The Social Security Administration states the average American salary is $50,321.89. If you’re like me, your annual household income is below this mark. Even as a married person with two children, we are able to thrive on $35,000 a year without living paycheck to paycheck.
It’s no secret that living on $35,000 a year isn’t easy. However, it can be done–even with all of the current financial uncertainty. You must be intentional with how you spend and save each dollar.
Today, I’m going to show how we don’t live paycheck to paycheck, take a vacation, and save for the future on a modest income. Practicing these money habits is helping our family of five pay the bills in 2020. Like many across the world, my wife and I are feeling the financial pinch of “unessential business closures” and the corresponding lost income. We don’t qualify for the $600 CARES Act unemployment benefits as we still have some work.
Update June 2020: I originally wrote this article in September 2017 when our taxable household income was $35,000. Almost four years later, we now make closer to $45,000 as our business is more established.
But we earn a variable monthly income and still live as if we earn $35,000 a year by practicing the money advice below. These frugal habits are helping us make ends meet in 2020 even though we have some debt and some expensive bills.
1. Have a Positive Attitude
This advice sounds cliche, but it’s true. If you need help maintaining a positive attitude, speak with your spouse, deepen your faith, listen to podcasts or music, and avoid negative-sounding content (like the evening news or talk radio) as much as possible.
My Biggest Fear was Quitting My Job
I’ve spent my post-college years on both ends of the income spectrum making between $20,000 and $80,000 a year. I’m now in the middle of that range and probably will be for the foreseeable future.
Having $2,000 of post-tax/post-bills of disposable income each month (when I made $80k a year) was a huge blessing for getting out of debt. Although the 70-80 hour work weeks, not having weekends off, and having to work nightshift wasn’t worth the extra pay. My wife would essentially be a single mom raising three children.
My wife and I didn’t need to earn $80,000 to make ends meet. I was scared to quit because I didn’t think we could live on a small income.
Well, I quit my job in 2015 when our oldest child was two months old. My original employment plans collapsed three weeks later. Instead of earning a stable income, I found myself unemployed and doing side hustles to at least make something. Thankfully, my wife (being the entrepreneur she is) supported us with her business income until I got on my feet.
Stomaching that unexpected $60,000 pay cut in 2015 was tough. In the process, I thought about working fast food to at least have stable part-time work. But I wouldn’t have time for job interviews with better employers.
We found out we could live on $35,000 a year. It took some adjustments to learn how to live on less. Using budgeting apps (You Need a Budget was helpful) was a big help, plus talking with family and friends.
Related: Check out these 20 tips to find your first freelance client.
2. Cut Monthly Expenses
The instant way for us to have more money each month was by spending less money. If you don’t have extra time to work a side hustle–even when delivering food with DoorDash where you can name your own work schedule and earn tips –saving money can be your only option.
We reduced our spending in these ways:
- Cancel subscriptions (i.e. Netflix, SiriusXM, cable tv, and less phone data)
- Compare auto and homeowner’s insurance prices (You can also raise your deductible)
- Switch to a prepaid cell phone carrier (We use Cricket as it uses the AT&T network- we cut our phone bill in half)
An effortless way to cancel subscriptions or lower your utility or subscription bills is using a digital assistant. Two of the best are Trim and TrueBill. If they can lower your bill, they keep a small “success fee.” Hey, you don’t have to call the phone or cable company and threaten to cancel your service or beg for a break. They do the dirty work for you.
- Truebill: Mobile app (and computer website) for Apple and Android devices.
- Billshark: Lower bill costs and cancel unwanted subscriptions (internet, TV, satellite radio, and phone).
- Trim: Cancel or monitor subscriptions with a text message, Facebook Messenger, or online website
If you like mobile apps, use Truebill. Otherwise, try Trim to avoid another download. Either one makes sure you pay the lowest price on your recurring bills.
Fetch Rewards for Scanning Receipts
I also use the Fetch Rewards app to scan grocery and retail receipts to earn gift cards. Use my referral code 9H5T4 to get 2,000 bonus points on your first receipt scan.
Getting 3,500 points redeems a $3 gift card. This is my favorite receipt scanning app because you don’t have to activate offers first. Simply buy what you normally do and Fetch matches your purchases with participating products to earn bonus points.
3. Avoid Debt Like It’s a Plague
What do monthly payments and vacuums have in common? They both suck.
If you don’t borrow money and go into debt, you instantly need less money to live on.
For instance, not applying for a loan with a $500 monthly payment is an extra $6,000 in your bank account every year. You can use that cash to pay off current debt, invest more, or build up your rainy-day fund.
Becoming debt-free in 2018 is how we could buy a rental property in 2019 instead of, let’s say, 2024. We do have a small loan on that property. But we wouldn’t have this investment property if we still were making a mortgage and car payment. The rental income pays our monthly loan payment.
Paying off debt also improves your credit score. Great credit has more benefits than qualifying for low interest rates. You can qualify for a job handling money or even moving into a better apartment or rental home.
Need Help Making a Plan to Get Out of Debt?
If you need help planning how to get out of debt, I recommend the Pay Off Debt App. My friend, Jackie, built this app to let easily see how much you need to pay each month to get out of debt. Simply list your loan amounts and the app calculates the quickest pay off strategy.
Need a Cash Advance Interest-Free?
If you need money fast to pay the bills before payday, consider Empower. This full suite money management tool lets you get up to $250 in advance with no interest, late fees, or credit check.* I remember having to creatively find ways to pay the bills without crazy-high banking fees. That isn’t possible sometimes–I know and you may too.
In addition to the Cash Advance, Empower offers several tools to improve your money skills. Some of the tools include personalized recommendations, a subscription cancellation service, and Automatic Savings plans to quickly reduce your monthly spending. Empower offers an Interest-Checking Account to stash your cash. All of these features are available for a flat $8 monthly fee.
Invest Your Interest Savings
As you pay off debt, invest a portion of your previous loan payments. Invest for the long-term and the short-term financial goals.
I personally use Sofi Active (they can also refinance student loans to help you save money) to buy individual stocks without commission. You can also buy fractional shares of the largest companies which makes it easy to invest with small amounts of money.
You can trade cryptocurrency futures too in SoFi Active (if you’re looking for unique stock market alternatives in 2021).
If you prefer help with investing. SoFi Invest also offers automated investing portfolios.
4. Don’t Drive a Fancy Car
My one “splurge” as a single person was buying a new 2012 Ford Mustang GT. I sold my dream car because the cash was more valuable than an eye-popping ride that depreciated in value monthly. It was an emotionally tough decision since that car was so fun to drive and because I didn’t have a car payment.
Talk about learning the value of detachment. Looking back, it was a small sacrifice (it’s only a car after all).
Instead of driving a $20,000 car Mustang GT (V8 with leather interior), I got a $2,000 Mustang V6. It’s like comparing apples to oranges, I know. I still reliably get to work with an older car and the extra cash was split between rebuilding our savings and loan payments.
Tip: Pay Cash for Vehicles
We own two vehicles and the total combined value of both is around $10,000. We now save up cash so we can avoid car loans for our replacement vehicles. Paying for the periodic repair costs less than driving a nearly-new vehicle.
Each month, we set aside about $300 into a savings account that’s exclusively for buying another car. Large family vehicles are expensive, even after the first five years of depreciation. As we buy older cars, the loan interest rate is higher than for a “new car.” Banking up as much cash as possible is helpful.
For some people, a new or almost-new car can make sense if you travel often or can keep it for a decade. Otherwise, you are better off letting the first owner pay full price sell to you after the car has depreciated in value thousands of dollars.
When you’re living on a modest income, it’s also harder to justify buying a brand-new $40,000 to $60,000 SUV or truck to cart the family around in as well. In our case, buying a used yet reliable family car was our best option.
For instance, we can buy a reliable family SUV (or minivan) that costs $20,000 or less and not lose sleep about still being able to pay the bills. Having a less valuable car can also reduce your stress level for the inevitable paint scratch, ding, or fabric stain. Life happens. I don’t miss these “stress moments” when I had my brand new sports car that cost as much as I currently make in a year.
5. Cook Your Own Meals
Our monthly grocery budget now is around $400 ($4,800 annually) for our family. FYI–We have three children under age six so that monthly cost will increase as our family grows.
Cooking your own meals is another easy way to spend less money. Even if you go to the grocery store freezer section, it’s still cheaper than going to a restaurant. I personally enjoy the freshness and taste of home-cooked meals more. We even eat organic food which we buy at a discount through local merchants and shopping online.
Need help grocery shopping? Avoid these 5 grocery store mistakes.
With my old job, I bought two meals a day and would spend $20-$30 daily. Conservatively, I spent $5,000 a year on meals, Starbucks, and gas station snacks. How I wish I could go back in time and get some of that money back.
Although it may sound weird to you, I don’t miss going out to eat. I don’t miss the sodium and the perpetual thirst accompanying most prepared meaks.
I do miss getting coffee and ice cream on a regular basis–but it’s still cheaper to get these luxuries at home. The savings multiply if you have several children at home who live ice cream as much as you do.
Need Help Making Meal Plans?
Ditching my poor eating habits and exercise also helped me lose 20 pounds.
You can start cooking at home with $5 Meal Plans. As you might guess, you can make an entire meal to feed a family for $5.
My wife is the better cook in our relationship as my cooking skills are slightly better than burning water. She’s able to keep us within our grocery budget by making weekly meal plans. Each week, before buying groceries, she makes a rough sketch of what our family is eating this week.
At first, planning ahead was difficult. One of our top recommendations to start meal planning is $5 Meal Plans. It’s possible for each family meal to cost approximately $5–the same meal at a restaurant could result in easily result in a total bill of $30 (or higher).
Grocery Shopping Apps
I’m also a fan of grocery shopping apps to help us indirectly save money on the products we buy in the grocery aisles.
There are a handful of receipt scanning apps to try but these are the two I use and like best:
- Fetch Rewards. This app doesn’t require you to activate offers first. Simply snap a picture of your receipt with your phone camera and Fetch awards you bonus points on qualifying items. Fetch can track your online grocery delivery orders too. You can start redeeming points with a $3 account balance (3,500 points). Enter code 9H5T4 when joining and we both get 2,000 bonus points!!
- Ibotta. You need to activate offers before scanning your receipt. Despite the extra effort, you can earn more per offer. Like Fetch, Ibotta can track your online orders from over 150 retailers. Cash and gift card redemptions start with a $20 award balance.
6. Shop Thrifty
My wife and I also do everything possible to buy what we need either secondhand or on clearance. That includes our clothes, gadgets, and must-haves. Don’t worry, we buy brand new socks and underwear.
Here are just a few ways we save:
- Always check Craigslist, Facebook Marketplace, eBay first
- Shop Online with Rakuten (get cash back on every purchase)–Read my Rakuten review to learn more.
- Check local thrift stores or consignment sales for used, name brand clothing
- Shop in bulk (only for products we will use and not throw away)
- Wait at least 24 hours before making a large, impulse purchase
In addition to avoiding debt like it’s a plague, we limit our shopping trips. Having two small children makes that easy for brick-and-mortar visits. Although the temptation still lingers for online shopping.
Making a list of items we want (and sticking to it) to compare prices and wait for deals is what works best for us. Planning ahead gives us the freedom to wait for great deals so we don’t have to pay full price because we wait until the last minute to buy.
I also highly recommend using a cashback portal to get money back on most online purchases.
7. Geoarbitrage–Live in a Low-Tax State
Geoarbitrage is another way anybody can thrive on $35,000 or less. I realize not everybody can just pick up and move.
If you have “California cost-of-living,” you need to earn the California-equivalent of $35,000. That’s why so many people are moving away from expensive cities and relocating to cheaper areas. Compare the cost of renting a U-Haul to leave California versus moving to California–the cost difference is astounding.
The high cost-of-living for my intended career and a mountain of student loan debt is why I pursued a different career path. My “dream job” simply couldn’t pay the bills. Perhaps you can relate.
Even if you can’t change cities, consider changing apartment complexes or neighborhoods. Never compromise your safety just to save a few dollars in rent. Living in a neighborhood without HOA fees or an apartment complex without a swimming pool can save you a small fortune.
8. Pursue a Side Hustle
Spending less money is only one way to live happy on $35,000 a year. I also recommend getting a side hustle. Once you live on a barebones budget, making more money is easier than cutting expenses. After all, you or I won’t willingly move into a cardboard box or ditch our health insurance to become minimalist.
Honestly, this is where my wife and I are at. We can’t cut much more unless we don’t run the air conditioning in the summer, stop taking vacations, or don’t eat as many desserts.
The bigger challenge for is in 2020 is rising costs. For instance, our monthly health insurance premiums increased while our coverage plan didn’t increase in quality. We’re also paying more for a few groceries and we have had some surprisingly expensive bills that challenge our emergency fund.
When your expenses increase by no fault of your own, working extra hours is the only way to make ends meets.
While I haven’t pulled the lever on these side income ideas yet, these side hustles offer flexible hours:
- Shopping for groceries as an Instacart shopper (you don’t have to deliver restaurant food)
- Delivering food with DoorDash (this is the busiest food delivery app in most cities)
If you have free time, put it to good use and make extra money. My side hustle (freelance writing) is now my primary income stream. You never know what will happen. Be patient and try new things to find out.
Invest Some Cash
I recommend starting with index funds as they are low-fee and give you instant diversification. If your employer has a 401k, invest enough to get the monthly match–it’s free money.
Once you build a solid stock and bond index portfolio, consider investing in individual stocks. Even if you’re not ready to buy single stocks, I recommend knowing what the stock market is doing.
Morning Brew is a free, daily 5-minute read covering stock market news. The digest can also give you investing ideas and help you plan your financial future.
You Too Can Live on $35,000
Avoiding debt and knowing how you spend your money on a daily basis is essential to living on $35,000. Making less than the median national or regional income doesn’t mean you will live paycheck to paycheck. Plenty of “wealthy” people struggle to pay the bills because they chase a high social status.
It is easier to save for retirement, pay off debts, and take exotic vacations with a high income. But a little planning and a positive mindset make it easy to live on a smaller income. Speaking from personal experience, I have no regrets giving up my large salary because we know how to thrive on our smaller income.
- How to Prepare for the Next Recession
- 7 Money Traps of the Struggling Middle Class
- 6 Advantages of Being Debt-Free
- Why I Don’t Watch TV
$35,000 a year is how much an hour?
Your annual salary is $35,000 a year when you make the following hourly wage each week:
- 40 hours a week: $16.82
- 50 hours a week: $13.46
- 60 hours a week: $11.21
Can you live on a small income?
Yes but it’s not always easy. You will need to keep your expenses as low as possible. One of the best ways is planning family meals instead of going out to eat. Also, ditch cable tv and use a pair of rabbit ear antennas for local channels and get a streaming app to watch on-demand videos.
That’s what I’ve done since 2008. It was an adjustment at first, but you will save money and discover new interests that don’t involve watching tv.
*Eligibility requirements apply. Free instant delivery is available for eligible Empower Checking Account customers with an activated debit card. Banking services provided by nbkc bank, Member FDIC.