How I live on $7,000 per year

Published on April 10th, 2013

Posted by Jacob in arly !etire"ent, #inance, $or%
I& you en'oy the blo(, also consider the boo% which is "uch better or(ani)ed and "ore co"plete*
+ou can read the &irst chapter &or &ree or see the reviews ,1,2,3,-,.,/,7,0,1,
A,2,3,4,,#,5,H,I,J,6,7,8,9,:,P,;,!,<,=,>,?,$,@A* <ubscribe to the blo( via e"ail or !<<* <ee
updates and lin%s on the &aceboo% pa(e, 'oin the &oru"s, and loo% &or tactics on the ! wi%i*
=he <ite"ap lists all the blo( posts*
4isclai"erB =his post has (otten wildly popular on the internet so in "any cases this post is the
&irst and only post "any people will read* !e(ular readers will already %now that IC" "arried and
that we split eDpenses .0E.0* Hence, our co"bined bud(et is $1-,000Eyear* #or &irst ti"e readers,
let "e point out that I have, however, been living on $7,000/year or less for at least a decade
and Ive only been married for 5 of those years* 5ettin( "arried "eant savin( "oney on
thin(s li%e rent, but it also "eant havin( to co"pro"ise and spendin( "oney on thin(s which I
rarely use and otherwise wouldnCt have bou(ht "ysel&* <pea%in( in ter"s o& bud(ets, itCs been a
wash* I spend as "uch bein( sin(le as bein( "arried*
:%ay, that does it* IC" (ettin( tired o& the pervasive "edia articles that detail how people are
Fsurvivin(G or Fbarely "ana(in(G on what Huali&ies as avera(e or de&initely "edian household
inco"es* =his is li%e writin( a articles about .C10G (uys who are Fstru((lin(G with their hei(ht
issues co"plete with tips and tric%s on how to cope with their shorta(e* HaI* #or the record, .C10G
is the avera(e hei(ht o& a >< "ale* #un &actB =his is also the "edian, since there are &ew 12J tall
(uys to s%ew the distribution*
=he water&all that &inally crushed the ca"el was this yahoo article which discusses how a sin(le
person FsurvivesGis livin( well on $20,000Eyear, but thatCs 'ust one out o& "any* In particular, it
&ollowed an initial article on how a &a"ily survives on $-0,000Eyear* =his is pretty close to the
"edian household inco"e in the ><I It "eans that about hal& o& everybody, thatCs 1.0K "illion
people, is currently livin( on 7<< than those a"ounts* <urely, thatCs no secret, and surely thatCs
not very re"ar%able either*
HereCs an article with a &a"ily thatCs stru((lin( on $2.0,000Eyear* Poor (uysI =hey spend "ore on
cleanin( services than I do on pretty "uch everythin( co"bined* !e(ardless o& how "uch I
"ade, I thin% I would pic% up a (odda"n broo" "ysel& be&ore I started tal%in( about "y &inancial
stru((les* =he (allI
=he "edia "ust be livin( in a bubble that is entirely separated &ro" 8ain <treet* 7oo%, it isnCt that
hard to &ind so"eone who lives on $10,000Eyear, or $.,000Eyear* I can even provide a couple o&
pointers to people who live on $0Eyear* ,And no, theyCre not livin( under a brid(eA*
=he proble" is, and I thin% I (et it now, is that the "edia is in the business o& pushin( content in
order to sell ads, so they "ust write &or the bi((est co""on deno"inator* It "a%es strate(ic
sense &or a "a(a)ine to write articles about &a"ilies who spend $-0,000 per year and now
stru((le because they had to cancel their net&liD subscription* :r &or a "a(a)ine to write articles
about &a"ilies who spend a Huarter "illion per year and now stru((le because they had to (ive
up their daily &irewor%s,LA* People can sy"pathi)e with people who are si"ilar to the"selves and
the entitle"entMclass always thin%s theyCre hard done to* <o o%ay "edia, you are &or(iven*
,LA =han%s 8oI IC" stealin( that one* It was 'ust too &unny*
However, I still have a proble" with the nu"bers* 2ac% in the days when I started this blo(, I
"ade the "ista%e o& callin( it arly !etire"ent Dtre"e* =he &irst proble" was the word
retire"ent which "eans di&&erent thin(s to di&&erent people ,see #A;A* =he second proble",
which is relevant here, is the word eDtre"e*
I get many comments from so-called complainypants that Im too etreme!" #he
etremeness seem to revolve aro$nd lentils and the low amo$nt of money I spend, abo$t
$7,000/year"
7ets "a%e another atte"pt o& dealin( with the lentil issue* ,Please bear with "e, it &rustrates "e
because so"e people will read so"e post I wrote about about lentils and discard the ideas o&
early &inancial independence outri(ht without a second thou(ht because they donCt li%e lentils*
=hat is a sad loss o& potential and all because this author li%es dal*A 9ow, so"ewhere on this blo(
I discuss the &act that I used to eat lentils in (rad school because it was Huic% and easy to coo%*
3onseHuentially, so"e now thin% thatCs all ICve been eatin( &or the past 1. years* =his is not the
case ,see belowA* I suspect i& I had said I used to eat ra"en as an under(raduate, people would
understand per&ectly* 2ut nooooNI ate lentils so IC" weird* Anyway N
The second and more important aspect is the $7,000/year. =he $heaton coMscale eDplains
this in a brilliant way* 3onsider people livin( at di&&erent bud(ets, e*(* $100%, $00%, $/0%, $.0%,
$-0%, $30% $20%, $1.%, $10%, $7*.%, $.%, $2*., $1%, and $0%* 9ow, what $heaton observes is
that people who spend one or two levels below you are inspirin( to you in ter"s o& bud(et
reductions* People who spend three levels below you are sli(htly nutty and people who spend
&our or "ore levels below your level are cra)y or downri(ht eDtre"e* =his holds no "atter where
you are* I& you spend /0%, then .0% and -0% is inspirin(, 30% is nutty and 20% is cra)y* I& you
spend 30%, then 20% and 1.% is inspirin(, 10% is nutty, and 7*.% is cra)y* 3onversely, people who
spend a couple o& levels above you are considered prodi(al and waste&ul*
=he proble" is that bud(ets deno"inated in dollars are very oneMdi"ensional* I& you loo% at the
article above o& a (uy who spends 20%EyearOthatCs al"ost three ti"es as "uch as I doO while
livin( in the sa"e area ,<an #rancisco bay areaA, I note that he does so"ethin( I donCt ,(o to
barsA but I have so"ethin( he hasnCt ,health insuranceA* :therwise we have and do "any o& the
sa"e thin(s*
$hat is the di&&erenceP I& I had to venture a (uess, ICd say IC" "ore &ru(al ,the way your
(randparents were &ru(alOin &act what I do wouldnCt be considered very eDtre"e by your
(randparents or (reat (randparentsOICd probably be avera(e &ro" their perspectiveA and I
adhere "ore to a doMitMyourMsel& ethics* ICd also suspect that ICve solved the housin( situation
better* :n the other hand, he doesnCt have a car ,but in <an #rancisco, that would be nor"alA*
$hat really is re"ar%able is the si"ilarity in li&estyle despite the disparity in spendin(*
I really hope that this is e"pathetically understood, especially by those who say theyCre Fnot
willin( to be as eDtre"e as "eGOso"eone who spends 1.M20% would be a typical eDa"ple* $hat
I hear is essentially that theyCre not willin( to learn how to stretch their dollars &urther* =heyCre
sayin( that theyCre not willin( to (et the sa"e thin( that I have &or $.00E"onth instead o& the
$1-00E"onth theyCre payin(* =heyCre not willin( to learn or to thin% beyond their current &ra"e o&
"ind*
=o be clear, the ! e&&iciency strate(y will (et you a $20% li&estyle ,i& youCre sin(leA or a $-0%
li&estyle ,which is the "edian &or a >< &a"ilyA &or "uch less "oney down* $hy wouldnCt anyone
want thatP Just about the only oneCs I can thin% o& who doesnCt want that are the corporations that
prey on consu"erists*
IC" sorry, but I &ind this to be the "ost &rustratin( part about this blo( or the ! pro'ect as a
whole* I "ay 'ust be a very bad sales"an*
9ow, 'ust &or &un, ICll answer the sa"e Huestions as the ones in the article above* 3ontrast and
co"pare in the co""ents*
9oteB +ou can &ind a brea%down o& "y $7,000 bud(et in the &reHuently as%ed Huestions* I have
been livin( on $.M7,000Eyear &or about a decade now* =his includes . years as a sin(le and .
years bein( "arried*
4o you avoid a lot o& the eDpenses that "any o& your peers spend "oney on, such as technolo(y
and "eals outP
I would thin% so* I usually (o to the "all to per&or" a %ind o& an anthropolo(ical eDpedition once a
year and I see nothin( there which interests "e* !eally nothin(* ItCs "ostly "idMran(e consu"er
stu&& which will tra(ically end up in a (ara(e or a land&ill about ten years down the road* Dcept &or
the rare pic%Mup pi))a, we do not (et our "eals out, "ostly because I hate eatin( out* 8y wi&e
coo%s practically all o& our "eals* However, we do have "any o& the sa"e thin(s* $e have
internet, net&liD, and a car ,"y wi&e drives it, I paid &or hal& o& its price and hal& o& its operational
cost in eDchan(e &or occasional ridesA* 8y co"puter is a seven year old 12Q powerboo%*
$hatCs your typical "ealP
A very typical "eal would be a salad &ro" the (arden ,cucu"ber, to"ato, lettuce, "esclunA with
ho"e"ade thousand island dressin( ,vine(arK%etchupK"ayonnaise, 'ust try it, thatCs all there is
to itA &ollowed with
pasta with a sauce based on beans, canned to"atoes, )ucchini &ro" the (arden, onions, and
olives* I douse this with hot sauce* #or so"e stran(e reason, IC" &a"ous &or eatin( lentils* I did
that when I was in (rad school because itCs Huic% and easy but since "y wi&e too% over the
coo%in( and I too% over the dishes and laundry about seven years a(o, this doesnCt happen
any"ore*
$hat about clothesP
Practically never, by which I "ean "aybe once a year ,usually soc%s and underwearA* In the
winter, I usually wear a suitK'ac%et and a Hawaiian shirt ,can you tell, I (ot styleA or even a dress
shirt* I also have a pair o& 'eans and a couple o& FparticipationG tMshirts* In the su""er I wear a
pair o& white doc%ers shorts* A lot o& "y clothes ,I donCt have a lotA is 10K years old* =he reason it
lasts that lon( is that I line dry it* I will also wear clothes until it &ails catastrophically ,ripsA* IC" not
opposed to 5oodwill and <alvation Ar"y, but usually they donCt have "y si)e o& pants, 33R3-S
sweaters and 'ac%ets last decades ,"y current one is al"ost 20 years oldAS and tMshirts are
incidental*
$hat about (oin( on datesP
$eCre both ho"ebodies* $hen we &irst "et, "y wi&eCs &riends dra((ed us out to a %arao%e bar*
$e le&t a&ter an hour and ended up bac% at "y placeOless noise, easier to tal%* :ur dates
consisted o& ho"e coo%ed dinners* =hese days I suppose our dates consists o& wal%in( the do(*
4o you indul(e in any luDuriesP
A lot o& "y stu&& &alls in the luDury cate(ory* #or instance, the suit "entioned above is a $.00 suit
,I bou(ht it on sale &or $100A* =his "ay sound eDpensive until you reali)e that the suit is old and
thus it holds up rather well* =he a"orti)ation rate, that is, spreadin( the cost out over the years
co"es to very little* $hen I buy tools or other thin(s to en'oy, I buy near the top ,this is why the
8all doesnCt wor% &or "eA* #or eDa"ple, ICve acHuired several $300 hand planes &or "y
woodwor%in(* =his "ay also sound eDpensive, but reali)e that i& I ever tire o& wood wor%in(, I can
sell those &or close to what I paid &or the"* =his "a%es the" "uch cheaper than a $-. hand
plane &ro" the bi( boD store* In &act, "any o& "y hobbies are &inanced by sellin( "y old (ad(ets*
8y one eDception is "y "artial arts trainin(* I spend over $1,000 per year on that or al"ost 1.T
o& "y entire bud(et*
4o you have health insuranceP
I do* I have a hi(hMdeductible health plan and an health savin(s account ,&or the taD deductionA*
+ou can read "ore about it in "y post on how to &ind cheap health insurance without the need &or
an e"ployer ,so"ethin( A"ericans have to worry aboutA*
4o you have any savin(s &or e"er(enciesP
$hat, do you "ean i& I suddenly needed to raise $100,000 in cash because there was a sale on
real estateP <ure, I do*
4o you anticipate or loo% &orward to havin( a hi(her salary one dayP
IC" &inancially independent* =o "e "ore "oney and hi(her inco"es are "ore o& a way o& %eepin(
score in the rat race and I le&t that race* <ure, I would li%e to have "ore "oney, because I li%e
"oney and havin( "ore o& it is nicer* I donCt &ind it worth the sacri&ice and I only consider it
incidental to the thin(s I do or that ICd be willin( to en(a(e in* I would say in so"e respects,
"oney does serve as a proDy &or value* #or instance, i& we consider "y boo% sales, IC" "ore
pleased by the &act that people are willin( to pay $10 to read "y ideas than I a" at receivin( the
royalties* ICve been as%ed why I didnCt %eep wor%in( in order to have "ore stu&& or "ore F&inancial
securityG ,I would have been a "illionaire at 30 i& I hadnCt retired at 33A* However, I already have
all the stu&& I would possible want to spend "y ti"e ta%in( care o&& ,I donCt li%e dustin( and
or(ani)in( stu&&A, and beyond a certain net worth, "ore net worth does not protect you &inancially*
In other words, i& thereCs an event ,li%e hyperin&lationA that could cause you to loose one "illion
dollars, it could 'ust as easily cost you &ive "illion dollars*
$hat about retire"entUdo you plan on ever savin( enou(h to retireP
Already did it* I& one is &ru(al and donCt "a%e the "ista%e o& buyin( the two &inancial
independence %illers on credit, that would be F"ore house than you needG and F"ore car than you
needG, and pay a little eDtra instead o& the Fbuy and throw awayG "erchandise in the "all, even an
avera(e salary ,which I hadA will allow a person to beco"e &inancially independent at a rather
youn( a(e* +ou donCt need a siD &i(ure salary to pull it o&&*
4o you have any advice to others tryin( to live on $7,000 a yearP
+es, read this blo( or 'ust as% your (randparents* $7,000 &or one person, which translates into
V$1-,000 &or our two person household ,which is located in a city with a cost o& livin( indeD o&
131A see"s eDtre"e today, but i& you (o bac% .0 years and co"pare how people lived bac% then,
it isnCt all that i"pressive* #urther"ore, by "any accounts people were happier bac% then* =hey
werenCt )oo"in( around tryin( to buy the newest cell phone "odel or waitin( &or the waiters in
order to eat, and stressin( out about their resu"es in order to %eep livin( their levera(ed and
a"ped up li&estylesOi& you call that livin(* :%ay, I rant, but &ro" "y perspective, "y li&estyle is
the sane choice, and itCs everybody else whoCs eDtre"e*