00 a month including taxes and insurance. That’s over $30 grand right there, so I guess I am suppose to live on less than $10 grand for food, electric, health insurance (oh yea, we pay $130.00 a week for that, not including deductibles and prescriptions). I won’t even list the rest. Sorry pal, this doesn’t work for everyone and certainly not everywhere, but I do give you kudos for being able to live so cheaply. Maybe it’s time different states lower the cost of living, or maybe we should all move to where the writer lives!

  95. 191

    Christina says

    I have a small problem with this post. What about those people who have student loan payments, children with special needs, deductibles, school fees, and those people who still have a car payment. It is not super easy to offset taxes by adjusting the grocery bill, especially when the child mentioned above has very strict dietary needs…often landing the parent in the more expensive parts of the grocery store. I see what you are saying here, and I agree that people need to be more financially savvy, but it is not as easy as you have outlined above. Not to mention those people who are struggling to get out of debt. Those years leading up to the plan you outlined above are difficult ones. It is not your article, but the dismissively condescending language you use when outlining how “easy” it is to live on $40000 a year. Thank you for your thoughts.

  96. 192

    Brian says

    This was a good read and I agree it can be done. I moved from NJ because of cost of living being so high to Mississippi. I am an IT guy and my salary is a flat 40 grand per year. I own a brand new truck, rent apartment with cable, internet and I live comfortably. I would have a lot more money if I did not buy things I don’t need but that’s my choice. I agree with the points about kids. All the people complaining about daycare, school cost etc. yes kids are expensive but it is not a requirement in life. It is a choice and so far I choose to stay kid free. Either way people who do have kids need to be prepared financially and cannot expect taxpayers to provide. Major point is even if I had a child I could live on 40 grand per yr. I would have to change my habits. Of course you cannot live on that in NY,NJ or the major West coast cities but it can be done elsewhere which is his point. MOVE AND DON”T HAVE KIDS UNTIL YOU CAN!

  97. 193

    Brian says

    I also have student loans and medical costs and I am never broke. Main thing is choices and all of us have them. I think people who stay in over priced areas because of family and struggle are insane. I left NJ and never looked back. I visit twice a year and I am fine with that. I have most of my family still there and struggling but one by one they are getting out.

  98. 194

    S. Cal Dweller says

    I believe truly that the secret to living within your means is to live BELOW your means. When I had a beginning job with the county ( college grad, NO student loans, paid it all before graduating at age 21, and was ORphan, no parents) was 1600 a month ( 1988) by 1994 was 3100 a month, same job. House payment 331.02 ( 30,000 house, paid off in 7 years, owners carried the note). YUP it was on dirt road. Yup was cement block. NO had no air ( swamp) and I put in propane heater eventually). I did work full time so the ONLY child went to day care when her frail and elderly great great aunt could not keep up with her any longer. With an income now in a range well, over six figures i live ina 1950 front house, and rent out the back house for 900 a month. I paid 110,ooo cash for both houses two and a half years ago. WE borrow the internet from back tenants ( share her code) we use the internet from our account at daughters, we DO have cell plan for three people. The gas, water, trash and sewer for both houses averages 100 a month, but is SHARED with the back house. WE ea have our own electric. WHY do I live in a NOT so perfect neighborhood in an UN -updated house ( I rent out ones i OWN outright that are much nicer to tenants) . MY kid goes to a private, religious university that is 3000 a month. I don’t want her saddled with debt. I consider it my “thing” to help he with college. The ONE thing in the entire universe that I wanted to do for my child since BEFORE she was even planned . Ihad ONE. I could afford ONE. OTHER cultures here in the US and all over the world would never even consider having a ROOM to themselves. Ea kid does nOT need their “own room”. Look at the Brady’s. Three to a room…LOL.

    I have been DIRT poor, with NO savings, no job, no health insurance or car insurance, no kids, so NO subsidies. I worked for the County’s welfare to work program for YEARS getting people OFF Welfare and into jobs, education, ESL and training.
    OUR biggest enemy is OURSELVES> other folks come to our country, live together in ONE PAID for house, or cheap rental and work 6-7 days a week. Do child care communally and cook communally to stretch dollars and lessen the work load. WE here in the US are so “different” when we go thru our budget with a house with rooms for the kids, cable, internet, etc etc. I’m not saying I don’t have it. I am saying the rest of the world does without it without ever even missing it. LOL.

    I KNOW living on 40,000 a year here in S. Cal would not be a fun time, and personally I say, EARN more so you can LIVE better. Start your own side business, tupperware, pampered chef, cookie Lee, Avon, Mary Kay or whatever. Baby sit. Dog sit. House sit. Tax write offs.

    I say live close to work . I always do. I don’t believe in spending HOURS a day on the road, and on gas, trains, subways etc. KEEP it simple. I, having worked with welfare recipients for YEARS know what they received…in 1988- 335.oo for one person, 535 for two, 642 for three, 735 for four, etc. That is cash aid amounts back then….for Palm Springs, cA ( Riverside County).

    I lived in a home I bought for 30,000 but on 99 year lease land ( non Indian) , dirt road, in flood zone, so I could have a HORSE, goat, chickens, rooster…etc. Ten miles fromwork in Rancho Mirage, Ca. Thousand Palms was where the house was. There was NO cable available and I had NO satellite, internet, etc.

    IT’s not about how much you make, it’s what you spend it on……having kids was a REAL luxury. I waited FOUR years after marriage and had ONE. I’ve been thru financial ruin, husband being murdered and all his taxes and business debts that I NOW OWED..etc etc etc. I find living BENEATH my means is the only way to ever get ahead. If it means living in shared housing, then i do that. If it means living in a house that’s “undone’ and renting out ones that are “all done” to tenants, then I guess that’s me too. Eating fresh veggies and fruits is IMPORTANT to me, and living in a “nice home” is less important. I get a little weary of it, but I figure as long as I can hold out, I can save, pay for my kids University and I invested in some cash foreclosures that Inow rent out and WRITE OFF so that my retirement will be in the houses i paid 50,000 each for that rent for 1000-1200 per month. They needed fixing mind you. I wrote off the repairs on my taxes in the year of loss.

    I know , I know..most people would say, “WHY”. To have more money for living life in the near future is why. EDUCATION is first in our home. Then comes everything else. But, that’s just me. Works so far.

  99. 195

    Nightvid Cole says

    Not every household can do this – many have to pay for health insurance out of pocket and if the $40,000 is from both parents working, there needs to be a day care bill in that budget.

    You also are making the absurd assumption that you have to pay for gas and car insurance and maintenance, but never will have to buy a car again. Many of us could use some hints and tips as to how to make a car last forever. No one I know has ever managed to go beyond 20 years or 250,000 miles.

    While I am certainly the most frugal person among my group of friends and am the first person to point it out when someone classifies a want as a need, you are a bit out of touch with reality in claiming that a family of four that can’t make do on $40k per year doesn’t know how to manage money. Maybe in some cases, but a blanket statement like yours is unreasonable. If you had said $80k or $100k, I’d agree. But not $40k, and pretending health care, buying a car, and day care are free is no way of showing how to get by on a low income in a world where those things have to be….uh…..paid for somehow.

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