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Ways to Live on a Low Income

Updated on June 7, 2013

As a project administrative support temp for the better part of the last ten years, I have had stretches of several weeks without an income or unemployment benefits in-between assignments. I have lived alone in Seattle, one of America's more expensive cities, for the last three years and made ends meet despite earning an average of less than half of the City's annual median income of $45,736. The most I made in a calendar year is roughly $27,000, and typical years see me earn $23,000-24,000.

Yet I have been able to eat at restaurants, go out to bars, buy tickets for sporting events, fly to see family once or twice a year and even save a couple hundred bucks per month.

How can a person manage this? I did it by learning and living by six basic rules:

1. Set a strict budget with expenditure limits and monitor your budget regularly. When my last roommate moved out of our two bedroom apartment with little notice three years ago, I fell into a panic. I could barely manage my end of our expenses (my assignment at the time paid a weak hourly wage), and with no prospective roommates on the horizon I had no idea how I was going to pay the last three months of the lease, let alone save for moving expenses to a new place.

After talking with a financially intelligent friend who had fallen into the same boat, I believed I could make it, and set out to reduce my expenses by tightening my budget. Used to eating out and holding little discipline for my money, I started a spreadsheet and noted every single bill and expense I expected to pay (including grocery trips), along with every paycheck I expected to receive. I started cutting unnecessary expenses until there wasn't a single negative ledger total at any point on the spreadsheet (if there was, that meant I could not afford to pay the bill in question).

Instead of a blank check at the supermarket and eating out whenever I wanted, I restricted myself to $30 a week for groceries and no other expenditures. I learned to love rice, bread, cheap beans, to stretch a cheap purchase of meat for a whole week, etc. Gone were deli breakfast sandwiches and more than one cup of coffee every couple days. If I wanted to spend anything beyond that, I had to add it to the spreadsheet and make sure my numbers still added up before doing it. The volume of items on my next bank statement went way down, and in finally being able to recall every last purchase I realized how much I was really overspending beforehand.

I was able to squeeze out the last three months, especially once an unexpected raise came along at the assignment and allowed me to save extra for a move to a more affordable one bedroom apartment. But even had that not happened, I opened up my budget by culling all of the excesses, then setting tight limits that I stuck to. Life became easier once I got a cheaper living situation and moved on to better paying assignments.

2. Remove unnecessary drains of your income. One common thread I find among people who make more than I do but can't seem to hang on to their money is how much excess they have in their lives. Expensive cable TV, regular clothing purchases, too many nights out, lavish cars that require hefty payments and insurance fees, etc. I'm not a fly on the wall in these people's lives, but just by listening to and observing them over time, I can find half a dozen reasons off the bat why they "never seem to have any money".

If you can move to a place closer to work, do it. If you can get a job closer to home, do it. If you can trade in the gas guzzling luxury ride for a smaller, more fuel-economical car, do it. If you can get to work in reasonable time by bus or train and leave the car at home, do it. If you have 200 cable channels, can you make do with 100? If you have a gym membership you don't use that much, perhaps you can find a way to work out at home and ditch it?

Look at everything that you spend money on and ask the question, "How necessary is this, really?" Many of the things you take for granted may be some of your biggest unnecessary drains.

3. Find a stable living situation well within your means. Hopefully you haven't let the real estate agents fool you into taking on a mortgage that eats half your income or more. Just because you feasibly can pay a mortgage on a home doesn't mean you should. Ideally you shouldn't spend more than 35-40% of your monthly income on living expenses, including rent/mortgage, utilities, homeowner fees and property taxes (if applicable).

If you're renting and you find your monthly rent is stretching you thin, do some digging on other possible places to live. Ask yourself how necessary amenities like a garage, a dishwasher or a balcony are, or how much space you honestly need to live comfortably. If you're willing to cut down on your demands, and sell off or give away some of the clutter in your home, you could find yourself a reasonably nice place at a portion of what you're paying now. Perhaps your current arrangement requires you to pay for expenses like water, sewer or gas that another complex may cover.

Perhaps you can find a place closer to a bus or train line that allows you to take transit to work instead of driving in, which saves money on gas and could save you a lot more if it's possible to give your vehicle up entirely and rely on rentals and car-sharing for when you do need one. My current place, for example, is an $800ish studio in Seattle's Eastlake neighborhood, just north of Downtown, that gives me close access to most of what I want or need. Often I don't even need to use the bus.

Price is important but so is location. Though I might be able to find a cheaper place in the suburbs of Kent or Federal Way, I would have to commute much farther, definitely need a bus pass (which is more expensive when you commute in from the suburbs due to distance) and wouldn't be close to many businesses due to suburban sprawl. I might even need to buy a car to get around. I may pay a bit more for a place in Seattle, but I get a lot of extra value over suburban residences that help offset the cost and provide additional hidden savings.

Look not just at the rental cost, but at other hidden amenities that can help you save money in other ways. Either way, try to find a living situation that doesn't eat up more than 35-40% of your monthly income. You want to keep your money free not just to pay your other bills and save, but just in case any emergencies arise.

One idea: If you live with a roommate, see if you can live alone on a similar price. I found that my electrical costs were high with roommates, but much lower when living by myself. This was because my roommates used heating and electronic devices that I did not, major drains on electricity and boosts to an electric bill that were not my fault. Another idea is to find others who share your personal habits, though this is not nearly as easy.

4. Take preventative measures to stay healthy. As the Federal government's health care debate has exposed, medical care in this country is very expensive, even if you have insurance, which itself doesn't come cheap. However, the lion's share of medical care treats injuries, ailments and existing sicknesses... rather than helps prevent illness.

I haven't needed to see a doctor outside of regular checkups in nearly a decade thanks to regular exercise (walking all the time helps keep you in shape, but I also do resistance exercises during the week) and a balanced diet rich in fruit, vegetables and whole grains, supplemented with a daily multivitamin. Most Americans are not only extremely sedentary (sitting at desks all day, sitting on the couch all night), but practice poor dietary habits rich in fatty fast food, processed junk and sugary sweets. This only promotes weight gain, heart disease, diabetes and other conditions that snowball into various poor health conditions that require expensive trips to the doctor.

Yes, I carry a cheap insurance plan in case of emergencies (which thankfully I've never had to use). Rather than get sick, the cheaper and easier way to manage your health is to become a health nut, develop an active and nutritious health-friendly lifestyle and avoid getting sick in the first place. Consider those push ups, jogs and servings of brown rice and asparagus a physical health insurance payment.

5. Minimize food spending outside of the grocery store. Anything purchased at a cafe, deli or restaurant comes at a markup since the food is to some degree prepared for you. The tradeoff of the convenience of having (sometimes) hot, (mostly) tasty food made for you is that you're paying more for it than if you had prepared it at home yourself.

Eating out is fine for special occasions or for times when you're on the run and don't have time to prepare or grab something at home. But making it a habit can prove a drain on your budget. Never mind the $4 lattes: A $3.29 breakfast sandwich before work will set you back $16.45 (plus tax) per week. That amount of money could buy you weeks worth of English muffins, sausage patties, cheese slices and eggs... if a sausage and egg sandwich is what you really want.

But it's so much tastier from the restaurant than at home! you say. You have a point there, and I have a point here: The reason restaurant food tastes so much better is because of additives and sodium... lots and lots of sodium, way more than is healthy to take in during a single sitting. Eat the right dish and you could take in a day's worth of sodium all at once.

That goes back to my point about maintaining good health: Excessive sodium intake can cause high blood pressure and water retention, which bloats you. And aside from looking fat, such food can actually make you fat, as many restaurant dishes can contain more than a day's worth of fat grams, as well as heart-risky saturated and trans fat, plus a giant load of processed carbohydrates you may not get around to burning off.

And that never minds the costliness of even the cheapest fast food (often in the $4-5 range), or of typical restaurant fare ($7 for appetizers, $10 or so for entrees). Think about how many grocery essentials you can buy for that $5, $7 or $10... money you're spending for one meal that's probably unhealthy. That $300-400 a month spent on fast or restaurant food could help pay off your credit card debt, or buy you a round trip somewhere nice.

Think of the rich flavor as a siren's temptation. It's only to indulge every so often. Indulging everyday (or close to it) is as risky to your health as it is to your wallet. Prepare as many of your meals at home as you reasonably can, or find healthy alternatives to take on the go (granola bars, apples, bananas, etc).

6. Avoid major purchases unless needed or budgeted for. Big screen TVs, $300 pairs of shoes, Hawaii vacations... I love them as much as the next person, but I also love not getting calls from collection agencies, not maxing out my credit, not starving and not getting evicted.

This is not to say these things have no place in a frugal life: Again, I take regular trips to see my family. But making sure you not only pay all your necessary bills, but make significant payments towards any debt while stashing money in savings, should be your top priorities. Only when these needs have been addressed should you consider spending extra money on frivolities.

Every month, for example, I add up the total amount of the following:

1. My required rent payment
2. My monthly student loan payments
3. $100 in monthly payments towards my consolidated debt
4. $200 in deposits to my savings account

For supermarket and other purchases, I make those with a credit card that I look to pay off every month. The above expenses for me add up to about $1200.

I monitor every paycheck I take in for the month and total up my earnings with each one I receive. Once I exceed that $1200 mark (or wherever it is), I take every dime I make for the rest of the month in excess of that total and use it to pay the credit cards. I pay off the card I've loaded my expenses onto before month's end, then take the remaining money and pay towards my consolidated debt. If I had no debt, I would put it in savings and save it for a rainy day... or a pair of LCD shoes or whatever it is kids love spending their money on ;P


Following these six rules isn't exactly simple and easy, I admit. I had to change a lot of personal habits and make some significant changes to life as I knew it. I had to change a lot of things about myself that I took for granted to be unwaveringly true. But I look back and feel glad that I did so.

And I admit that as a single unmarried renter, it was far easier for me to adopt reductions in my spending than it would be for a married homeowner with two kids, or a single parent, or someone with health problems. I would be surprised if a person could impose all of the changes I would suggest in full immediately or at all. But it's possible to make changes in at least one of these facets, if not several.

I encourage everyone struggling with their finances, or looking to live on a lower income, to take a good look at everything they spend money on and figure out what they can happily live without.

Extra resources to help you cut expenses, save and invest money


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