How To Live On $13,000 A Year

Despite popular belief, you can live a really good life on $13,000 a year. Perhaps it’s the many years I lived on $500 a month that make a $1,100/month lifestyle seem lavish.

Once my house is paid off (by February 2018), this will be my monthly outlay for living expenses. This expense list below reflects my current lifestyle*, so the main thing I’d be losing is the mortgage payment (plus all the extra principal I’ve been adding to my payments). For some, $13,000 a year can either be super low or super high, depending on the cost of living in your area. Some can get by on $5,000 a year by not living in a house and by not owning a car. Everyone needs to figure out what is enough for them and stick with that.

For those who say “well that’s only for one person,” you will be surprised to know I can support my girlfriend on this as well**. Children could also be mostly-supported by this outlay, though it would cost more monthly for insurance, food, clothing, and other expenses (though keeping iPads and other gizmos out of the house definitely keeps costs down).

Before I list my personal monthly expenses, here are a few tips on how to cut your expenses to live on less than $13,000 a year:

- Live in a smaller house/apartment.

- Live closer to work (within walking distance is ideal).

- Set the thermostat to 60F in winter (use space heaters and dress appropriately) and 75-80F in summer (use fans).

- Buy a used car for cash. Skip the collision insurance.

- Avoid debt like the plague. If in debt, make plans to pay it off aggressively, starting with the debt with the highest interest rate. Stick to your plans by sharing your goal with others.

- Avoid the mall and any shopping trips. Sell something to finance your next purchase. Or better yet, sell something, save the proceeds, and bask in your less cluttered living spaces :-)

- Drop the cable subscription and any magazine subscriptions.

- Rethink your cell phone plan.

- Find hobbies that cost next to nothing or are free.

- Purchase quality clothing that is always is style. Make sure all shirts match all pants.

- Use a clothes line instead of a dryer (clothing will last longer).

- Eat more fruits and vegetables. Embrace the versatility of oatmeal.

- Shop less for groceries and plan your meals in advance. The freezer is your friend.

- Start a garden. Learn to compost. Learn how to preserve food.

- Drink water instead of coffee, soda, fruit juice, milk, etc.

- Drop the gym membership and exercise outside.

- Use a hand-powered mower. If your lawn is too big, get a smaller lawn.

- Get a high deductible health insurance plan.

- Purchase things that are easy to repair and retain their value.

- Learn how to fix/do something on your own instead of instinctively calling an “expert.”

- Become a regular at the library (this will reduce all media expenses, and may replace your need for a home internet connection).

Now, here’s my list of monthly expenses (post-mortgage):

Property taxes and insurance (on 1,150 sq ft house): $339
Electricity: $50
Water/Sewer/Trash: $75
Oil and burner maintenance (monthly average): $150
House Maintenance Fund: $75
Food: $150
Health Insurance: $72
Car Insurance: $39
Gas: $75
Car Fund (to cover non-monthly car expenses): $50
Library: $5

Total: $1,080 / month ($12,960 a year)

Even if I moved and decided to rent rather than own, this expense list would still be valid since I would substitute all house-related expenses (property tax, insurance, water, sewer, trash, oil, and money set aside for general repairs) and replace them with rent and renter’s insurance. I’d leave electricity alone since most renters are responsible for the electric bill. So that leaves almost $650 for rent, which in some places can get a nice apartment, and in others, a lot on which to park an RV. Of course, if I went car-less, then I’d have over $800 for rent, though I’d opt for a cheaper place. (See Three Things To Make You Go Broke)

I own my car outright, so that keeps monthly vehicle expenses lower. Also, notice the lack of cable, internet, landline phone, cell phone, etc. It’s true that I don’t have the first three, but I do have a cell phone. I had a dumb phone so my employees had a way to get in touch with me. Now, as my business grows, I decided to get a smart phone which is paid for through the business and written off, so therefore, it’s not included on my expense list***. Also notice there are no categories for clothing, splurges, eating out, etc. I rarely buy clothing, and only eat out for special occasions. It’s not that I’m depriving myself, I simply don’t desire to buy tons of stuff and eat out at restaurants. Any media I need (books, music, magazines, newspapers, movies/TV shows, etc.) is conveniently stored for me at my local library. Movies and TV Show DVDs are $1 each at the library (I pay 83 cents each since I purchase the “6 for $5″ coupon book) (See Getting Rich At The Library (Couch Potato Edition).

Do you have any tips for living on less? Please post them in the comments below!


A note about inflation: Of course, property tax and insurance, in addition to all others on my list, will go up over time. If renting, rents will go up in lockstep with all property-related expenses (since the landlords will need to cover the increases somehow). With an investment portfolio and a business, my dividend and business income will go up (business income goes up as I raise prices for my goods and services gradually over long periods of time to adjust for inflation). In time, this article should be translated to “How To Live On $26,000 A Year,” but by then the average income will be north of $100k.


* This is assuming I keep my car and drive the same amount, which I would not do if I decide to work less. I own a business that will support this lifestyle on about 10 hours of work each week. I have the option to double my income by taking on more work (about 5 extra hours of work each week will do the trick). I also have the option to sell my house and use the proceeds, my other investments, and business income (without my participation, which I doubt I’d do since my job is very fulfilling) to fund a $13,000 a year lifestyle for two people. $13,000 a year would go a long way in a small cabin, which would be my first choice if I sold my house.

** Of course her cell phone, health insurance, car bills (gas, maintenance, insurance), isn’t included on this budget, but the only one she would need would be the health insurance. Everything else she actually needs would be covered with this budget (contrary to what most people say, a car and a cell phone are not needs).

*** I am very low tech. If it wasn’t for my business, I would not have more than a pay-as-you-go phone.

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