Could you live on $40K a year? If not, it may be your fault

My average spending over the past 5 years has been $163 K per year, plus what I put away in savings and tax shelters. I might be able to live on $40 K per year if I had to, but that would mean many sacrifices. The big ones would be 1) stop paying tuition fee for my 2 kids in university amount to almost $40 K per year (but then they would have to get loans), 2) sell my properties since property taxes amount to $12,000+ per year and move into a low-end house or "gulp" low rental, 3) exotic vacations (oh, wait I don't do these anymore), 4) cut back or eliminate investments in tax shelters (but these weren't included in my spending figure above) 4) stop all reno work on my primary home (as I will have to sell it anyways), 5) sell all cars but one and remove collision coverage, 6) get rid of satellite TV and cellphones. When I was a student, I lived on $30 K per year (and paid my own tuition), but that was 24 years ago.

My wife and I live on $29,000 a year. I lost my job to outsourcing, just as I turned 65. I had planned on working until our mortgage was paid off, but that would have only taken one more year. We stretched out that and have cut our power bill in half. We go out to breakfast once in a while. Still drive our car, and budget closely. It is not all that bad. My wife won a trip to Jamaica last year. We still splurge on Lobster on Mother's day, and Christmas. Our children and grandchildren come to our place at Easter, Thanksgiving, and Boxing day. Grandchildren come for a sleepover every second weekend. Our house is warm in the winter and air conditioned in the summer. We follow the store flyers more closely now. Still manage to pay all our bills and save $600 a year in the rainy day fund. What more do we need?

One trick I have learned is the reverse minimum payment on our only credit card. I had to pay a $700 repair bill on the car. I paid off the whole $700 that month. Charged $650 the next month, and so on, until it was paid off. No interest at 19.5%.

you can absolutely live on 40k and even that is a high number. To think otherwise is why our economy is in ruins; it will never be enough.

My wife and my combined net income is now over 250K. However after graduation 8 years ago my income in the first year was only 32K. In that year I managed to save enough for a downpayment (5%) on a condo (while renting) and have an ok life (some ski holidays, got a cell phone, internet, satelight tv etc). In the next year my income increased to 39k and I got a vehicle and bought my condo. Year after that it went up to 55K and I bought some investments. Year after that I met my wife and my income went to 62K and hers was up to 60. Year after that my income went to 72K, hers to 65 and we bought a house. At that point we started renting our condos. In the last 4 years that 137K we were at has gone to 250K and it seems like it will continue in this track.

What extras over 7 years ago do I have you wonder? My wife and I saved 103K this year in net worth increase. We could live without that but its our future. An extra 75K in taxes. I could definately live without that bill. Otherwise it affords us a much nicer house (12K a year above my 40K lifestyle condo), 2 nice international holidays a year (10K in total), nice technology (5K a year in ipads, laptops, tvs etc) and my wife's furniture habit (5K a year which this year was a nice couch and loveseat). Take all those off and the rest of our lifestyle is a 40K a year life.

So yes we could give up our nice house, international holidays, new technology and my wife's furniture habit and live on 40K a year. Other than those items my life wouldn't change much at all. I still drive the same vehicle I got when earning 39K and my wife also drives a 7 year old low cost vehicle (although she is currently looking at new ones for next year). We would eat the same food, wear the same clothes, have the same cable/internet/phone and do the same things each day.

So I'd agree that 40K is doable for us.

Wow, I have been living on far less than $40k a year and I do just fine. I don't need a huge house or a new car every year or a boat to go with my RV that costs more than some people's houses. Seriously, if you can't find a way to live on this reasonable amount, then you have been spoiled for too long. Its what you do with your life that buys happiness, not money and "stuff".

@Sarah, so I make $445 K per year, and if I live on only $40 K per year or less, what will I do with the all the rest? Bury it? Burn it? Hoard it? Tell my company to stop paying me so much? Or maybe, just maybe, spend a hell of a lot of it, which puts its back into the economy. And please don't give this crap about money and happiness. No matter what you say, I equate money with happiness. I have been without money, and I DAMN WELL WAS NOT HAPPY! And also, for the record, I don't make all this money by doing something that I hate. I work at something I love, and find extremely challenging and emotionally rewarding, and as a result, I do it extremely well.

Could I live on $40K?
Of course I could. Perhaps the question we should be asking is how Canada, a country with such a bounty of natural resources could be so woefully mismanaged that the average earner takes home only about $39,100 as of 2010, before tax.
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How pathetic are our leaders??? Yes there is a degree of personal responsibility but if the AVERAGE is below $40K a year and we still have Billionaire's getting corporate welfare shoveled into their bank accounts by our leaders there is clearly a problem here.
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Blame it on a bad education system, a corrupt government or a failure to outline to each Canadian what their income SHOULD be as a portion of the Canadian economy but don't stop at assigning blame.
Korean's have had their standards of living rocket up in the past 30 years while our Trudeau on-wards leaders have overseen one of the most disappointing performances of a modern economy.
At least the American's can use the excuse that they were squandering their income on pointless military expeditions.
What excuse can we use????

Thanks a lot for this contribution it's been very useful for me.

Sure you can, just don't do anything! Or do things that are free!

@John, we are debating whether we can live on $40k not $445k. I don't know too many people making that kind of money so stop showing off. If you can't used up all your money, donate some to charity then. You shouldn't even be involved with this debate.

@Steve:
Sounds like to me that you are a hybrid commie NDP from the phrase "outline to each Canadian what their income SHOULD be as a portion of the Canadian economy ". No, each Canadian should actually earn what he deserves via productivity and his skill set.

My wife and I(both retired) have a before tax combined income of $60,000. However though we have absolutely no debt, own our modest home, each have a paid for car, we generally live frugally and we have not treat ourselves to an out of country vacation in 6 years. However still we don't have much cash to spare, at the end of the year, most of the net after tax income has been spent.

Your numbers seem a little fishy Canuckguy.

Your income taxes on income properly split between you 2 would be 10K. Property taxes another 3K, sewer/water/power/heat no more than another 8K. Lets put food at another 6K. That leaves 33K to spend on non-essentials or around $90 a day..... Now by all means spend your money as you choose to however your scenario doesn't seem like it would be difficult at all and infact you should easily be able to holiday often (you can fly to Mexico and rent a condo for a month for not much more than what you are average spending already). The only alternative I can come up with is that you have some very expensive hobbies. :)

I have been retired for a few years and am waiting for my 65th (3.5 yrs away) and the unlocking of my RRSPs (company pension was rolled into these). Early CP income is $8k, and I use $30K each year from my LOC against my house. I live in the GTA, and I get by fine. I vacation 3x a year, once each to Europe (fam in France) and the Caribbean (winter avoidance!!!) and go 1-2 times to Vegas (when I get free hotel rooms). Own my house so the $150K that Ill run up till 65 on LOC will go when I sell. I am careful now, dont eat out 4 times a week (or more), and hit the pub rarely anymore (once/week).
My life is different to be sure from the mobile one I had previously. but age has me slowing a bit anyways so .....
$40K per person per year should be comfortable for most - especially those who are partnered.
I have monthly expenses (med ins, house, cable/internet, utilities, etc) of about $800 and drive about $30/wk in gas. Life is good, as good usually as health allows. No problem.

@Western Guy,

I've been reading comments hear for about 3 years now...50% of your posts have the sole intention of informing people about how wealthy you are from your rental property ventures to your current salary...and the other 50% are usually meant to portray your decision making prowess as largely superior to anyone around you. I hope you are venting on here because you bottle it up in real life, otherwise, you are going to die with nothing but money around you.

Our family of 5 lives off approx. $45 000 per year. It is a stretch, we don't live a lavish lifestyle, we pay the mortgage and have no other debt (that is the key). We still take family vacations and put the kids in sports. We don't buy things we don't really need and are still able to put money into savings. Of course we would love to have more, but we don't live beyond our means.

You can definitely live off $40K a year. I am single and live in Toronto, I make a little more than that and manage to save 10-12k per year and live very comfortably. I take 1 one week trip per year or 2 weekend trips. Granted I don't have a car, that saves me tons of money. TTC is my saviour. I also live in a beautiful brand new 3 bedroom apartment with 2 great roommates. I think it would be hard to live off 40K if I had kids and/or needed a car, but it would still be manageable. My generation is used to living comfortably and having what they want. It's dangerous that people don't understand it took their parents years to get their families there.

Where are you guys working to earn so much money? They say only 5% of people earn over 100,000$. You guys do seem to be bragging or misleading us the reader why?
Anyways, my comment is that it cost me 30,000$ net to run my house hold what I spend is the luxury but I can't really afford so I do without and just live simply. Life is good family is happy. Yes I could live on 45,000$ a year.

It's all about your life expectations. If you expect a lot, it will cost you a lot. If you live frugally, $40k is easy.

John says he equates money with happiness. Well, that's **his** problem, isn't it? His life experiences have dictated his attitude. But if the rest of us are adaptable and flexible, then it's not difficult to live on $40k.

I'm retired (age 58). I own my (newly built, 1161 sq ft) condo in downtown Toronto, free and clear. I own my car (Acura 3.2TL). I have a reasonable RRSP. And I live quite comfortably on $25k per year. I don't travel much, but I do enjoy the occasional vacation trip (just came back from HK/Japan). How do I do it?

By being frugal. This is how most millionaires become millionaires (read "The Millionaire Next Door" by Stanley and Danko).

The truth is, many Canadians have been spoiled rotten. They expect too much, and this costs them dearly. Happiness is a state of mind; it's not about spending lavishly nor about indulging your every whim. Dial down your expectations. Enjoy the **simple** things in life.

And what if you are raising a family? $40k is still doable. Many immigrant families do well enough with this kind of income. So, please, Canadians, stop with the whining.

Fresh out of school and making $16 which adds up to $26,000 a year after taxes. Yes it is hard to live some months and takes a lot longer to pay things off, but im getting by.

I feel as if making $40,000 a year would make life a heck of a lot easier.

Well, I've averaged less then $20 K per year in the last ten. With that amount there is not much to put away for retirement which is closing in on me quickly.I am now 56 years young.
My vacations consists of visiting family within 500 kilometers. Hotels are out of the question. My entertainment is rented videos and beer drank at home, a one bdrm rental in Toronto.
Living downtown I am constantly asked by Homeless and and others lees fortunate for lose change.
Other then savings the worst thing about having a low income is dating. If one does not bring in a "professional salary" or own a home/condo few girls, ladies, or women will even meet you for a cup of coffee! $40 K would heaven for me.
No, I would not buy a vehicle.
Would be nice to see at least the Grand Canion before I leave this planet.

@Richard - AMEN! You are 100% accurate. I have never had any handouts in life and learned at a young age to live within my means. Millionaire Next Door is a great book for everyone to read. I think a book like this should be mandatory in our High School Curriculum. Not only does it teach you to live within your means, but it would also help re-shape our society back into one that places less emphasis on the accumulation of "stuff" and material goods.

to Jack L

Really!!!! Your type of whining is the problem with our Society.... Too many "I must haves" and "not enough I will give ups".... Personally I have to kids in College and paying tuitions live in a modest size house. Was able to retire on good investing and luck. Your soapbox is very old.... DOWN SIZE .... quit trying to keep up with the Jones's.

Tell me, is that 40K after taxes or before. My yearly income is just over 40K but my disposable income ends up to be about 28K. Now tell me how easy it should be for me to support a child and household on 28K?

Today, for a family of four you need 100K to be confortable for the most part. Sure folks can live on 25K or 40K or whatever, anything is possible and one key is no debt payments. The real story though is the squeeze that has been taking place over the last 50 years. Back in the day, one wage earner could support a family of four whereas today, while possible, is in fact rare. Here are a few numbers regarding inflation in North America since 1959 may help to illustrate:

Income then, $5,000, today $46,520 or 9.3 times higher
New car then $2,250, today $30,000 or 13.3 times higher
1 Litre of gas then 5.5 cents today $1.30 or 23.6 times higher
New house then $12,400, today $353,147 or 28.5 times higher
Gold then $35.10 per ounce, today $1750 + or over 50 times higher

Inflation has been steadily robbing the population of real wealth. Over the past 50 years average pay has lagged way behind the rate of increase of those essential items required just to live.

The basics of life, housing, food, transport have gone up much faster than our retained buying power which has lead to high debt levels, esp. in N. America. I have an e-book coming out this month on inflation and related forecasts that can help anyone gain insights and understand what is likely coming in the next decade and am giving out the first few hundred editions free. If you want a free no strings attached copy send me a note at drs122@hotmail.com and I will personally respond.

I should be so lucky to live on 40K. Retired and loving it.

I am a single mom and make approximately $20,0000 a year or less. I do not receive any child support or assistance. I I made 40K a year I would feel blessed!

It's how much you earn, but how much you keep. You have to ensure that you keep your expenses in check. Know exactly what your expenses are, spend less than you earn and save the rest. By following these simple principles you can get ahead on 40/k a year.

www.ingeniousinvesting.com

It's not about how much you earn, but how much you keep. You have to ensure that you keep your expenses in check. Know exactly what your expenses are, spend less than you earn and save the rest. By following these simple principles you can get ahead on 40/k a year.

www.ingeniousinvesting.com

I am 30years old and make approximately 38k a year on a salary job and also earn a few thousand a year extra playing poker which makes my income closer to 42k but it varies. In addition to earning small dividend payments from a few stocks and interest from mutual funds which I dont spend so I do not include that in my yearly budget. I own a modest home which I have paid off and drive an old 95 vehicle which makes for extremelylow insurance payments. So yes it is very possible to live and have a good life for around 40ka year. I also take yearly or twice yearly vacations, last year I went to vegas for a weekand thailand for 6 weeks :). However I live in a smaller town which for 1, made the purchase price of my home far less expensive than buying one in a major city. Also I have not thrown money away on a new vehicle which would automatically devalue about 30% the MOMENT I would drive it off the lot and do a swan dive in value based on the time owned and km driven thereafter. I NEVER pay for anything by credit card unless I can afford to pay it off before 4-8 weeks go by.

CREDIT CARDS ARE A SCAM IN LINE WITH VLTS, SLOTMACHINES, AND EXTRA CAR INSURANCE SUCH AS WINDSHIELD DAMAGE, FIRE, AND INCIDENTAL THEFT COVERAGE(say the wallet you left in plain site on the carseat)

IF ANY OF THESE THINGS WERE FOR THE BUYERS BENEFIT THE INSURANCE COMPANIES WOULDNT MAKE ANY MONEY!!!!!!!!! WAKE UP PEOPLE!

The only insurance I have is house and minimum car insurance. I have minimum required car insurance which costs me only 550 dollars a year with safe drivers discount. Since I figured that if I have a car that is blue booked at less than 1000 bucks then it ultimately wont matter what happenns to it.

I buy what I want for food and although I do eat dried noodle soup(Mama brand noodles, its the only way to go. Check out an asian grocery store if you never heard about them) I do so because it is actually a tasty quick addition to a lunch or a snack.

Now I could spout more ways to savemoney but Im not surehow many people are actually going to read this so Im going to stop typing

It is perfectly easy to live on 40k a year, just cut up your credit cards and dont buy anything that you dont see or recieve any tangible value for. I hope this helps someone.

PS. IF YOU DONT HAVE A TAX FREE SAVINGS ACCOUNT, GET ONE!!!! THE BENEFITS ARE NOT LIFE CHANGING BUT THEY ARE THERE :)