Friday, February 19, 2010

How I Could Live Decently on $20,000 a Year

This article in The Atlantic, and this one in the New York Times, suggest that ever more formerly middle-class Americans will have to work for $10 an hour. That's $20,000 a year.

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 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.


Anonymous said...

And groom your dog yourself. And don't fly across country. EVER. And buy no expensive presents. There is certainly no place in the Bay Area you could rent in a SAFE neighborhood where you could live on $20K/year. Gas, a little dry cleaning -- all these things add up. I think you're being naive. I lived on $22K/year in 1993 and I could only do it because I lived with my parents and took BART to work.

Anonymous said...

Dude, I'm a grad student who lives on $19K/year, not in subsidized housing, and I live much nicer than that. My clothes come from the gap sale rack and I went to 10 countries last year. I eat organic food, go wine tasting, and live in California. If I lived somewhere cheaper (Illinois maybe?) it'd be even easlier.

Dave said...

"I honestly believe, with great certitude, that I could live and live well on $20,000 a year. Here's how. (Frankly, much of this is the way I live now and has been key to my now being a millionaire despite never earning more than a middle-class income nor inheriting a dime from anyone.)"


Your wife makes a significant contribution. School district superintendents earn well over $100,000 a year, which can put the millionaire status within reach.

Health care costs are another thing to consider: I earn $20,000 per year and I am not able to afford the health plans offered to me by my employer. Bi-annual visits to a dentist can really leave me "out of pocket."

Marty Nemko said...

I stand by my claim. (And by the way, I "groom" my dog now---that is, I get in the shower and shampoo him once a month, then towel him off.) There are racially mixed neighborhoods that are reasonably safe and inexpensive. I'd live there---yes, in the Bay Area. If I took my time, I could find a studio apartment on a decent block and/or a decent building in Emeryville or East Oakland for about $600 a month.

Marty Nemko said...

I would have been a millionaire without my wife's income. Re health care, I'd join an affinity group to get lower cost group Kaiser care and would use a dental school's students to get low cost dentistry. You can get quite wealthy on a very middle class income if you live the way I describe (which is not painful at all, quite pleasurable) and save religiously and prudently (e.g., the nation's highest yielding CDs or dollar-cost-averaging into Vanguard Funds-of-Funds.

Anonymous said...

That Mr. Nemko has gotten some skepticism for his claim does not surprise me. I'm a friend of his, and after reading this I was skeptical as well, and told him as such.

From 1997 to 2005, I lived in the Bay Area, worked at a music store, and the most I made there was $10.50/hr, which comes out to just under $22K/yr. Despite my own skepticism to Mr. Nemko's claim, I was somehow able to live on just that, up until 4 1/2 years ago. Now that I make more, I have often wondered how I was able to live on so little.

I didn't (and still don't) own a car, relying solely on public transportation, the kindness of friends and occasionally friends of friends, and my own feet to get around. I lived close enough to my job that I could walk there in about 15 minutes. I ate at home a lot. I was fortunate enough to have health care insurance, since I've had a pre-existing condition since I was 2 years old (asthma). I went out pretty often, but much of my entertainment was free or low cost. I wore clothes and shoes until they were worn out, and sometimes even beyond. (I still do this, much to my mother's dismay.)

I also admit that at the time, as long as my bills were paid and I didn't have to ask my parents for money, I didn't care that I was making so little. My job at that time came with a lot of drama, but even so, I liked it there and the people as well.

I'm still skeptical that Mr. Nemko could do it, but I know him pretty well, and I'd bet on him if for some reason, this came to pass.

Shawn said...

"You can get quite wealthy on a very middle class income if you live the way I describe (which is not painful at all, quite pleasurable) and save religiously and prudently (e.g., the nation's highest yielding CDs or dollar-cost-averaging into Vanguard Funds-of-Funds."

Sounds like the line from Millionaire Next Door. But why have money if you never spend it? I am 27 and honestly believe that if I take a 2 week vacation somewhere now I will have more fun than I would at age 70, because I can do more things. So I take a different approach; I believe in smoothing. If one does plan to retire, semi-retire when you are in your twenties instead. Take longer vacations, and perhaps never fully retire no matter how long you live; be semiretired your whole life.

Marty Nemko said...

The biggest reason not to spend is that spending big greatly restricts your career options. And you'll find that the benefits spending yields is usually dwarfed by the negatives of the jobs you must take to afford the spending. And if you vacation in your 20s, you may find yourself forced to accept a career that pays $20,000 a year.

Anonymous said...


This works for you because your house is paid off and your property taxes and insurance are much, much lower than what most folks pay.

If you are young and starting out, there is absolutely no way that you can live in the Bay Area on $20,000 a year.

A studio apartment in the Tenderloin (SF) is going to run you at least $1200 a month. That's $14,400 per year. A MUNI fast pass is now $60 a month, or $720 per year. Your Kaiser health plan would cost another $3,600 a year. That's $18,720, which is probably more than your net pay after taxes, and we haven't included utilities or groceries. Not to mention that most landlords won't even consider renting to someone with that little income.

Even going to the east bay, the cheapest apartment that I could find in Oakland on Craig's List was $800 a month, so $9600 a year. Plus the cost of taking BART to and from the city 5 days a week at roughly $6 a day. You might be able to squeeze by but you won't have any savings and again, very few landlords will rent to someone who makes less than 3x the annual rent. At $9600/yr for the cheap apartment in Oakland, you would have to make about $28,000 for your rental application to even be considered.

Marty Nemko said...

You DO need to have SOME initiative--I know people who DO live, for example, in backyard cottages for $600 a month. Sure, if you have to deal with professional apartment building management companies, you're gonna have more trouble.

Anonymous said...


It is possible to find a deal on a garden apartment, even in The City. $600/mo is hard to find but not impossible.

Still, at $600/mo your annual cost of living will look something like this:

$7200 for rent
1800 for Federal/state income tax
3600 for health insurance
2600 for groceries ($50/wk)
1000 for utilities
720 for bus passes
$16,920 total

This leaves you with about $3,000 or $225 a month for all of your other expenses AND savings. That is a very tight budget. It could be workable but if you have any major unexpected expenses you won't have the savings to cover them and will end up in debt. This is why I say that your situation is unique, because you admit that you have quite a bit of cash tucked away despite your very modest income.

Marty Nemko said...

At $20,000 a year, I believe I would be liable for little or no income tax. I do think that people are not going to be able to save for retirement. We will work until the end, which is not necessarily a bad thing.

Anonymous said...

I agree that it is going to be difficult to save for retirement. This makes the case for self-employment....provided you remain healthy.

Anonymous said...

I live in Indianapolis. The cost of living here is much lower, but last year we lived on a bit less than 22,000. We is a family of 5, with the 3 children under age 7. We kept up with our bills and rent, had enough money for gas, food, and one meal out a week. Our shopping budget for food and other things was $120. We just gave up on a 93 minivan with 187,000 miles and got another 93 minivan with 106,000. It can be done. It's not that much fun sometimes, but it's not that hard if you are careful with your money. As for savings, we have absolutely none. Just trying to keep the kids in clothes that fit takes care of that.

Anonymous said...

About 10 years ago I remember the NY Times had a piece about how much in savings you need for retirement and then profiled some retirees. One guy lived in Texas, got $10K/yr in Social Security and sounded so satisfied with his life; he was even able to take a trip to Europe each year - he camped and used a bicycle to get around.

I do agree with Marty, we forget how to enjoy many of the good and less expensive things in life and we would all be healthier if we walked more, prepared meals at home with real food, invited friends over for dinner and impressed them with the bargain bottle of wine we had just purchased. I think that living inexpensively is a challenge at first, but then it becomes a way of life and you are so much freer.

Anonymous said...

I have been mulling this over, after reading it a week ago. My husband's unemployment is running out and while we've been grateful for it, we knew it would not go on forever, and have been trying to be smart about our expenses and prepay anything we possibly could.

We're in So Cal so our housing expense may be higher than in some other states but even so, you've really got me in a pare-down-and-edit mode. Thanks so much for that!

Anonymous said...

This article
says that Americans are more dependent on government handouts than ever before.

From the article: "[F]or the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.

"Economic growth typically depends on consumer spending, which is fed by wages, rents, interest and other forms of income. But the tentative revival of consumer spending in the second half of last year appears to have been fed largely by an extraordinary flood of government spending, as growth in other kinds of income has disappeared."

I, for one, don't see an end to this. We may all have to live on less soon, very soon.

Mr. Nemko, on your radio show last night, you claimed that the Obama administration and its policies related to work may be hurting the American worker, rather that helping. I find it hard to disagree with you. That argument might also make a good blog post here.

Marty Nemko said...

Okay, your wish is my command. See my latest post: Why Any Recovery Will Be Jobless:

Anonymous said...

My husband and live in Florida and starting out, we honestly lived off of $14k a year. And we lived well. We buy all our groceries at Publix when they are Buy one/get one and use coupons on that. We frequently go to Publix and spend 30.00 and walk out with 100.00 of groceries. We have a dog, but we made sure to get a tiny dog that doesn't need grooming and costs almost nothing to take care of. We go on long walks and hikes in the evenings and weekends. Only see movies on Saturday mornings (because a local theater offers them cheaper then) and even still managed to entertain our friends.

We don't have cable, but we do still have the internet. Therefore, we don't need cable to watch any of the latest shows.

We never really felt poor then and we don't now. Ironically, we've considered ourselves blessed to be making $20k now. Just wanted to gives a little perspective.

Hyena said...

I agree: it is entirely possible to live on $20,000 per year. It is also not as harsh as you prescribe.

I currently make about $34,000 dollars per year but, when I moved to Los Angeles, had an income of about $15,000 a year and was draining savings worth $5,000. Even with all my mistakes, I managed to make ends meet and even live in some of the most awesome places in Los Angeles.

I think you're being liberal with your estimates, though. I currently live on approximately $1,400 per month (calculated from salary ex savings) and could make it on $1,300 per month if unemployed (my commute adds about $100-200 to my expenses through gas).

In fact, I'm planning on this so I can survive on my unemployment insurance when my job ends.

This isn't austerity either: I eat out at good places every once in a while (thank you Eat: Los Angeles). I have nice furniture that I got by trolling Craig's List for months. I drive a Volvo 850 Turbo (hence the gas expense) and so I have a really nice car by almost any standard. My clothing always meets expectations (thank you fashion district and thrift stores). It includes Netflix. Etc.

I'd also agree on the point about status. Trying to compete with people to look wealthy is a bad way to go. It's better, on the whole, to cultivate competition in a status bracket you can live in, like being a hippie dude.

But I think you're being a little loose on the assumptions. It takes a lot of patience and intelligence to pull this off. I think it is much easier for someone who could, in theory, pull down a good middle class income with little effort to live on a much lower income. Every person I know who lives like me is at least a standard deviation to the right of normal on ability testing.

All of us, also, are extremely liberal. A huge amount of my savings is driven by ethical objections to consumerism and a desire to use my savings to help others. (I've bridged a couple people into college who were on the verge of collapse due to the poor choices of their parents and inability to find a job in this market.) I think most people, in their heart of hearts, are much more greedy and craven than I am now. Most are also unwilling to confront these things or have not experienced a poverty which forces them to.

So I think that any "I did it" stories will have a profound selection effect. I imagine that it will involve people who are smarter than average and who have a philosophical commitment to liberalism, the non-political belief that progress, compassion and careful thought together will solve social ills.

Anonymous said...

I agree that you can probably live on $20,000 but only temporarily. That $300 catastrophic health insurance has a $5,000 deductible. The first time you use it is the last year you get by on $20,000.

tara said...

I spend too much, I know I do. I do like to shop, and I'll admit it soothes me. I realize I might get flack for that, but what I've figured out is that I can go to the second hand store and get a pretty vase or a nice used jacket for one of my kids and get the same effect.

Anonymous said...

Having just lived on $1900/month Calif. unemployment for 6 months in San Francisco, I say hogwash. It is not plausible to live in the city of SF on that amount of money unless you are living in absolute squalor, hungry, without utilities.
You DO have to pay federal and CA state taxes on 20k/year salary.
I love when wealthy people from wealthy backgrounds assume that they can "live like the poor."
20k/year is POVERTY, as in hunger, suffering.
ESPECIALLY in SF or the immediate Bay Area.
Do people do it? Yes. Does it cause suffering? Yes.
And the fact that you tal about making 20k/year and in the same breath talk about Vanguard is, well, laughable. People who make 20k are worried about how to eat and pay basic bills, and can't worry about investments that only the wealthy even know about.
I think there is a very high level of hypocrisy in this hypothesis, and I'm going to go so far as to assume that the person who authored this article is actually, quite wealthy, and from a wealthy background, with a VERY expensive education etc to go along with that.
This article makes a JOKE out of being poor. Not funny AT ALL.
We'll let you get back to monitoring your Charles Schwab accounts now....

Anonymous said...

This is all well and good if you are healthy and have good teeth. If not? Well I'm sorry, you are screwed no matter where you live and whether or not you're willing to see dental students (which I would not recommend if you are having serious work done).

God forbid that you try to support a dog, or wife, or kids on that $20K. Also, why are you living alone? That's not a smart financial decision. If you're living on pennies you should be sharing a house with like five other people.

Anonymous said...

HI, I believe you could live well on $20,000, as my family of three (with cat) have lived in a really really nice neighborhood in sf for about 5 years, subsisting on one lousy paycheck from a non-union grocery store and student loans.Without going over our tax records, I think we were living on $24,00 a year. We used the library, took the bus, hung out in the park, went to the beach. We ate really well because we bought ingredients instead of packaged food. Until very recently we lived in a cleverly arranged 1 bedroom apt. By using our tax refunds wisely, we paid off 3 credit cards and $2,000 worth of hospital debt. Oh, and we don't have cell phones because that's where most of our debt came from. I am pretty sure cell phones are a scam that keep most borderline poor people in debt. But that's just what I think. And finally, none of the yuppy people in our neighborhood minded hanging out with us when we were living so tightly, so I guess you can say that there is not even a social cost for living frugally.

Anonymous said...

Nemko, I think you make some good points, especially about appearances of status and driving cars that are new, taken care of, and last forever (I have my parents' 97 Corolla and it's running awesome, I'll have it for a long time still), but I think you don't support enough the idea of living WELL on 20 grand. Let's take my case, which is obviously only one of millions, as an example.
I am a grad student at Cal, making 1600 a month before taxes as a GSI (plus supplemented income, probably 22000 a year) and rent a studio in Oakland in the hills for 900 a month, all included. Pretty reasonable and safe. If you take my gas costs, rent, parking pass at school, books, and grad student fees, that's about 1100 a month. Considering after taxes I'm looking at about 1400 in income, that's 300 bucks for food, emergency savings, gifts, plane ticket for my brother's wedding in PA, clothing, oil change, medical checkups at school, etc etc...
I consider personal happiness to include being able to afford attending my brother's wedding, especially since I'm the best man; too much financial strain due to something so integral to a person's being, like attending their sibling's wedding, would surely negate your argument. Happiness is an impossible term to define, and it seems foolish to do so, but either way, I think having enough money to not have to worry that your free sport, basketball, leads to a broken ankle and thousands of dollars in medical bills on your credit card, or to be at your brother's wedding in another state without having to stress about how to pay it off, is preferable. Your argument assumes someone either has money saved up from years making more than 20 a year, or that nothing will ever happen outside of their control (injury, illness, family obligations, etc.), or that they are happy buying clothes at thrift stores and having sub-par health care coverage.

Anonymous said...

This $20K claim would have credibility were it accompanied by a real budget outlining the various expenses. Without that it's not as impressive.

Living vs living responsibly are two different things. I pay thousands in insurance premiums alone. No disability insurance? No life insurance and you're married? No health insurance?

You should call it "surviving on $20K a year" instead. Because that's all it is.

I lived on $28K in GA 10 years ago and that was ok. But a decade later even that would be tough. Thankfully today we save 50% of our after tax income and live quite well. But life living paycheck to paycheck is not really living.

Anonymous said...

It's all moot. Why should average people HAVE to live off $20,000/year? It's absurd.

In the early 1950s, my grandfather, who had no formal education at all and was the "first generation" born in America (born to dirt-poor Eastern European immigrants) made enough off a simple manufacturing job to support a family of four (including himself.)

What luxuries do we have now that they did not have then? Very little. No computers back then, and no cell phones, but I guarantee you the cost of that TV (a new invention back then) made up for all that and more.

OK, I'm off-topic...but I wish more people would dare to "entitle" themselves to a little better than they do in America. It's easy to be poor in Europe...why is it so hard here?

Financial Samurai said...

Hi Marty,

Big claim. Can you share with us how much you earn now, so we can understand you more realistically?



NoeValleyJim said...

You can easily rent a room in a communal household for $600/mo, even in a pretty nice neighborhood in San Francisco. If you are willing to live in Oakland, you can rent a room for $400/mo.

Anonymous said...

Thousands of (single) grad students at Stanford and Berkeley live off of about $20,000 every year in the most expensive region in the country. With roommates, you can live in a nice house in a good neighborhood for about $600/mo, save on shared utilities and cooking responsibilities. Even student health insurance is about $300/mo. now but out-of-pocket costs are low.

I spend less money on organic food from gourmet groceries than people spend at McDonald's, even for the hot cooked food.

The (single) people I know who are "unable" to live within this budget invariable spend many times the amount necessary on food, "stuff", and entertainment, yet at the same time eat much less well. They can't live without cable TV, don't want to eat leftovers and throw away 80% of their food (which means they spend 5 times as much). They always say it's not possible even if you tell them exactly how you do it.

Marty Nemko said...

Some responses: to the latest group of commenters.

I have lived on $20K a year in today's dollars for a number of years. Now I do make considerably more. I profoundly believe that you can do so. Some of the sniping--e.g., "There's no money to invest in Vanguard." is, I'm guessing, frustration that the person hasn't the savvy or discipline to follow the blueprint I laid out on how to live on 20K.

I totally agree that we must value labor. Nearly all work (other than jobs as, for example, tobacco salesman) are worthy work. I have deep respect for the dishwasher, ditchdigger, etc--people willing to work for little money and less status. I do wish they were paid more.

I agree with the commenter who said that most of us will have to learn to live on less. This IS China's and India's century and the policies being put in place (e.g., everything from mixed-ability classes to "comprehensive immigration reform") will accelerate the rate of the U.S. standard of living declining to closer to the world average.

Marty Nemko said...

Oh a brief response to the person who argued you can't responsibly live on 20K a year because he spends thousands a year on insurance of various sorts, including disability. We cannot eliminate risk. We all assume some measure of risk. If one is living on 20K a year, it's reasonable to not purchase disability insurance--which covers your income in cases of where you're disabled for a long period of time (usually capped.) Cost/risk/benefit analysis is key not only to living cost-effectively but to wise decision making. Yet it is one of the many important skills that the schools choose to not teach. They'd rather function on arcana--which would certainly fail any reasonable test of cost/risk/benefit analysis.

Ed said...

I totally agree with this. I lived in Santa Barbara on ~22K and loved it. If I had been more responsible with my money I could have lived on less.

Anonymous said...

If you could live well on $20K/year, why weren't UCB's "cooley wages" good enough for you?

Marty Nemko said...

They paid me, if I recall, $12,000. But that wasn't why I left. I would have found some other part-time teaching gig and been okay. I left because I was a temp (a visiting lecturer) and they didn't need me after the one year.

Anonymous said...

If you need chronic meds to be functional it's either 100s/mo in employer premiums plus deductible. Without that insurance it's 100s/mo for the meds and doctor visits for refills. And god forbid you don't get into an accident, get sicker, or lose your job.
The risk is all on you.
That's how most of world (exclude developed countries) lives (or not). People die when they don't have a job, can't afford treatment, and relatives can't bail them out

Anonymous said...


If you own a home that is paid off, of course you can live on 20,000 a year in the bay area.

If you are a renter, as virtually all low income people are, it is impossible to live on 20K. A room will cost you 700-800 a month, which leaves you with 600-700 for food, utilities, transportation, insurance, and all of your sundry expenses. You can _get by_, but you will have to cut corners, and you will not have savings Most likely, you will not have insurance, either, unless it is paid for by your employer.

It's not a matter of one's's just simple math.

Anonymous said...

I live in San Francisco. Everyone that I know has room mates. Out of a dozen people, the lowest rent that any one pays is $725/mo, and that person lives with three other people. Average for utilities is $50 per person in the household. So, $775 total.

$775 a month is $9,300.00 a year.

Food is expensive in San Francisco. Even if you shop at local markets and prepare all of your meals, you will spend at least $100 per week on groceries if you are actually eating 3 meals a day.

$100 per week on groceries is $5200 per year. Running total $14,500.00.

MUNI bus pass is $60 a month, or $720 a year. Running total $15,220.00.

Single-payer health insurance premium, about $300 a month, or $3600 a year. Running total $18,820.00.

Taxes on $20,000 a year withheld from your pay: about $2000 for fed/state/social security combined.

Out of $18,000 take home, we have over spent by $820, and there is no room in this budget for savings, emergencies, education (so that you can get a better job) or trips to visit your family or friends.

The only people who can live on $20K in the Bay Area are people who own their homes outright. In other words, people who are already established and have a nest egg saved away.

Anonymous said...

I am a twenty-three year old woman who lives on $10 an hour.
Ten-dollars an hour is enough to live, but by no means live well!
Ten dollars an hour, if I actually am scheduled 80 hours, for a year is 20800 after taxes that is $17680. I am blessed that my company provides health insurance with a reasonably low deductible and a 80-20 co-pay at around $850 a year. So I have a working income of $16,830 a year. I deposit ten percent of this for school (I do get some aid, but I still end up having to pay well over a grand for *rented textbooks* and the remainder of tuition) so I have $15,100.
I live in a very rural area, so my rent is much lower than most. ($425 or $5100/year), but it also comes with a higher price of commute (I probably average $50 in gas a week or $2600/year). Factor in car insurance ($65/month, $780/year), student loans ($100/month, $1200/year), internet/cable, admittedly not necessary, but very helpful with my school/limited entertainment budget ($115/month, $1380/year). These bills amount to $11060 per year, leaving me with approximately $4100. This leaves me with $340 a month. $50 a week to food, and I have about $140/month discretionary income which usually goes toward ensuring my work clothes don't look too ragged and that I have deodorant and soap(I might be poor but I don't have to smell bad).
I don't qualify for food stamps or any form of assistance. I'm not sure how anyone lives well off of $20,000 a year. One can live, but unless there's a giant nest egg or some outside help I have no idea how one could equate my living with "living well."

Silverback said...

Funny how it's the people most caught up in the San Francisco lifestyle who proclaim the loudest that it can't be done, and come up with fanciful budgets proclaiming the fact. Actual fed+state taxes on $20k are under $1000, especially if you take advantage of every credit you can. More to the point, living poor while saving is work, just like finding a job, and takes more than buying the first thing to come along. It's a life where you pick your sacrifices, just like I sacrifice time and potential opportunities to do what I do now.

Personally, if I had no dependents, I would forgo health insurance entirely. It only makes financial sense for those engaged in high-risk activities, like biking on busy streets daily; otherwise take that money and put it in a health savings account.

Anonymous said...

If you have student loans you have to repay you'd be hard press to still be able to live on that...

Anonymous said...

I live in San Francisco.
Last year, as an experiment, I tried to see if I could live on a "food stamp" diet. By shopping at the Mexican stores in the Mission, I was able to eat 3 square meals a day for a month for about $110.

I believe the point Marty is trying to make is not "if I can do it, anybody can". The point is: we have a choice. We can either spend lavishly, but pay for it by working long hours in some job we don't like; or live frugally, and work at a job we truly love but that doesn't pay very well. The less money you _need_ to make, the more freedom you have.

Shawn said...

"Status is the enemy of success" is the mantra (or truism as I would phrase it) up by "threshold workers."

Anonymous said...

I do all of these things and have lived off of between 11,000-14,000 per year. I've never made more than 48,000 yet I'm 23 with a quarter million dollars. Some of that is from investment growth and I'd have more had 2007/08 not happened. I never would have investment growth though had I never saved 60-80% of my army checks.

Anonymous said...

I have lived on about $20,000 / year in the Bay Area since 2003.

I drive an Audi A4 (1999 that I purchased used and have owned outright since 2001) and even own a sailboat that I purchased new this year for approx. 30K that I sail and race regularly.

I am single and rent an in-law unit that is about 300 sq feet in a very safe East Bay neighborhood. I used to own a 2400 sq ft condo by myself, and frankly, don't miss it.

"The less money you _need_ to make, the more freedom you have" is a very true statement.

So true.

I used to make more than 10X than I do now and used to spend well more than 10X of what I spend now. I still eat well, occasionally spend money to eat out and go to shows and I don't forget to celebrate life.

I don't buy clothes I don't need, things I don't need and I pay attention to prices of food. I but the things I use and like when they are on sale. I always "save" 40% or more on my Safeway or Lucky checkout receipt.

And, I contribute 10K+/yr to my IRA and other savings...

Anonymous said...

I make $20,000 a year and it is horrible. I can barely cover my bills and would have to be crying in pain to see a doctor because I can't afford to. I'm college educated with great references but in this economy I lost my job and wound up working my butt off in admin. collecting part-time jobs with undependable hours. I don't have cable, I keep things till they fall apart and i'm constantly stressed. It's easy to say you can live on 20,000 when you have money it's another story when nothing else comes in at the end of the month and there are still jobs to pay. Thank god I don't have kids.

Marty Nemko said...

Most recent Anonymous, are you following the ideas in this post? Whether I have money or not now, is irrelevant. I absolutely could live decently on 20K a year by following those principles.

Anonymous said...

This is an awesome article, i found it because i googled "live on $20,000." I also appreciate it because it seems to california-centric, which is helpful to me because i am a young person who has lived here my whole life. I want to stay in this state because i feel that there are a lot of good opportunities out there, but i am obviously still struggling to put all these pieces together and make it work.

Anonymous said...


I stumbled across your method of living on $20,000/year, because I just asked that question to the bing search engine.

I think the some of the comments listed are from people that have not been out on their on for long periods of time. I have lived off of $25,000 or less my entire adult life; and it is exactly like you have stated in your comments.

If there are any major expenses to come up,one will not have the income to cover them. In addition, I lived in a boarding room in NC for many years. I have visisted many of the places that you have mentioned for some recreation out on the town moments. Also, I have eaten many of the foods you have listed in order to eat somewhat healthy and to save a little money for the gas tank. Your method will work.

North Carolina

Anonymous said...

The first serious medical problem and you are bust.

First time that old car blows its transmission, you are bust (or without a car)

If can be done, but it's living on the edge month to month with no back up. Literally always a month away from the streets.

Not healthy for an individual or a nation.

naturewolf said...

Most people out there like to spend money whether they have it or not...I live on less than $11,000 a year($884 a month), I pay for a home, have internet, telephone, no cable, I eat well, have a vehicle, a loan, and a couple credit cards. I always look for deep deals, or free stuff that others no longer want, I fix other people's "trash" and resell it, I "barter" with others to get some things I want or need. I grew up poor, so I learned to be self sufficient without having to pay others to do things I need done. I will say though, your geographical location has ALOT to do with it. I live in northern Maine, rent is cheap($450 p/mo average), the closest mall is 60 miles away, I enjoy all 4 seasons, there is very little crime(and I mean VERY LITTLE), and am able to save a little money for unforseen mishaps and repairs. For those of you curious mortgage,interest,insurance,and taxes p/ less than $242 for a 4 bedroom house...TOP THAT!

David said...

I'm retired, living on about $12,000 per year. I own my house, so no house or rental payments. The property I live on is worth about $40K, and it's in rural West Virginia, so the taxes are low. I drive an old Chevy S-10 pickup and keep the oil changed, with a tune-up every three or four years.

I almost never eat out, except maybe once or twice a year at Shoney's. I eat cheap stuff, like rice and peas, and I only buy meat when it goes on 99 cents per pound special--and then I load up my freezer.

I grow apples, peaches, pears, and cherries, and I might be eligible for a "farm exemption" though I've never taken advantage of the possibility.

My utility bill is around $30/month because I do without indoor plumbing, instead using a washtub and a clothesline for laundry, a rag and a bowl of water for bathing, and an outhouse for the necessary.

And I have enough money above expenses to shop on eBay and Amazon. I'm riding the federal poverty line, but I live so comfortably that I don't feel poor.

Anonymous said...

I agree you can live on 20,000 a year, but you give up a lot of things. I Saved money over the years and had a ill with a brain tumor and two years later another cancer..even with insurance (paying cobra every month) it cleaned me out. There is no retirment or investement left for my old age. This 20,000 a year can work IF you do not have medical problems or a serious illness.

chas said...

Do want to live great on twenty grand a year ..MOVE TO CANADA...Free medical.Etc and you are 10 times safer..

Anonymous said...

I'm living in Europe and it's no easier to live on a low income. Due to a 'personal disaster' my income dropped by the equivalent of $40'000. To around $19,000 dollars. I moved to a different city to a job with the same salary so I could reduce my travel costs. I looked for some time and found a landlord who agreed to me renting with no deposit, allowed me to share his home for $550 pcm. Maybe not unusual but this includes sharing all the living accomodation in a spacious safe area 2 bedrooms (my child came too!) And our dogs. Most of my friends thought Is gone mad! I was used to my own home and did wonder myself. 1 yr on I walk to work, spend less than $50 PER week on groceries and petcare by buying reduced food/ingredients. Buy clothes from sale rails which Continues to surprise me as to how much fun it is. Still own my convertible, but only use it occasionally. I have saved the Equivalent of $9000 dollars and am now in a position of being able to rent or buy my own place again. I think the secret is is to initially save your emergency fund. Food is really easy as long as you have a freezer. I could further save money by not owning a car or having a small car but mine's reliable and I enjoy it.... Incidentally, we still go to the salon, still eat out from time to time and still have coffee out and visit friends.... It can be done and it can be enjoyable. You just have to decide really what things you can do without and what's worth sacrificing. Personally I think disposing of the hard done by attitude goes a long way to making it easy living on a low budget.

Anonymous said...

Living on $20 grand a year is completely possible. My mother raised me, by herself, on $393 per month, which is less than $5 grand a year. And she is a college graduate! We didn't have much, but we had each other. This is why I get so upset when people whine that they only make $10 an hour or that Communism/Socialism is better than having to pinch pennies.

Anonymous said...

Good Sir,
Maybe if you are lucky (which I really hope you are) and are never diagnosed with a serious chronic illness such as Multiple Sclerosis--P.S. One medicine to prevent further progression of this disease is 1,000's of dollars monthly--Alternative treatments are not inexpensive either. (Excluding self-help approaches, such as meditation.) Oh, you could decide to never treat it, but the first time you suddenly can't feel a limb or develop intractable vomiting-good luck!!!

Anonymous said...

Sure, it can be done. Don't get married, and don't have kids. Keep your debt load as low as possible.

Anonymous said...

You're a men's rights guy, but you're missing the gendered aspect to frugal living.

Beautiful young women are attracted to men with status, which usually means outward displays of money.

A young man who lives according to your guidance is going to have an extremely difficult time attracting desireable women.

WornDown said...

I have lived this moneysmart/lifestyle my whole life.

I have always lived with roomates. No wife or kids.

Master certification in a blue collar trade. 6 years of college. Finally spent the last 15 years as a computer programmer.

I have moved 21 times because smart people move to where the next job is. I even lived in a storage shed during the worst of the 1980's inflation. I have always worked 80 plus hours a week.

I have saved every dime I could. If it was not related to increasing my education or helping my extended family (and friends) then I would not spend it.

At age 52, 40+ years of my working life is gone. I have zero debt. I have less than $200,000 dollars in assets all in the bank losing value by the day. My only permanent address is a P.O. Box. I still can't buy a home because I don't know where the next job will be.
I can't safely invest my money anywhere thanks to our government.

The prison I created and have lived, by saving every penny, I would not wish on my worst enemy. Don't try it. Life happens while your making plans.

NOTW said...

I am living proof that this is realistic and possible. I found that I do everything this article mentions. I live in a decent area in an upper middle class neighborhood, buy clothes at Goodwill and some department stores, use public transportation, eat at home, and by the end of the day, I am able to save 35% of my income month after month. Living on such a low income teaches you to be smart about money and disciplined.

Anonymous said...

no.matter where you live its expensiveyou cant pay mortgage or rent utilities health insurance and groceries for a family on that i dont care how much you sacrifice but uf your by yourself you might be able to live you would just need a roomate

Anonymous said...

i agree completly

Anonymous said...

can i pay 500$ mortgage 100$ a month utilities 89$ amonth car insurance 35$ a month phone 80$ a month gas 175$ a month on groceries on 350$ aweek

Marty Nemko said...

Most recent Anonymous, that's simply not true. Many people, including some of the commenters, are able to live decently on 20K a year, especially if they use the methods outlined in this post.

Marty Nemko said...

Most recent Anonymous, that's simply not true. Many people, including some of the commenters, are able to live decently on 20K a year, especially if they use the methods outlined in this post.

Marty Nemko said...

Anonymous who listed his expenses. Those add up to $980 a month. That's less than $12,000 a year.

Marty Nemko said...

Anonymous who listed his expenses. Those add up to $980 a month. That's less than $12,000 a year.

rtdnan said...

It's possible to live on 20K. The problem is finding a cheap place to rent. There is Tremendous competition now for these inexpensive cribs in fairly safe hoods. Living with lots of room mates is not ideal, and can be far more irritating than moving back with ones parent. The easiest way to survive on min. wage is to live in a Van, and put the 600/mo. in a savings acct. Join a gym for work outs and showers, and eat healthy fresh foods that can be bought daily. Granted, not everyone is this independent minded, but if you like your privacy and are usually occupied out in the world all day long, then a van is just a place to sleep. You won't miss an apartment if you don't have much use for one anyway.

Anonymous said...

Don't try this in Houston. Vans are not safe, neither are back yard cottages. Typically, apartments require 2-3 times income coming in per month to rent. You wont find much here at 600/month, and this will not include water, sewer or gas. Even then, its risky to rent. On top of that, it is imperitative to put in a wireless video alarm anywhere you rent/live. You will pay a pet deposit and a monthly pet rent on top of that.

Anonymous said...

Also, in Houston most apartments require Rental Insurance..., living in a communal room environmental is NOT recommended for Houston. This is an unrealistic and unviable amount to live on in Houston. Perhaps this person put this out there to cause controversy, of which he did. His description of how he budgets is incomplete, medical, insurance car and selves now mandatory, gasoline and car maintainance, still costs something, which he has not covered in his budget.


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