The average income for American workers was about $40,000 during 2010 while the median income was only $26,400 (meaning half of Americans made more and half made less). I’m sure it’s fairly close to the same today.
For those living in major metro areas, this may sound unbelievably low and unimaginable to be able to live on. For others, this may not be a surprise at all. Having myself had the good fortune of having earned the gamut of wages from low to quite comfortable to in-between, I can tell you that generally speaking, we are all trained that the more you earn, the more you will spend. At the end of the day someone earning $40K may have the same amount saved for a rainy day, as the guy making $140K. People tend to spend what they have. I am guilty of having fallen into that trap for years of my career, until one day I figured it out and plugged the holes where the green stuff was flowing through. It’s amazing how quickly the reservoir will fill back up if there’s no way for the water to get out.
You could argue that often times the person making $140K is actually worse off than the one making $40K because the higher wage earner will have his income leveraged with higher loans than the other. The $140K earner may owe $400K to various institutions for his McMansion, Mercedes, college loan, credit cards, ski boat, and RV. The $40K earner may only owe $8K on credit cards or a used car loan. If the $140K guy loses his job, he’s royally screwed. If the $40K earner loses his job, well, as you can see he will be less screwed than the other guy.
While I’m sure there are plenty of responsible high-wage earners out there, my instinct and life experience tells me that most live it up and buy their toys to the limits of what banks will lend them. Very few actually plan and develop strategy that will enable them to use their bounty to live within their means and one day end up with zero debt, a paid off house, paid off vehicles, and a retirement strategy. Most of them will have gotten themselves in such high debt, that they will be working till they drop, and never pay it all off.
What about the $40K earner? Will he/she be able to live comfortably? Lets define ‘comfortably’ to include not owing anyone anything, having plenty of food to eat, a roof over their head, a reliable means of transportation, being happy with what they have and finding joy in simple things (which is really what happiness is about at the end of the day). This alone will put you in a better ‘place’ than the rich guy who will be a slave for his entire life. Sure, you could live on $40K, and be happy doing so.
After taxes (depending if you are married or not, deductions, etc.) you would end up with ‘about’ $30K, or ‘about’ $2,500 a month. If you resist burdening yourself with debt, you can do quite a lot with this amount of money and set yourself up nicely after awhile.
Here are a few tips…
Buy used things.
Learn to cook your own food.
Resist the urge to buy new high-tech gadgets.
Grow some of your own food.
Enroll in an employer-matching 401K fund at work.
Did I say don’t buy new things?
Pay cash for the things that you do buy.
Take enjoyment from the simple things in life.
Resist ‘bigger and better’.
Enjoy your friends boat, not yours…
There are plenty of old used cars that run just fine.
When you must buy, buy on Sale.
Ride a bicycle instead of a car when possible.
Make ‘being frugal’ a fun thing.
Did I say how there’s A LOT of good used items for sale out there?
Check Craigslist for FREE stuff.
In summary, I believe what I’m trying to point out is that you don’t need to make big bucks to live comfortably. I’m also suggesting that you may be happier than the ‘rich’ guy, so long as you don’t burden yourself to the system and it’s debt-machine. Instead of always striving to make more money, why not strive to release yourself from the system? It seems like a better goal to me…
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