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

faultA 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, there are still millions of 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’m certain I could make it most everywhere else in America, where the cost of living is significantly cheaper.

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’m 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. After all, as these testimonials show, there are plenty of folks in America who still live comfortably today on less than $40,000* annually.

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 $44,100 in 2015.

Photo Credit: Hitchster


  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

      • 3

        Nick Y says

        how do you figure you can save anything for retirement. if you add in a mortgage — albeit that small one that you have — that already puts you in the low 30s. And I think $640 is on the low side — really low side – for a supposed high cost area.

        If you pay Fed/State tax on the that 40k you’re already down to 32k — not including Social Security tax. That basically leaves you w nothing to save. You might have to cut your grocery bill by half in order to save $4k or 10% of $40,000. not to mention SS tax.

        • 5

          K Mathisen says

          My husband is 45, I am 51 and we’ve been married for 24 years. A first glance we might seem poor, hell, even financially pathetic to some if they judge us on income alone. But they would be wrong. I worked for over 20 years but retired at forty because I loved what I did yet hated having a job. That leaves me time to actively manage our finances and save lots of money by doing things like cooking for us, myself. We have learned to make do on what was once our lower income and we’ve never been happier.

          We make less than the 40K you mention. In 2014, we put between 9 and 11% right off the top, adjusting upward as he earns raises, into a Roth 401(k) at my husband’s work. He received a $2/H raise two weeks ago and I changed the election to 13%. We will never miss it. He also receives a 3% match.

          I pay an extra $250.00 in principle on our mortgage every month.

          We have no credit card “debt”, though I do use Discover every month to get the cash back. I pay it off in full, maintain a terrific credit rating (836) and in the last 24 months they have paid us over $250 to use their card. That is more than the interest we’ve made on the money we keep in our emergency MMA fund ($40K.)

          And, for the last two years, I have put $2,000 into a Roth IRA for me so that we would both qualify for the 50% Savers (tax) Credit – $2,000 combined. (Where else can you get an IMMEDIATE 50% return on your investment ?!? ) That lowered our 2014 Fed tax bill to $44, which includes the tax on the nearly $8K we put into the 401(k)! Bless those Roth’s that grow tax-free.

          We take the money we saved on taxes because of the credit ($2,000) and invest it until it is time to take it and add it to my IRA again, to qualify for the next credit. We will be down to a 20% credit this tax year. Still, though, win-win-win.

          Of course, we are in Wisconsin, so the cost of living is much more reasonable than on either/any coast. $1.19 for two pounds of carrots. A loaf of whole grain bread goes for $1.89. A gallon of gas is $2.65. Et cetera. We are generally content with simple pleasures and can pay cash for the occasional extravagance, which for us can mean hot dogs with everything and root beer floats.

          Most important, we want for nothing and are able to make regular modest cash donations to charities whose good works we admire.

          I also find the time to post lengthy (very) parenthetical comments.

  2. 6

    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.

    • 7


      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!

      • 8

        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.

        • 9

          Jade says

          I like how you shut him up with a perfectly valid point. :)

          People (especially single parents such as myself) who have to pay for childcare and their child’s medical/dental/vision insurance (because my work offers it, my child isn’t eligible for the free program through my state, and I can’t insure her without also insuring myself as they don’t let you do that) can’t afford to live on $40,000/year in most cities, let alone large ones with high rents to live in neighborhoods where you can get to work by 8am (so you don’t get fired) and won’t get shot at.

          I make very close to $40k/year. I claim what I have to claim on my taxes so I won’t owe at the end of the year and might get $50 back. Add to that, my health insurance through my company for myself and my child is expensive!!! (around $7,000+ per year pre-tax, it has to be the most expensive plan with copays and the tiniest deductible or I’m paying to have insurance I can’t afford to use because I’d have to pay $4-5k out-of-pocket and after taxes before it kicks in, which I don’t have the ability to do on my very tight budget).

          Thanks to my city being suddenly insanely popular and tech companies moving their employees here in droves to save money, my rent has nearly doubled just in the last couple of years.

          Bottom line: after finally leveling up with several pay raises at two different jobs, my checks are as small as when I was making $29k per year, and my expenses are *at least* 1.5 times what they were then. Think about that; I was struggling then, now struggling would be a step up from where I’m at. Getting by in the city I’m now stuck in is impossible on that much money. It wasn’t always so unaffordable.

          I get sick of seeing so many glib financial advisors on the internet who have been able to put themselves in a position to not truly have to take their own advice. It must be nice.

          • 10

            Len Penzo says

            Jade, I didn’t respond because I was trying to be nice by not stating the obvious. If you have to pay $22,000 for child care and can’t afford the child care, then whose to blame for that? The childcare company? Or the person who had the kids without having the means to afford them in the first place?

            As for taking my own advice: I follow it every day — be personally responsible. That’s all I’m advocating; why do you have a problem with that? That doesn’t mean bad luck can’t befall me that will eventually put me in dire financial straits — but if it happens, it won’t be for lack of trying.

            • 11

              Jane says

              With all due respect to you, Len, I completely agree with Jade. I am neither taking sides nor attacking you, but I honestly wish there were less of these “If you can’t…” “It’s your own fault” articles, if one can call it that.

              You probably have a respectful background in finances–I’m not arguing against that at all. But what you and many other people are failing to take into account is the state of the economy on the average John and Jane Doe. I am a young professional who knows the value of work hard, and has been since she was 14 years old, but I now find myself still paying off student loans and tuition and medical expenses from 7 years ago! I live in NYC on a very strict budget that does not give me any freedom to have any sort of life other than to work like a dog and then to apply for other jobs in hopes that there is one that pays better–it’s absolutely soul-crushing, to say the least. And let’s not discount the fact that I’m unmarried without children or pets to care for!

              Again, I’m not speaking for anyone here, but life sure seems cushy if you live in a palace or a mansion or even a nice NYC apartment, but some of us are trying to pull it together with what little we have. It depends on one’s job, the mercy of one’s employers, and whether one is fortunate to have financial support from others–but many people don’t. I’m one of those people who busts her back to make ends meet, and I very much get upset when “financial advice” implies it’s ‘my own fault’ that I’m suffering and that I can change my life around by simply ‘cutting back’. Of course that’s all true, but it’s not possible to cut back even more on my salary–I don’t own a tv, and the only way to reduce my grocery bill is to starve myself for a week.

              Life isn’t black and white. That’s what I wanted you to be aware of. And I want EVERYONE to know that if you can’t live on $40k, it’s NOT your fault and that we should all continue to try–maybe it means we change jobs or negotiate for a raise or look into government assistance or something.

      • 12

        Lisa Joyce says

        I cant do it. I have a mentally retrded nonverbal autistic son and I have ms addisons and lupus. my medical runs 800 a month that eats up my paycheck and then some plus a sitter for my son so I can work. my mortgage for my trailer that is making me sick is 750 a month lot rent included. we don’t qualify for rent restricted once we leave the trailer but we cant afford 900 + amonth pay the car payment 355$ buy food I have to have boost or ensure besides regular groceries. we live in macon county Tennessee. it cost my husband 75.00 a week in gas to commute to mt Juliet to go to work which is 90 miles round trip. got any ideas for me.

  3. 13

    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.)

    • 14


      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.

    • 15


      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. :-)

      • 16

        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.

      • 17


        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.

    • 18

      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. 20


    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.

    • 21


      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. 22


    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. 23


    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.

    • 24


      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.

      • 25


        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.

    • 26


      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!)

    • 28

      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.

      • 29

        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.

        • 30

          Carole says

          40000 less taxes and other deductions = 2400 per month
          Rent $1200. other bills $250. 3 adults. How do I save for retirement on this

      • 31

        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.

      • 32

        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.

      • 33

        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. 36

    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.

    • 37

      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.

      • 38

        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.

        • 39

          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!

      • 40

        Keith says

        Government help with housing…lol.. Live in SoCal on 40k… lol.. ID10T error.

        SF Valley… Near JOBS..

        Single Person. REAL NUMBERS AHOLES>>>>>
        Rent room in house ROOMATES. 700.00 mo
        Util split 4 ways
        elect = 250
        gas = 50
        Water =80
        Trash = 35
        Cable = 225 (every movie channel) Your renting a room this is voted on by roommates not your choice to cut it. And never being able to afford to go to a movie you need it).
        RENT TOTAL = 860
        MIn Car ins = 50 not full coverage min.. coverage
        PHONE = 100
        TOTAL = $1010 per month Fixed Bills.

        ADP pay check for 40k 2 week check 1182.19 after TAX ADP 2015 table. REAL NUMBER…

        1280.71 24 checks per year. 2x per month

        On P.s. $40k a year is $ 19.23 per hour…. 2x the min wage.

        OK back to reality..

        Total take home per mo. at 19.23 per hr. After Tax $2561.42
        Less fixed Exp. $1010. = $1561.42 mo

        Food= ? Yea could eat beans everyday. (Health?) How much a day for food… Could you eat on 10 dollars a day? 3 meals ? Healthy? NFWay… I eat crap and it costs me 150 a week one person and yea I eat some meat too. $600 food mo. ONE PERSON

        Gas =? Depends on where work is.. 350 miles a week is a tank of gas. 50 miles a day x7. You have to go to the food store too… Ill be cheep here and say $40.00 week gas $160 a month. (One reason you have cable)

        $801.42. after eating crap and getting to from work.

        Health ins.= ? Well for me. I’m older and would only get a partial discount making the big 40k. Mandatory Health Ins Making over 48k = $902.00 a MONTH!!!! I am 59..
        Making $40k = $500.00 400 dollar low income discount.

        After everything leaving the WORKER with 401.42 a month.
        OR making 8k more a year 48k income… Got a raise ?? DOOM!
        After everything making 8k more…. leaving the worker with Negative – $98.50

        O yea and this is single person… Make it a female with one child.. Try again….. You can find a job for 19 dollars an hour!!!!

        Double the rent to1400 either studio or 2 rooms… same price unless living in south central with a child is considered good parenting.

        Redo this at the wanted 15 dollar rate not 19 = FAIL awful life….and add a child

        • 41

          Len Penzo says

          Wow, Keith. Where do I begin?

          Your numbers may be real, but all they prove is that you are living beyond your means when you don’t have to. In fact, it shows that you’re living somewhere with a cost of living that is far beyond your means. (Never mind that you aren’t trying hard enough if you can’t eat healthy for $300 per month. Also, if you drive 50 miles per day, you need to find a job closer to home — or a home closer to your job. Also, if you have roommates who insist on you doling out $56 per month for cable, then find new roommates! — Don’t say you can’t … because you’re making my point. As for taxes … Your pay check example shows total tax withholding of $9300. Based upon the marginal tax rates for 2015, someone making $40,000 would owe $5855 in federal taxes — but that’s BEFORE deductions and tax credits are even applied, which would lower that figure appreciably. And state taxes would be even less. So bottom line is there is a lot of income that is ultimately returned to you by the tax man that you didn’t account for.)

          But even so, if it’s as bad as you say it is, the solution is simple: move. Yes, move. Out of SoCal. To some place with a lower cost of living — like another state in flyover country, or the SE United States.

          Don’t feel like moving? Then look in the mirror. ID10T error, indeed.

          The truth is, people can and do live comfortably and happily on $40,000 annually. Here are almost 20 detailed testimonials from fellow Americans who do it every day.

          Best of luck to you in the future.

  8. 42


    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. 43


    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. 44

    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. 45

    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…

    • 46

      me says

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

  12. 47


    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. 48


    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. 49


    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. 50


    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. 53


    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.

    • 54


      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. 55


    @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. 56


    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.

    • 57


      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. 58

    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. 59

    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. 60


    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. 62


    @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. :-)


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