How I Live on Less Than $45,000 Annually: Matt from Massachusetts

My name is Matt and I’m a long-time reader of Len’s blog. After a few years of planning to share my story of living on less than $45,000 a year, I finally came around to actually doing it now that the ol’ 2020 budget is set and we’re off to the races.

My wife and I are young professionals, both in our mid-to-late 20s, living a great life in Greater Boston — and we’re living well within our means.

I’ve always had a not-so-subtle love affair with the almighty dollar; it started young, as I’d hustle to earn a buck by shoveling snow during New England winters, washing cars, mowing lawns and, eventually, in the food-services industry. I’ve always been a saver; I opened my first Roth IRA the day I got my first regular paycheck. My wife, bless her, is even more frugal than me I think. (Thank you Mother-in-Law for that trait, despite her upper middle class upbringing!)

My Expenses

The whole $45,000 a year challenge is actually one that I’ve been holding myself to for a while and actively track ourselves against it. I’ve been using a spreadsheet for about three years for tracking our net worth and the sources and uses of our monthly savings, as well as other tabs for things like investment performance, mortgage schedules, historical savings by year. For budgeting and tracking how we’re doing on cash flow each month, I use Mint; I could probably find something better, but it’s so ingrained in my weekly process that I struggle to change.

We bought a very nice newly renovated one-bed one-bath condo in a neighboring city to Boston a few years ago for $270,000. As a result, we get a great cost of living in an expensive metro area while still being walking distance from great restaurants, outdoor activities, and a 15 minute or so drive downtown. The mortgage principal and interest is about $1000, with another $250 in HOA fees and taxes. I realize this isn’t workable for a family, which we don’t have yet — but if we did, we could have gotten a less-updated place in a different area with only a minimal increase in commuting time and cost.

We have a single car; a 2010 Honda CR-V with a whopping 190,000 miles on it. We stay very regular on the maintenance — much of which I do myself — so the car runs great and probably has another 50,000 or so miles of life. My wife does most of the driving on it to get to work, while I take the commuter train; the train is a bit pricey, but saves time. We could probably cut back on our insurance by about 50% given our spotless driving records and the age and value of the car, but we inherited the coverage through my wife’s family and she likes their agent, so we haven’t touched it to date.

My wife and I are both food lovers and we both enjoy cooking, so our groceries budget contains some fat (pun fully intended!) at $250 a month even though we buy plenty of meats, fish, organic fruits & vegetables. We keep costs down by focusing on sales, especially for the meat and fish. The grocery line item includes occasional non-food essentials such as dish soap, garbage bags, and so on.

One huge area of fat for us is the $200 a month we each get for entertainment. After a trying first year of marriage where someone (okay … it was me) was way too critical when running through Mint every week with an iron fist. Since then, we moved to a system where each month, we both get $200 automatically transferred out of our main checking account and into separate splurge accounts for each of us that the other can’t see. We can use the splurge accounts at our own discretion. Mine usually ends up being saved and then applied towards precious metal purchases — so really it ends up being bonus savings! If push came to shove, we could probably cut the combined $400 per month way down to save more or tighten the belt even further if $45,000 a year became too luxurious to manage.

Last year we we’re paying as much as $150 a month for cable and Internet — so we quit the cable insanity this year. Now we’re a data-only household, supplemented with Amazon Prime and Netflix streaming services. That was a big switch, but we’ve been managing really well and we’ve basically replaced that time with more worthwhile pursuits, so it’s gone unmissed. I highly recommend it for anyone looking to quickly cut something out that’s both expensive and bad for you.

The $200 a month on the miscellaneous line item is a catch-all for things like my wife’s infrequent haircuts, car maintenance expenses, pharmacy pickups, and Christmas gifts — stuff I don’t want to individually budget for or track. Some months we’re way up and some way down; it just ebbs and flows, depending on what’s going on. And some months we’ll do a big durable goods refresh that blows this out.

The mobile phone and gym expenses cover both of us. We’re both on family plans with our respective families at $20 a month each for high — but not unlimited — data plans. The gym is Planet Fitness; it’s $10 a month for each of us, plus annual membership fees that get amortized over the year.

One area that may raise a few eyebrows is the vacation line item at $100 a month. I travel a lot for work, and so I get a ton of free miles and hotel points from that. As a result, we get to take pretty luxurious vacations for almost free; the $100 a month goes towards cash expenses like excursions and eating out, which also gets supplemented with cash back from one of my cards. That said, we both also love to camp and do road trips and staycations, so I’m completely confident that we’d be just fine spending this amount even without my work perks.

Closing Thoughts

Like I said, despite living in one of the most expensive places in the nation, I’d say we’re living a pretty great life — we get to have a blast together during downtime by cooking or exploring the outdoors and far off lands, and we still see friends socially at least once a week. All for about $36,000 in annual expenses.

Yes, with our current “challenge” budget we only have about $600 left over for savings but, as I mentioned previously, there are additional places we could cut to increase that total. For example, we could reallocate our splurge funds into savings; that would increase our annual savings to $5400 per year.

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If you’re a household CEO who is successfully making ends meet on roughly $40,000 per year or less ($45,000 maximum, please) 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!

Photo Credit: Dwight Sipler