I honestly believe I could live and live decently on $20,000 a year. Here's how.
Core to learning to live well on little is recognizing that status is the enemy of contentment. Status costs a fortune (e.g., tony vs. okay neighborhood) and yields little real benefit. Making the decision to forgo status purchases and instead follow the practices below has enabled me to live far better than I otherwise could: for example, to pursue careers that are personally rewarding that I otherwise could never afford to have pursued: hosting a radio show on NPR-San Francisco for 24 years, being a writer, indeed, blogging as much as I do, while never promoting myself nor taking any advertising.
Here's what I'd do to live well on $20,000 a year. (I do most of these things now.)
Rent a small backyard cottage or a home's basement or attic apartment in a modest but safe neighborhood. Depending on where you live, it may take a little initiative and persistence to find such a place but they do exist, even in high-cost areas like the San Francisco Bay Area.
Drive an old, small, reliable car--e.g., 1995 Corolla. I drive cars 'til they drop. My previous car was a 1982 Toyota that I bought new for $8,000, drove for 23 years and 273,000 miles and only sold because my wife begged me to--it was running perfectly and looked fine. Buying long-term reliable cars and keeping them forever has, in itself, saved me a fortune over my lifetime without significantly hurting my lifestyle .Because car insurance rates vary so widely, I'd compare the best I could find on insweb.com with well-reviewed providers such as Amica.
Get a high-deductible Kaiser Permanente health plan. If I weren't insured under my wife's employer's health plan, here's what I'd do. I'm healthy so I have low health care expenses but need to insure against a catastrophic event. A 59-year-old male in good health can get a high-deductible Kaiser plan for about $300 a month, and these days, Kaiser is attracting some of the best physicians so I feel I'd get reasonably good care. Here's a link to Kaiser Permanente's instant-quote website.
Or if I worked for a corporation, even as a Wal-Mart greeter for at least 24 hours a week, my kids and I would get $1500-deductible health care coverage for just a dollar a day. And Wal-Mart kicks in another $500 a year for uncovered expenses.
Just being smart about those three--digs, heals, and wheels--should enable you to live decently on $20,000. These will also help:
Eat out only at places like Souplantation/Sweet Tomatoes. At home: fruits, veggies, canned tuna, oatmeal, nonfat milk, ground turkey, whole grain bread, are, ironically, the cheapest and the healthiest.
Buy clothes and furniture at consignment and thrift shops (Salvation Army, Goodwill, etc) , flea markets, and CraigsList. My wife always dresses beautifully and has never been averse to buying at consignment shops in upscale neighborhoods where, for example, she has bought designer dresses such as a $1,000 designer gown for under $100, usually well under.
Enjoy low-cost recreations: Forgo expensive recreations such as live concerts, clubbing ($8 drinks?!) and frou-frou restaurants (they're more expensive for smaller portions and often taste worse) in favor of taking books and videos from the library, taking hikes or walks, playing a low-cost sport (for example, basketball rather than skiing or golf) watching good TV shows, phoning or getting together w. friends--for example, inviting them over for dessert and to watch a video, or just hanging out with a romantic partner--Or find love by, for example, volunteering at a nonprofit, taking a local adult school class, or hanging out at a bookstore/coffee shop.
Save wisely. On $20,000 a year I would have little or nothing to save but if I did, I'd get a no-interest, no-fee checking account at a convenient bank and put my savings in one of Vanguard's All-in-One Funds.
This plan for living decently on little may sound simplistic but for most people, it really is as simple as that.