A person can live on $40,000 a year if...

Parent Cafe
1

These threads periodically come up…

If the person pays no income or social security tax and the rent is under $1300 a month, a person can live on $40,000 a year or less? Right?

I know people talk about rent being 30 percent of your income or less…but if taxes are low?

What am I missing here? Might not even need all the following…people do live on less… I am just making sure. :slight_smile:

Annual costs
Rent $15600
Electricity, gas $1200
Cable, internet, phone $2000
home furnishings like tvs computers etc $2000
cars (insurance, gas, repairs, replacement, registration) transportation $3000
health costs (co-payments, etc), drugs, depends on age… $3600
dental costs, eyeglasses, exams $1000
food $7000
clothing $1000
gifts/holidays $500
entertainment, travel $2500
Haircuts $500

Total…$39900

2

I can relate to the scenario- our income and mortgage are pretty close to your figures (actually income is a bit lower).
Since you said “a person” I am assuming this is not a family so take these figures as for just two of us (which is really about the exact same -for us- as an individual with the exception of food costs)

I’m not quite sure what you’re asking, dstark, but these figures seem awfully high. I think the main thing that you’re missing is that if you “make” 40k then you’re not actually taking home 40k due to taxes (ETA: I see now that you didn’t say income but “living on” in which case… income is considerably higher). I readily admit that I live in a pretty low COL area but we’re not struggling by any stretch. It’s tight but we’re not rationing (though we are still paying off unexpected wedding costs).


[QUOTE=""]

Electricity, gas $1200
Too low for us and I’m in a low COL area. For us, it’s about $150/month.

Cable, internet, phone $2000
About right though can be cut considerably if you are willing to sacrifice cable.

home furnishings like tvs computers etc $2000
Not really an annual thing.

cars (insurance, gas, repairs, replacement, registration) transportation $3000
Maybe in a bad year.

health costs (co-payments, etc), drugs, depends on age… $3600
Maybe if you have chronic conditions.

dental costs, eyeglasses, exams $1000
Too high assuming even decent insurance.

food $7000
Almost $600 PER MONTH?! Are people eating a top cut of meat with each and every meal and snack?

clothing $1000
Maybe.

gifts/holidays $500
This seems too low. A few family members, close friends, etc and you’re well above this in gifts.

entertainment, travel $2500
Reasonable.

Haircuts $500
WHAT?! I don’t think I’ve spent $500 on hair cuts in my entire life let alone in a year.

[/QUOTE]

What’s missing?
-Few hundred dollars in student loan payments every month.
-Money put aside for savings.
-Other day-to-day expenses like cleaning supplies and toiletries.
-Pet expenses, if applicable.
-Home repairs.
Hmm… I’m sure other things.

3

Romani, you haven’t seen my daughter’s hair. I might be low there. :slight_smile:

Yeah…the home furnishing, tv thing is too high.

Ok. I see your edit. Your post is helpful.

4

It’s true, I haven’t seen your D’s hair lol. Though I would love to see what $500/year looks like :p. I generally trim my hair myself and my first radical hair transformation came a few weeks ago- cut off well over a foot and dyed it. $30 :slight_smile:

5

Romani, :slight_smile: . My daughter’s hair is very curly. Not a do it yourself type hair. All naturally curly.

6

Romani, I don’t know what you are doing up this early. I haven’t gone to sleep yet. My wife is going to kill me. I better go. :slight_smile:

7

Are you talking about costs for a single, young person?

Heck, I lived on a small fraction of that as a grad student.

8

My hair service costs almost $500 a year not counting products or treatments. Before it cost almost a hundred more but the reduction in frequency has benefited my hair and pocketbook. :slight_smile:

9

My hair costs 500ish a year, and I am not counting for coloring supplies, so I can do that part myself.
Should cost for car payment be included? One could certainly survive on less than $700, but If you are going out to eat sometimes, $700 probably isn’t that unrealistic. My son’s dining hall was over $10 a meal, and it may have been over $12. Housing totally depends on where the person is living. In my limited current experience, one son got his own large bedroom, bathroom, office room in a group house, and a driveway parking space for $700, and the other got half of a tiny one br apt, where he gets the parking space only because other student doesn’t drive.

10

Not too hard for a single person or a married couple without children, if medical and educational expenses are manageable, there are no emergency home or auto repairs, and there is no unusual need for legal services.

For elderly and disabled individuals, the big expense in my own experience has been in hiring assistance for daily living tasks, respite (if there is an unpaid family caregiver), or companionship. Even ten hours a week at $20/hour (likely more in our area) can add up.

11

I think the $3000 for the car is too low. That’s just the insurance where I live, if not even enough for that for some folks. I spend about $100/yr on haircuts including nice tips, thanks to Great Clips.
Although I didn’t realize it at the time, my parents obviously struggled some financially when I was little. We ate things like white bread with butter and sugar as a sandwich, spaghetti with ketchup, and always powdered milk. So that $7000 for food could be a lot less if one needs it to be, though it might not be the best health-wise.
As for furnishings, the free section on Craigslist is your friend. I’m currently on the look out for just the right living room furniture so I can dump my current stuff. I’ve become increasingly frugal because of the paying for college thing.
Health costs could be a lot less depending on insurance and overall health and age.

12

D1 lived on $46K after tax in NYC the first year out of college. She didn’t have a car, health insurance was paid for, and had very medical expenses because she was young. Her utilities (internet and electricity) were $600/yr. I bought her a laptop and she took a lot of furniture from us, but her rent was $24K a year. She paid for a monthly metro card and taxi rides. She didn’t have a lot of disposable income, but she managed.

13

I think that’s not too far from one of my kids budgets but what has been pointed out in articles I’ve read is that there is no cushion if something happens like losing a job, a serious illness, maybe a theft. If you are out of work for two weeks, everything falls apart.

14

When people talk about % of income to spend on rent or mortgage, it is of gross income, not net. It is not realistic to think with income of 40K there wouldn’t be income tax or SS to pay. To net 40K, one would need to make north of 60K.

15

Health insurance cost seems to be missing too. Based on age, this could be a very large chunk of the budget. Smart people usually carry renters insurance too.

16

My first job out of college was fairly significantly less than that, and now I’m making around that (pre-tax). It’s fine to live on - not luxuriously, but do-able (and I do live in a high cost of living area).

The issue for me is that as someone said before me, there’s not room to build much of a cushion, and there’s not room for significant other expenses. A lot of my expenses are a bit under the estimates there (I get my hair cut around twice a year) but I have student loan payments, and I feel like I have to significantly curb my spending when I have unexpected expenses. Like I’ve had a busy work month with a lot of long hours and eaten lunch out more than usual and just paid for a phone repair, and I’m not eating lunch out at all for the next month. Also, if I were spending that much on a car, I wouldn’t have a car. I have a pretty old car, but I don’t rely on it to get to work and such - I take public transportation.

The distinction between pre-and post-tax is also not insignificant, though.

17

A very large rock fell down from a bridge. It barely missed me, but it damaged my car’s front bumper. Total cost $2000 for repair, $500 deductible, totally unexpected. I find there are always unexpected expenses, especially when there are more family members living with you, the probability just goes up.

18

Two of my kids are living on less than 40,000 per year. It helps that they both have roommates to share expenses and have no college debt.

19

This isn’t too far off S’s budget:

Rent: $ 12000
Utilities (elec/water) 1800
Cable/int/phone 2000
Car (payments, ins,
Gas, maint.) 6000
Health costs:
(Ins., HSA contrib.) 1200
Dental: missing
Eye related costs N/A
Food 6000
Clothing 1000
Gifts 500
Entertainment/travel 2500
Hair/personal care 600
Dry cleaning/renters
Ins., misc. 2400

Total: 36000

S contributes to 401k and puts any excess in savings.

@dstark - laughed at the hair comment. I spend $160 (including tip) every 6-8 weeks on cut and highlights. I can relate.

20

So my car isn’t actually worth $2,000, and if it needed a repair that cost that much, I would probably not repair it and be carless. That’s why I specified that it was an old car and that I don’t depend on it to get to work. Many of my peers at work do not own cars (or share one used car for a couple). I agree that an emergency cushion is important, but if I needed a car, I’d get a more reliable one, and I’d have to cut money out of something else to create that cushion. Likely not having a public transportation pass would help.

Also, that sounds really scary. I’m glad the rock just hit the bumper.