Son’s net pay is approx $38K. He better be able to live on that! I did a quick add up in my head and after his basic expenses he should have approx $1600/month left for discretionary spending. That being said, we pay his car insurance, cell phone and he is still on our health ins. He also has no student loan debt and no car payment. He also has a roommate to share expenses like cable/internet. Heat/water are included in his rent (share is $1000.)
I spent $0 on my hair. My wife cuts my hair. But I think our COL is still higher than $40000 a year. (Well…the payment for our 15 year fixed rate mortgage is relatively high IN OUR STANDARD – but at one time, my coworker in California said my mortgage payment is almost like “nothing” as compared to his mortgage payment.)
I actually do not know our living cost. I do not know our S’s living cost either. All of our expenses are mixed with each other – we really do not distinguish his expenses from our expenses. But I think all of us are on the frugal side.
@oldfort, Glad to hear that you ended up being OK for your “rock” incident. DS told us that at one time, a large branch from a tall tree fell down after an ice storm in the north east and almost fell down on him! This happened in the city area.
The $0.00 in annual savings is pretty darn scary.
My rough estimate based on my factors:
Annual costs
Rent $12000
Electricity, gas $1200
Cable, internet, phone $2000
Home furnishings (tvs, computers, etc) $800
Cars (insurance, gas, repairs, replacement, registration) transportation $2600
Health costs (co-payments, etc), drugs, depends on age… $3000
Dental costs, eyeglasses, exams $750
Food $3600
Clothing $1000
Gifts/holidays $750
Entertainment, travel $2000
Hair care $500
Savings $9800
Savings is too low for my liking. I’d cancel the cable and just use Netflix/Amazon/Hulu package. No car payment. No student loans. Merp, looks doable.
My son probably lives on about that, though he makes a much higher salary. But what are his expenses, really? Even though he has high rent in SF ($2500), eats out all the time, what’s left when you’re young? A couple of bucks in toiletries, transportations costs, beer, entertainment. He’s not much of a spender, and lucky to still be on our health insurance and cell phone plan. Things get a lot more complicated if you own a home, or are older.
Some of the expenses are definitely not realistic for an older person. You could pay far more on dental, medical, glasses. I just got my first pair of glasses for $386. Holy crap, is that what they cost nowadays? Just had to pay for a dental implant (4K) that insurance didn’t cover. My parents pay many thousands of dollars yearly for dental costs alone. If you’re getting your hair highlighted, you can spend plenty of money. Our dogs cost us at least 10K annually. Then again, if you only have 40K to spend, you’d better get a healthy pet (that you don’t need to pay someone to watch), watch your teeth fall out without replacing them, and forget covering up the gray. And I don’t see eating out, good coffee or alcohol in the budget—luxuries I wouldn’t care to live without. But when I was a young second Lt, I made 24K/yr and I was rich!
Heath and dental seem to increase a lot with age. These account for a small portion of S’s budget, while I spend 18K on premiums and deductible for medical and probably another 2k+ on dental (just had another root canal). Of course, housing, especially home maintenance, is another item that tends to increase with age. Unlike medical/dental, housing costs are more susceptible to control (ie can continue to rent, live in smaller house, etc).
@mcat2 - my H is balding and just shaves his head. Helps off-set my hair expenses- lol.
Hair cuts aside (and goodness, I really have to thank my hair person for not gouging me!)… I’d have very little sympathy for a person who couldn’t live (and save!) on 40k/year (with the exception, of course, of those with high necessary costs such as high medical bills). Families might be a little different, but an individual? It comes heavily down to choices.
Most of my friends live on about 30k/year (pre-tax… this is our standard stipend plus additional grants/work) in a semi-high cost of living area (rent ~1500 for a one-bedroom) and they do just fine. They travel, eat out on a regular basis, though granted they do not have to pay for health and dental (which for me was less than $200/month on the Exchange). I wouldn’t classify any of us as struggling, though I guess we really only have ourselves to compare to. Most of my friends outside of academia are making (generally) less than that AND paying student loans… they’re struggling. I also have one friend who made 6 figures out of college and still thinks it’s not enough because he can’t afford a 4 bedroom house with an in-ground pool yet. Choices.
The way the budget is laid out is not how I’d spend… For instance, I cut my own hair and would roll that $500 into food.
Cable/Internet/Phone for $2000 a year sounds too high also but I don’t get cable, only internet and phone.
You’re still in SE Michigan right? I moved to the other side of Lake Michigan and for some reason groceries are much more expensive here than in SE Michigan. Also I assume that’s including alcohol.
For prescription that’s kind of on the high end but yeah, like $200-$400. If your power is under 3 though you can just go to CVS or a similar store and buy glasses for $10.
But glasses you don’t need to buy all that often.
Certain costs can vary widely. My D’s health premium including dental in her previous job cost her 1200$ a year with a $500 deductible for health and two free teeth cleanings a year for dental. Her new job is with a small company that doesn’t offer health or dental. Her premium for health is almost $3000 a year with a $6000 deductible. She doesn’t have dental. Prescriptions, teeth cleaning, Dr visits are all basically on her since she isn’t likely to meet that deductible. ( which is a good thing)
Her new job offers her things that the old one didn’t.
I think the biggest savings I have seen for all of my kids is that having a housemate to share utility costs. The cable, internet etc is the same whether you have 1,2 or even 4 people sharing the bill.
Your costs can be quite low when you’re young and single. However, when you buy a house, have kids and start getting old–completely different story.
Is this the same D that you bought a house for? I think $40K is adequate and she should figure out how to make it work. I did supplement my D’s rent for 2 years after graduation because I wanted her to live in a safe area. Other than that, I told my kids to live within their means.
My S makes about 36K–has a car, but also has an apartment mate, puts money away with a matching IRA plan at work, and saves besides.
Millions of people live on less.
My D makes 30 in a good year, her H probably 45-50. They own a house and save a bit of money every year.
Severe frugality runs in our family.
A person can live on $40,000 a year if…they have to. I have done so for many years, raising my kid in Brooklyn, NYC.
When I was first supporting myself, I devised my budget by first looking at fixed costs(living expenses including utilities, and car). After that, I looked at what was left over and made decisions. It was all about priorities. Saving money was a top priority because guaranteed there were always unexpected expenses.
I sacrificed on some of the soft expenses like food in order to make the money stretch.
Some of the items in your budget seem extravagant to me, but I think it’s just a difference in lifestyle expectations.
If this is a young single person, the home furnishings seem like a lot, as young people starting out can buy from consignment shops or craigslist. The dental costs and eyeglasses also sound like a lot unless the person has a specific condition. You don’t necessarily need new glasses every year
The food could be cut down significantly, as could the entertainment and travel.
If this is a young person needing to establish a professional wardrobe I get the $1000 for clothing, but otherwise that could be cut significantly as well.
As for gifts - my kids are just starting out, and so this is the first time they are assuming responsibility for buying gifts for family members at holidays, birthdays etc - we always bought gifts for, say, grandparents, from them. So frankly I would expect their spending on gifts to be modest and it would be wrong of our extended family to expect lavish gifts from young people starting out.
I think someone making $40k spending $2500 a year on entertainment and travel doesn’t get that people who make $40k don’t have “travel budgets” except maybe by car or at very modest places.
As Garland says, many live on far less.
If you figure out your economic priorities, then figure out how to save on the rest, many things are possible. Some do without cell phone data plans, using wireless only. Share housing. Color your own hair, if needed. Eat vegetarian protein sources. Buy used clothes, shop garage sales. And for the younger generation, learn to cook and eat out less. My offspring spend amazing amounts of money on meals out. Though I hate to say it. Back in my day, we cooked together and had potlucks.
Regarding Old Fort’s post above, I had similar car damage last year, with a $500 deductible. My issue was hail, which comes under comprehensive, not collision. Afterwards, I lowered the comprehensive deductible.
My kid makes quite a bit less than 40K. He is able to save some money. He shares a basement apartment with a roommate. They do not pay separate utilities, no TV. He has a car-sharing arrangement–does not own a car. Pays for gas and some insurance, runs errands for owner for use of car. Cell phone is probably one of his bigger expenses. Haircuts maybe $150/yr? Clothes certainly less than $1000, but he does buy nice clothes (too expensive for his income, imo) when he buys them. Not sure about food, but he is making it work in a high-cost area. The main thing is to have enough savings to pay high deductible should any major health issues occur.
Eyewear can be expensive if you want glasses and contacts. The frames drive up the cost for me. They cost about $300 to $400 or so…
In my budget I cut entertainment and travel to $2000 a year. I feel the amount, while not frugal in any means, is a fair amount for a single, young adult. It leaves room for a trip a year plus entertainments such as bars, shows, or events. Say you take one $700 trip, you’re left with about $108 each month which is pretty good. If you want to go out, it’s in your budget. If you don’t go out, you just saved some of your budget. 
Re: buying a house. I made the choice to buy a house in a lower COL area rather than rent in Ann Arbor because it was cheaper and better in the long run. (Plus, 3 bedroom house vs 1 bedroom apartment…). Again, choices that many/most (though certainly not all) can make if they are willing to sacrifice a bit.
Vlad, I said that I was in a low COL area. That food budget is outrageous around here.