Monday, August 27, 2012

How I Could Live Decently on $20,000 a Year (revised, June 27, 2014)

Update 6/27/14: HERE is a little video I created that I believe both drives the point home and is quite entertaining--if I say so myself.
 Per the article in The Atlantic, How a New Jobless Era Will Transform America, and one in the New York Times, The New Poor: Millions of Unemployed Face Years Without Jobs, and in light of the beliefs we career counselors quietly admit among ourselves, ever more formerly middle-class Americans will have to work for $10 an hour. That's $20,000 a year.

Even if you're not forced to, if you can live decently on $20,000 a year, you then have the option to  pursue a career you'd love even if it pays little--for example, a creative career.

The good news is that with a little smarts, you can live decently on $20,000 a year. I have done that and still do many of the things I'll suggest here:

Basically, it comes down to digs, wheels, and heals.

Take the extra time to find a great deal on digs, a place to live. For example, tell everyone you know you're a good tenant looking for a good deal on an apartment, backyard cottage, basement or attic room in a house, etc. When I came to Berkeley, I was able to unearth a room-to-rent listed by a widow living in a mansion who was nervous about living alone. So I got to live in a Berkeley Hills palace for $85 a month. Okay, that was in 1973, but in today's dollars, that's still just $439.

Wheels? From a private party, buy a three- to 15-year-old Toyota. (Subarus are okay  too.) They are the most reliable, long-lasting cars. Over my lifetime, my family members and I have had a half dozen Toyotas and they've averaged over 200,000 reliable miles. My current one, a Prius, has 235,000 miles on it, it runs like new, and all I've had to fix is the water pump. All I do is take it to a quick oil-change place every 5,000. I've never done the "routine scheduled maintenance" and nary a consequence. Keep your cars until they drop and you'll save a fortune.

Heals? Well, if I did work for Wal-Mart 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. But let's make things difficult. Let's assume my employer didn't provide health benefits and no family member could include me on their plan. The smart money these days is on Kaiser--it's the most tied-into ObamaCare. And you can get a decent individual plan for a few hundred bucks a month. A year ago, I looked up plans for me, a 62-year-old male, an expensive category. They range from $317 to $723 a month depending on deductible and co-pay. Kaiser adds dental coverage for just $25 a year.  Google "Kaiser individual plan" to get to the correct page on Kaiser's website. Importantly, most good docs I know are opting to work for Kaiser because they incur no start-up or malpractice-insurance costs, and the work hours are livable.

Just those three things--digs, wheels, and heals--get you down to $20,000 annual living expenses, especially if you do these less central things:

Get clothes at Wal-Mart, Target, Ross, consignment stores, or thrift shops like Goodwill or Salvation Army. Choose carefully and you can look great for little. My wife has bought $1,000 designer dresses at consignment shops for under $100, usually well under.

Ironically, healthy food is among the least expensive: vegetables and fruits, whole-grain bread, canned tuna, peanut butter, etc.

Recreate cheaply: Instead of going out for $20 dinners and $8 drinks, invite friends over for dessert or your secret-recipe cheddar cheese popcorn. Go on a hike or play ball instead of an expensive sport like golf or skiing. Borrow books and videos from the library. Read and watch YouTube videos on the Internet. Have sex.

Many people resist living this way, not because their quality of life would be bad but because of a desire for status, a desire to appear wealthier. But if someone thinks less of you for living modestly, s/he has shallow values, hardly a person for whom you should change your lifestyle, let alone to a career you'd like less.

Key to living well on less is recognizing that status-seeking is the enemy of contentment.


Anonymous said...

When it comes to wheels, I'd also consider Subarus. I live in a place that's somwehat mountainous and gets snow, so all-wheel drive is more of a need to have than nice to have option.

Like Toyotas, Subarus are extremely reliable. 200K miles is no sweat. My Outback station wagon has 115K and still looks great.

However, I woul disagree with skipping routine maintenance. Your other fluids break down and get dirty too. But even the "big" maintenance tasks done every 30K miles, cost a lot less than a car payment.

Anonymous said...

Good advice overall, but remember that the only way Kaiser (or anybody else) will take you at the rates you quoted is if you're in absolutely perfect health--an iffy proposition at 62. One diagnosis of high blood pressure and you're SOL even if you make $200,000 a year!

Caterina Rindi said...

Check out other ways to create a slightly passive income through sharing! Share your car when you're not using it, with; or give rides to strangers with SideCar ( Borrow tools and equipment instead of buying, with Use your local timebank to share services instead of paying for them (eg. in San Francisco). Find free furniture and items on and Lots more options emerging in this new Sharing Economy!
~Caterina Rindi

Nightvid said...

A personal vehicle on $20,000 a year? I don't believe you - at least, not unless you take big risks i.e. don't save enough money to comfortably cover expensive repairs or replacement without having to just let it sit there and not drive much...

Nightvid said...

I want to see an TCO -style breakdown for your vehicle costs or otherwise I'm skeptical that you can really afford it on $20k a year...

Marty Nemko said...

Truly, thanks to the wonderful Toyota corp, I have never had ANY maintenance expenses other than oil changes. And yes, at 130,000 miles, I changed the timing belt. My current Toyota, a 2004 Prius has 201,000 miles and then only repair has been a water pump and, while he was at it, I had him replace the belts and hoses, just as a precaution.

Anonymous said...

This is how I live, for the most part. I make around 20 K a year, give or take. I found a fairly nice apartment for $450/month WITH UTILITIES (of course, this is in rural Wisconsin, I do realize that that's not the norm in most places). I buy gently used cars to keep the payments low and make them last by taking good care of them. I work as a nursing assistant so insurance is available to me through work. I rarely dine out, I cook at home using economic and wholesome recipes my mom taught me. I buy gently used name brand clothes on ebay for my son and I and we look very chic without spending much at all. My 5 year old son and I entertain ourselves by looking for free or very cheap things nearby to do. It's pretty easy once you get in the mindset that you don't have to spend money to have fun.

Serge said...

Hi Marty, I just finished listening to your previous podcast. While I usually earn substantially more than 20K a year, I've budgeted to spend less than 20K a year for many years now. And yes it's doable even for someone like me who owns a small town-home (since 2004) in one of the wealthiest Seattle suburb (Bellevue)

I work a union (but not highly paid) retail job 3 days a week just to keep my health insurance. And the rest of the time I try to make money by reselling through fulfillment by Amazon. By assuming enough risk and having some capital there is a potential to make 6-figure income or more by sending the inventory to Amazon warehouses where it is send on your behalf to costumers. And unlike with eBay, there is so much less work packaging and shipping. And people do pay a lot more for the convenience of Fulfillment by Amazon. However where there is a profit to be made, the competitors come shortly. For example, I was selling a lot of cat toothbrushes through fulfillment by Amazon, even though other were selling them cheaper through non-FBA, people paid a premium. But now other sell through FBA, and at such discount that I can't make any more profit.

The point is that, even though I can find now and then great opportunities to make a very nice profit (sometimes $500+ a day), its ephemeral, so having a very low budget for living expenses helps eliminate the stress that I won't make enough in profit to get by. The unemployment in Seattle area just dropped to 5.9%, and it makes me often think why can't I join a lucrative career (with my three college diplomas for all they are worth), instead of staying as a small-scale speculator (or called more charitably "entrepreneur"), but I feel a form a freedom by working for myself and certainly I have a lot more of free time.

So the two main things I forgo to live comfortably on 20K a year in a high living expense area is:

(1) Forgoing owning a car and associated expense. Not that public transportation is great, in fact they keep cutting it with the budget deficits. But I just can't justify myself for owning own because (a) I get 90% of my shopping done online (b) I am hermit and I don't like visiting people (except Toastmaster club once a week) (c) there is plenty of trails around my house to walk my dogs (d) I have a car share membership (Zip Car) for rare occasions when I need a car

(2) But most importantly I forgo relationships with women. Just because even the so called "liberated" women will want me to pay for a $50+ dinner, and that's just outside my budget.

So I may not marry too, since, again, I believe vast majority of women have an ingrained need for their husband to be a provider, work hard and make money (they get stressed-out, disrespectful and confrontational if their husband is not bringing enough "bacon") And vast majority of divorces and family problems are related to finances.

Also kids, even by not buying them designer clothes are much more expensive and time consuming than pets.

So I filled my house with three cats and two dogs to keep me company. And while perhaps second-rate to a perfect human relationship, walking my dogs through countless trails for two hours a day, does give me some form of comfort and happiness in the absence of a "family wage" job.