After steadily increasing his monthly retirement contributions over time, Ryan is very close to achieving his multi-year plan of reaching his retirement fund maximum contribution limit.
My name is Ryan and I’m a 38-year-old teacher. I’m married to my wife, Louise, who is in retail management. We have three kids, ages 2, 7 and 9.
I manage the majority of the finances, but communicate with my wife about financial planning because you need a partner’s support.
I’m big believer in saving for retirement; I’ve always been a long-term thinker, but really got serious about retirement planning three to four years ago. I’ve been consistently increasing my savings since then and now do it monthly.
Our Income and Expenses
After taxes, deductions, and retirement savings, my wife and I combined live off roughly $40,000 per year. I do occasionally teach an adjunct course or two, and those financial windfalls help boost savings and allow us to travel some.
Here is a summary of our basic monthly living expenses:
Our home was inherited from Louise’s grandmother, and even though it’s small, it’s paid for, so that’s a blessing. We could use a larger space, but I’m delaying making a larger home purchase to focus on retirement saving first. Our plan is to buy a house in five to 10 years, but saving for retirement is our bigger goal right now.
I firmly believe in buying used cars; we have a 2006 Toyota Camry that’s paid for and a 2004 Toyota Sienna van that we pay $170 a month.
After we pay our “core bills” we have a little money leftover for usually one to two more expensive trips out to eat, such as a steakhouse or Olive Garden. The rest of our money goes toward groceries and gas.
We don’t buy a lot of extra stuff like clothes and consumer items on a month to month basis. We usually buy those throughout the year when we have extra funds.
For fun, we normally go to the beach for two to three nights in the off season. You can get a much better rate and use the extra money toward dining or other events. We also go to some local free events.
Our Savings
I currently put 14% of my income into a teachers retirement pension (6%) and the rest in a separate 457(b), which is similar to a 401(k). I’m working on a multi-year plan to reach the maximum contribution limit. In short, I increase my contribution every month by $15, of which my check goes down $11.25 due to it being pre-tax and with factoring in raises only feel roughly a $75 decrease annually. But, this decrease is well worth the long-term retirement benefit; and since I do it gradually, I really don’t notice it.
I also have a $1000 emergency fund.
Closing Tips and Thoughts
The advice I would offer probably echoes your own, but here’s a brief top ten I’d throw out to folks to help with retirement/financial planning:
- Greatness requires sacrifice. Period. Whether you’re starting a business to make extra money, starting a second job, or reducing your paycheck to go toward retirement, you’ve got to commit and put in
the work. - Eduction is key. Not just formal college education; educate yourself about retirement and financial planning. No one is looking out for you and your family the way you are, so you’ve got to dial in. A library card is free and offers so many great resources, both in print and in digital form.
- Have a plan. Start small, but start. Being organized with a rough monthly budget can save you time, stress, and heartache. Use a cash-based system to help track and manage your spending (channeling Dave Ramsey).
- Don’t compare yourself to others. This is tough because there’s always going to be people out there that are — seemingly — way ahead of you. But, there are so many more behind you that haven’t even
started. - Figure out a way to make more money. I know, easier said than done. But, there are tons of opportunities for part-time jobs that can add a few more dollars to your bottom line each month. The question is: What are you willing to do to create multiple incomes streams for your present and future financial security?
- Be adaptable; things change. No plan is perfect. No plan is permanent. Just because you thought of something doesn’t automatically make it the best option. Vet your ideas and be willing to shift direction if you need to.
- You don’t have to be rich to feel rich. Assess what you really value in life and work toward more of that thing. For example, I place a higher value on time and family than I do money. Yes, we need money to live, but without time, family, and friends what kind of quality of life can we truly have? Having time to spend with family makes me feel very fortunate and rich.
- Time is your friend. Compound interest is a magical thing. I could write a book about this one alone, but the sooner you commit to a retirement plan, the sooner that compound interest will work in your
favor. Google “compound interest calculator” from MoneyChimp and just play with it. You’d be amazed at what’s possible. - Buy assets, not liabilities. Say $1000 drops in your lap, and you think: Hey! Found money. I can drop this at the mall and have a great time!But then the money is gone and you’ve likely got nothing to show for it but some depreciating consumer goods. Instead, you could have taken most of that cash and invested it.
Finally — and most importantly — choose happiness. You have a lot of control over your life, even though it may feel out of control at times. Choose paths that lead toward your ideal lifestyle. Fearlessly pursue your happiness. No one can give it to you. You have to go after it. And you know what? It’s worth it.
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If you’re a household CEO who is successfully making ends meet on roughly $40,000 per year or less, I’d love to hear from you. Contact me at Len@LenPenzo.com and be sure to put $40,000 in the subject line. If I publish your story, you’ll get a $25 gift card or an American Silver Eagle!
Photo Credit: Courtesy of Ryan
Independent in thought and action. Way to go!
I’ll second that, Dave. You’re doing great, Ryan!
Congratulations on your financial success!
Congrats on being able to stick to your budget and still raise a family.
I have three kids as well and it can be very difficult at times. I noticed some items on the budget that maybe you can clarify:
$27/month for property taxes? Where are property taxes that cheap?
Also, I noticed the low grocery budget and wondered, where is the budget on diapers, toiletries, kids clothes and kids functions? I see that your wife works, do you pay for daycare?
There is so much more spent on a family that I don’t see in the budget. Thanks.
From the article …
“We dont buy a lot of extra stuff like clothes and consumer items on a month to month basis.”
But I’m curious about the property taxes too. Seems really low.
Hey Don! To address your questions: when we had our first child my wife mostly stayed home and worked on a very limited basis. Gradually she picked up more hours until we had another child, which we then repeated this process. We have never paid for childcare because we have arranged our schedules so I can get the kids on days she has to go in OR a family member can fill in on a limited basis, but we try to be as self-sufficient as possible. Childcare is prohibitively expensive, especially for lower income earners (which is the majority of people), so we focused on ways to avoid having to go the childcare route. Diapers are an expense not listed, but Id say they are around $40 a month. We dont buy a ton of clothes (I only buy cloths once or twice a year and not many items), but my wife does work part-time and buys the kids affordable, but stylish clothes. Lastly, the $27/mo. property tax is paid annually in a lump sum and the reason its so low is because we live in an older, small house that has a low tax valuation. If we didnt have this house Id still seek out a low cost living situation so I could focus on retirement planning. Id rather live below my means now than struggle more when Im older, but theres always a struggle at any age or income level, which keep life interesting. Thanks for the comments. – Ryan
Thanks for the reply Ryan.
For us, my wife stays at home since child care for 3 kids is phenomenally expensive. She wants to return back to work as soon as my youngest is old enough to go to school full time. She picks up some part time gigs that definitely help out.
I’m lucky to have a good career but with the rising cost of health insurance and child birth costs, I feel that a lot of my pay is devoted to healthcare and HSA. This is really cutting into having extra money to max out my 401k. I keep telling myself…. this will get easier…
Ryan, thanks for showing us that $40,000 a year is more then enough to live on if you’re responsible with your money.
“I place a higher value on time and family than I do money. Yes, we need money to live, but without time, family, and friends what kind of quality of life can we truly have? Having time to spend with family makes me feel very fortunate and rich.”
Your family is very fortunate to have a man who thinks the way you do. If only most people thought the same way.
This was really helpful! 40K a year is a common annual salary, and it’s nice to read about someone that really got it together financially!
Yeah, everyone should get a free house. I wish someone would leave me one.
Is your comment supposed to diminish his accomplishment, or is it just sour grapes?
Even if he is paying $1000/mo. rent, which seems high to me considering his stated property tax, then Ryan is still only spending about $33k per year.
To address your comment: Before we were able to move into the inherited house we lived in a two bedroom apartment and were paying $400 a month. The house was a situation where my in-laws didn’t want to rent it out and wanted us to be able to use it because it is on family owned land. However, if the house never materialized I would have ended up paying cash for a used trailer in order to save that $400 a month, which ended up costing us around $25,000 over five years. I have friends and family that have thousand dollar mortgages and it feels like a burden to me. I’m sure homes are great investments, but if you put that same $1k in a index fund for 30 years I’d be willing to bet you have a better return than the home. Every situation is different. The house we live in is small and it’s not an ideal situation (two bedroom, one bath), but I think we are doing okay. Thanks for your comments. – R
Wow, this is great and what a blessing that you inherited a home. Mortgages are a killer. I love to see how people create financial plans to live well on less. It’s inspiring.
I wonder if you’re making the best use of your fully paid off house? Feels like a portion of it is “dead capital” and could be better used if you took some equity out of the house and reinvested into another rental property. True, it’s slightly more risk, but as long as the cash generation more than covered the mortgage and then some….
GreenDollarBills – there is nothing that is more secure than a paid off house. Especially for folks that aren’t rolling in the dough. And with the property taxes they pay, even if he lost his job they wouldn’t end up homeless. I can’t think of any investment that would be better for a family with young children. I have lived on a salary far below $40,000 for most of my adult life, with two kids, and some of us just don’t have the tolerance for risk that others do.
Congratulations on the savings rate and the detailed budget. I like seeing these articles to see how others are doing it. Comparing your budget to ours, some notable missing items include
vehicle registration
school lunches for kids?
school related fees: book rental, supplies, pictures, field trips, etc.
house maintenance (monthly pro-rated cost of future repairs, say 1% of house value per year divided by 12 months)
lawn care, landscaping, etc.
clothing
haircuts
gifts (birthday, Christmas, etc.)
Hey Mark ! To address your questions:
Vehicle registration is approximately $160 annually and I usually pay that when I get a windfall from teaching (side gig). All children in our school district get free breakfast and lunch (probably because 80-90% were qualifying for free meals anyway). We live in a high poverty area, so much so that the local school in many surrounding counties started a “Backpack Buddies” program to send food home with kids on the weekend. We don’t have a ton of school fees. We buy our school supplies over the summer and I’d say $50 annually. Field trips are usually 1-2 a year and no more than $20. We do not do a lot of maintenance on the house on purpose. My father-in-law advised me not to put a lot of money into the house because our long-term play was to move out and the house has a low tax valuation and just isn’t worth putting a lot of money into it. Lawn care: we went in a few years ago and collectively bought a riding lawn more that we share between three houses (mine, father-in-law, and brother-in-law). We live on family land and usually someone from one of our households will cut all the lawns. We help with gas. Clothing: I addressed this in another post, but we don’t buy a lot of clothes. I buy clothes a few times a year and generally stick to the basics. My wife buys the kids clothes and we stick to budget friendly items that look good. Example, I bought my toddlers a $4 pair of shoes from Dollar General recently. Haircuts, not really a monthly line item. I get my hair cut every 2-4 months and generally will say, “Time for a trim,” and go when I get paid that month. Mine haircut costs $15, my daughters are usually $10-$12. I don’t know how much my wife’s haircut is off the top of my head, but she don’t go but every 3-4 months herself. Gifts… if we have a birthday in a coming month (like we did in September), I will try to go ahead and buy a gift when I get paid so that money comes out of our monthly disposable income. For Christmas, I try to get at least one adjunct gig in the fall and that windfall covers Christmas. My wife and I combined have a rough take home pay of $3000/mo (or $36,000 annually). The windfalls of adjunct pay put us up to the $40,000, but those are not guaranteed and so on a month-to-month we budget without them.
Thanks for your comments. – R
Please forgive me if someone has addressed this in a previous comment, but is charitable giving not a line item anymore?