Thriving on $30,000 A Year In The US

Can You Live Well On $30,000 A Year?

Before we answer the question of how hard it is to live well on $30,000 a year, it is important to mention this article : How Much Do Americans Make in 2011? It points out that when you throw out the top 10 percent of US earners, the mean income falls to just a bit over $30,000 in the US.  I was a little shocked by this number because I, personally, would find it hard to support a household on that income.

But as we think about saving for retirement and realize that we (or at least most of us) have not saved enough to live like Lords during retirement, it may be more than an interesting intellectual exercise to figure if we can survive on the average US income (minus the top 10 percent).

I read a compelling article about some older artists in New York City who all pursued their artistic passion, and they did it on $30,000 a year or next. Most people bring up NYC as one of the most expensive places to live, so it was fascinating how these creative people found creative ways to make do on a very moderate income.  Most of them had inexpensive living arrangements. Either homes were paid off, they lived with relatives, had rent controlled apartments, or shared places with multiple room mates. They did not feel deprived because they had the freedom to pursue their passion.

Money Really Does Not Make Us Happy But Electricity And Food Does!

So there you are. Beyond some minimum income that can provide some comfort, additional money is probably not the key to happiness. But here we are, mystifiied on how we can survive on a household income of $30,000. Right now, I would say I would need at least $10k more than that to feel secure, and would be better off if my income was at least $50,000. That, in my mind, is middle class in America today. Of course, I have also read about people making 4 times that much who think they are middle class. So persepective has a lot to do with it.

The Money Therapist

Does money, or things you buy, fill a hole? Does that hole ever really get filled? The artists in my example above were willing to put up with shared housing and cans of cheap food because their passion was their art. That’s what satisfied them and made them happy even though it did not make them rich in material things.

This may be a good time to evaluate what you need vs. what you think you need. Small differences like keeping a car a few years after it is paid off and forcing yourself to save, rather than use credit, for a vacation really add up over the years. A few years without a car payment mean you can start saving up for a good down payment when you need to replace it. Taking a vacation you can write checks for mean you won’t be paying off last year’s cruise when you want to take your next one.

Practical Strategies To Live On Less Money

OK, now that we’ve changed our perspective, it is time to think about the way people live who can live comfortably on less money.

1. Debt should be well managed. This does not mean you can never get a loan. Sometimes loans are more sensible than blowing through your emergency cash. However, you should only take out debt you can afford to pay back promptly. You should also run up less debt than you can run up. If your actual debt ratio is a lot less than the credit that is available, and if you have a good record of paying your debts, your credit scores will increase. Good credit scores mean you can save money on future loans.
2. Be mature about your budget. If you have to have the latest 4G cell phone plan, make sure you can budget for it. The expensive cell may have to replace some other luxuries. If you do not want to give up movie and dinner night, and you have a tight budget, stick to the cheap phone. It still makes phone calls.
3. Pay yourself first. Really, every time you get paid, sock something away in a savings account. This is old advice, but still good advice.
4. Be Flexible. You may need to change your ideas about an ideal living arrangement if you want to survive on a lower income. Can you take in a roommate, or can you become a roommate in somebody else’s house?
5. What Makes You Happy? Figure out what really makes you happy. Is it engaging in a passion like the artists, or is it spending time with your firends  and family? If you pursue real interests, you will probably find you do not need to waste so much money on impulsive purchases.

Many of us are having a tough time saving for retirement. A lot of our assets may have gone down the last few years with stock market declines and the housing crash. We may have to evaluate our notion of a comfortable income for today and for tomorrow. But we’re a pretty tough generation.

Related articles:

1. Simple Steps To Save Money Next Year
2. Was 2010 Really The Worst Year Ever?
3. 30 Year Mortgage RIP?
4. 10 Year Term Life Rates Can Be A Great Deal!
5. Time to “Catch Up” on Retirement Savings?

This entry was posted on May 11, 2011 at 8:27 pm and is filed under Retirement. You can follow any responses to this entry through the RSS 2.0 feed.