Alpha Consumer: How to live well on $40k a year
Kimberly Palmer, who writes the Alpha Consumer pieces at US News and World Report, wrote this piece that’s getting a lot of links and syndication across the Internet: The Secret to Living Well on $40,000 a year.
The Q&A interview is with a couple who were both teachers, and it was expected ahead of time that the wife would stay home at least for a time when their children were little.
A snippet:
We ended up being married four years before Ava was born. During this time, we tried to live off one of our teaching salaries and used the other one to pay off debt and establish an emergency fund. We were not sure how long Tracy would be able to stay home—we initially aimed for one year—but were able to have her stay home for six years and work part-time for one. We were able to do this even after having our younger daughter, Ella, three years after Ava. The key for us was the long-term planning.
Update Feb. 4, 2013: This piece is getting some search engine traffic as people are apparently asking this question again. If you want a more detailed discussion as to how this income bracket applies to the cost of living in Michigan, go to The myth of the middle class lifestyle.
This post has 5 comments
September 27th, 2011
Interesting article. As for the comments at the end, which state “You can’t do that in NJ!”, maybe you can’t. The point was that a family of 4 can live on one teacher’s salary if they plan ahead. Teacher’s salaries are likely higher in NJ and other expensive states. I’ll bet you could do it in Michigan, and in Idaho (where I live). PLAN is the key word. I might add, delayed gratification is a biggie, too (we were married over 8-1/2 years before we had children–some things you can’t control–but it has worked out well for us financially for the rest of our lives).
September 27th, 2011
I find posts like this article frustrating in that there is not 100% disclosure of their familial budget. how much is rent/mortgage, taxes, car expenses (tax, repair, oil, gas, if not also a loan), clothing, hair care, food, etc. Just what is $40,000 paying for?
Also, where is this family living? I live in one of the most expensive areas of the country: real estate, electricity, gas are all exceedingly expensive compared to other locations. A 2 bedroom appartment in an iffy area is easily $1500-$2000 month here.
Can’t really make a blanket statement that indicates that everyone can live off of $X/year.
Yes,live below one’s means. Yes, do things yourself to save. Yes, buy used, make it last, repair, make do. Yes, plan ahead when possible. Yes, curtail spending and avoid debt at all costs.
That said, one could NOT live on $40,000/year in Fairfield county,CT,or anywhere in the tri-state area, in fact, you’d most likely be on state/government aide as well. Many who live outside of this zone would flat out faint at real estate prices and taxes alone.
September 27th, 2011
I am living in an expensive part of CT, myself and 2 children at home. We live on $29K a year (after taxes)… Of that, $13560 is mortgage/home insurance and home taxes. It can be done… it’s certainly not easy but I’m doing it. The bills are getting paid, even some home renovations and car repairs… I do get some government assistance but it ends up being about $1400 a year in food help and some help with the oil bill.
I get by by cooking from scratch, taking hand me downs, being active in Freecycle, trading with and networking with friends, filling my freezer with sales items- buying only sales meats and eating from the freezer. I have to super carefully plan out Birthdays and Holidays… I have to say “no” to myself quite often… I buy used, I do book swappers and CD swappers. We get Netflicks…
of the $29K
(as I said ) $13560 is mortgage
Gasoline $50 wk/$2600 year
Car insurance $400 a year
Food (I pay an additional $240 a month to what I recieve) $2880 a year
Phone/net $55 a month/$660
Utils $150/month/$1800
Garbage (you have to pay for this here, no options) $220/year
Entertainment comes to $80 a month/$960 a year but this incluides anything and everything from the occasional meal out, renting movies, Netflics, extra gas for outings, school field trips and fund raisers…
Additional heating costs $$1800
Added all together, that comes to aprox $25K a year.. leaving me another $4K a year… Or aprox $333 a month for everything and anything else. I maintain an emergency fund and hit it only for real emergencies… it’s hard but were doing it and getting by…
September 27th, 2011
Good point about variances in cost of living. A detail to be aware of with Michigan is that while housing prices are reasonable, our vehicle insurance is very high.
September 27th, 2011
60+ year old ranch home that needs work. 2 bedrooms originally, we coverted porch into a third. Yes, we ONLY have one bathroom, approx 1200 square feet total home. “Cozy” House expenses of a comparatively “modest” mortgage (many here have $4000-$8000 mortgages! Ack!)plus insurance, taxes = $23,590.56/year. Add utilities (electric, oil heat, propane, cable (our only “entertainment” and no reception otherwise-too many trees), phones, trash, septic maintenance)=$9651.60, and I am already up to $33,242,16/year. We live here as down county towns are cost prohibative with a comparable house to our home costing at least 1.5 million, in the condition it is in. Location, location, location.
We also have transportation costs, life ins, personal care (hair/clothes), food, medical out of pocket, school related costs, the newspaper, gift/Xmas, msc. We are also helping DD with some of her college, not as much as I’d like.
Very difficult to live in this town on $29,000 or $40,000 year, after income taxes. We are living with unemployment and have an austere budget. Because of my income, we don’t qualify for aid. Luckily, I was raised frugally and have ramped everything up a notch to continue to avoid any debt, build my emergency fund back up. All bills are paid monthly, including our one Credit card.