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October 03, 2021

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

Earlier this week, ESPN ran a much-hyped documentary called Broke, which details the rags-to-riches-to-rags stories of bankrupt pro athletes.

At first glance, it’s the kind of sob story no one wants to hear – “You blew how many millions on jewellery?” – but the doc, which has not yet aired in Canada, did well to address the unique pressures athletes face to spend, including supporting families, entourages and a lifestyle that is doomed by the worst case of Keeping Up With The Joneses you could imagine.

However you slice it, the most remarkable takeaway from the story is that, for some people, even millions of dollars a year isn’t enough to live on.

To which we ask: if you had to, what’s the lowest income level you could earn and still get by?

In Canada, the average earner doesn’t take home much: only about $39,100 as of 2010, before tax.

But is that enough to scrape by?

*Bing: How to cut your spending each year

Personal finance writer Len Penzo, who has been exhaustively cataloguing his every expense online for the past 12 years, argues that if you can’t get by on $40,000 per year, it’s your own fault.

Certainly, that statement’s bound to stir it up, but let’s lift the hood on this one, regardless.

Penzo argues that $40,000 is the kind of rough baseline that consumers should be able to live on, at a bare minimum, if they slash their expenses in line with earnings.

So, in other words, it’s great, and much easier, to live on $100,000 per year, but if income falls, so long as it stays at or above $40,000 annually you should be fine.

Penzo offers tips for cutting back in line with your earnings – the usual suspects: trim on your utilities usage and grocery bills – and genuinely seems to believe that’s enough to get you under the 40K per year ceiling.

However unrealistic that figure seems, Penzo at least offers an intriguing insight, in that nine of every ten cases of personal debt are likely the fault of that overextended consumer.

And, he’s been able to back-track his way to the $40,000 figure, something that after cuts and cuts every consumer should be able to find their way to.

Do you agree or disagree with Penzo’s 40K number? Could you live on that little?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...