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Do you believe you just couldn’t live on $30,000 a year? Well, you could. For that matter, many families do. In some cases it’s because that’s how much they earn after taxes. In others it’s because they choose to live on that $30,000 so they can save the rest for retirement, to buy a house or pay for their children’s college education.
You would need to earn a bit more
To have a net income of $30,000 a year means that the only federal tax you would be paying would be your FICO (Federal Insurance Compensations Act) tax, which is currently at 6.2% This means your total annual gross pay would have to be at least $31,860 or $2650 a month or $15.30 an hour.
A typical budget
What would your budget look like if you were living on $30,000 a year? Here are the five major categories and the percentages you could budget for each.
Mortgage or rent
The maximum percentage you should spend on housing is 25% to 30% of your income. And this should include your utilities and other monthly home expenses such as homeowners or renters insurance. This means to live on $30,000 a year you would spend no more than $625 to $750 a month for housing.
You should spend about 18% of your income on transportation whether you drive, take the bus, train or a cab. If you drive, this needs to include your gas, tolls, car payments (if applicable) and your auto insurance. This means you will need to budget about $450 for transportation.
Even when living on $30,000 a year, it’s important that you save at least 10% of your income. This would be approximately $200 per month. This will add up so that by the end of the year you would have a nice $3000 cushion.
You will need to spend no more than 15% of your budget for food. This means about $400 a month. If you have a large family, this just might be difficult but it is what you should shoot for.
It’s best to keep your spending on the Internet and your phone (including cell phones) at no more than $170 a month or about 6% of your total budget.
The biggest drain
Without question the biggest drain on any budget is the cost of housing. If your mortgage or rent exceeds $750, you may have to find a cheaper place to live. You might be able to lower your mortgage by refinancing. The interest rates on mortgages today are at almost an all time low. As an example of this, www.bestrateloans.com is currently advertising a 30-year fixed rate mortgage with an interest rate of 4.125% and the website www.bankrate.com reports that the average interest (as of this writing) for a 30-year fixed rate mortgage is 4.33% (4.39 APR).
What this would leave is $680 for everything else. And since everything else could be a lot of things you will need to get creative or to put this another way, you will need to live frugally. You could save money on food with a home garden and comparison shop for your auto insurance to make sure you’re getting the best deal possible. And if you’re carrying more than $200 a month in debt, you need to find ways to get rid of it. One of the best methods we’ve found is to “snowball” your debts. This means ordering them from the one with the highest interest rate down to the one with the lowest. Then focus everything on paying off the debt with the highest interest rate as this will free up the maximum amount of money you would then use to pay off the one with the second highest interest rate and so on. While you’re doing this be sure to keep making the minimum payments on your other debts. Follow this strategy and you could be completely debt-free in just a year or two – depending on how much you owe.
Other ways to trim costs
In addition to the tips given above there are some other ways that you could cut costs to stay within that $30,000. Here are six of them.
Become an extreme couponer
We have seen cases where people have been able to cut their food bill from $800 a month to less than $400 by couponing to the extreme. There are websites where you can get manufacturers’ coupons that you can use at practically any store. You can even buy coupons in bulk. Virtually every grocery chain now has loyalty programs where you automatically receive good money-saving coupons at least once a month. The store we use emails us 18 pages of money-saving offers each month. We just choose the ones we want and they are then downloaded onto our loyalty card.
Eat out but sensibly
There is absolutely no reason to pay full price for meals when you dine out. You can get cheap gift cards from Restaurants.com that’ll save you 50% or more so when you go out to eat, this could cut a $60 bill down to $30 and save you as much as $1440 a year.
(Photo credit: Foter.com / CC BY-SA)
Get your entertainment kicks for less
Anytime you go out to a movie it probably costs you at least $30 and that’s with no popcorn. You might be able to find a theater rewards program that would get you free tickets and snacks. You could pay for your family fun using your cash back debit card. Or you could stream movies and TV shows to your TV using Netflix for just $7.95 a month or if you really want to go the cheap route there is RedBox where a relatively new movie costs just $1 a night.
Save on clothing
The first thing you can do to cut your clothing costs is to stop buying brand-name stuff. As nearly as we can tell the biggest difference between a sweater from Abercrombie and Fitch and one from Target is that the first one has a label that says Abercrombie and Fitch and the one from Target doesn’t. You could save a lot of cash by shopping at discount stores such as T.J. Maxx and Marshalls. And consignment stores can be a good way to get designer-label clothing that’s been gently used – for far less than if you were to buy it new. There are other ways to save money on clothes by shopping yard sales as revealed in this video.
Ditch that second car
If you have two cars think seriously about ditching one of them. That would basically cut your transportation costs in half. You would save even more if you have a loan on that car as you could sell it and pay off the loan. That would cut both your debt and your transportation costs.
Let your smartphone help save you money
There are a number of apps available for use on Android or iPhones that could help you save money. One that we like is RedLaser. It’s available for use on the iPhone, Windows phone 7 and Android phones. The way it works is you simply take a photo of a product’s barcode. RedLaser will then search, compare and spit out a list of the best available prices for all online and brick-and-mortar stores within the radius of a few miles. When you find the lowest price for an item, you can use “By It Now” directly through the app.
A second helpful app is Slice, which can be used on the iPhone or Android phones. It syncs with your Yahoo or Gmail accounts and when it’s opened will immediately go hunting in your inbox and automatically keep track of your shipped orders then alert you as to price drops that could help you take advantage of adjustments at merchants that offer this. Walmart, Kohl’s and Target are examples of adjustment-happy merchants.
A third of these useful apps is Retail Me Not. It’s only available for use on the iPhone. What it does is give you access to literally tens of thousands of coupons and deals from retailers that are convenient to you. This enables you to do your shopping online direct from your phone and even redeem coupons directly in the store from the app.
Coupon Sherpa can also help you save money. Plus it eliminates the need to clip organize and store coupons. It’s website offers both printable and mobile coupons. You can tell the app your favorite stores to easily track their latest coupons.
Finally, there is the app Key Ring. It’s free and can be used on an Android, iPhone, iPad or Blackberry. What it does is give you the ability to store all of your loyalty cards. All you have to do is take a picture of the ID number for each card and it will be stored in the app. Then your loyalty cards will be available to use whenever you need them and you will never leave any savings behind.
Of course, don’t forget to keep track of all your spending and saving with a helpful mobile budgeting app. In this way you’ll be sure of exactly what’s coming in and what’s going out.