Figuring Out a Great Life on a Limited Budget

About a week ago, Sarah and I sat down and took a look at our finances, something we do on occasion. We’re mostly just looking for things we can be doing better, as we’ve found that, for the most part, we’re on a very good financial path that we don’t want to upset.

For kicks, we decided to see what our day-to-day financial life might look like if we suddenly both decided to quit our jobs. What would happen to us if we were both unemployed by choice for a long period? We ran the math on our retirement and other savings and found out that we would be living somewhere close to the poverty line if we stuck with a 4% withdrawal rate on our savings and added in residual income that we would earn with no additional working effort.

This was an unusual moment for us. It was the first time that we felt like we could actually do this. We could, if we really wanted to, walk away from our jobs and just fill our hours however we wanted on the backs of the careful spending and saving and professional choices we’ve made over the past decade.

But what would that life really look like? Could we live an enjoyable life on that income level?

We concluded, after some discussion, that if we gave up some of the things that we value, we could in fact pull this off, and that it’s the relative value that we place on those things that would maintain our professional focus for the ensuing years. (Mostly, we’d have to give up some well-loved hobbies and we would seriously axe our travel plans in coming years.)

We could live a happy life on about $22,000 a year, in other words. This does include having our home paid off in full, though we would still have to pay insurance and property taxes on it.

What would that life look like, though? How can someone with modern tastes enjoy life on such a limited budget? Mostly, it falls right in line with the way we already live our lives, with a few significant alterations.

Cut almost every subscription bill right down to zero or as close to it as possible. We’d eliminate our cable bill and switch exclusively to Netflix and over-the-air channels (with Netflix being chopped, too, if necessary). We’d keep our internet bill, but go down to a lower speed, and the same would be true for our cell phone bill (less data, mostly). We’d cancel basically every other subscription that we have – things like Amazon Prime would vanish.

The thing is that we mostly use television for unwinding from a stressful professional day — and without that daily stress, neither one of us would have much reason to watch television at all.

Is this a big loss? See, the thing is, it seems like a big loss given our day-to-day routines right now. I need a stable internet connection for professional purposes (as does Sarah at times), but without that… what real purpose does it serve? My main hobbies don’t involve the internet and none of Sarah’s do. I almost never watch television and Sarah usually only watches it in the evenings to de-stress, and without professional stress there’s really no need for anything beyond over-the-air channels. Most of the Prime packages I get are work-related (books for research, etc.) so that could easily go away. It’s easy to see how many subscriptions and ongoing bills are mostly necessary thanks to our careers, and eliminating most of them and reducing some of the others would not strongly negatively impact our day-to-day life.

Eliminate a vehicle. With both Sarah and I no longer chasing professional goals, we could easily eliminate one of our vehicles, reducing ourselves down to one vehicle that could transport our whole family if necessary. We’d sell or trade both cars and replace them both with the most fuel-efficient minivan that we could find.

This elimination cuts out insurance costs, registration costs, the cost of replacing a car, and so on. There’s no need to own and maintain a second car if we can get by with the other transportation tools available to us to meet our needs.

Is this a big loss? Again, it’s not a loss at all if Sarah is no longer commuting to work. Our biggest real need for vehicle redundancy is to ensure that Sarah can make it to work in all circumstances (nasty weather, a car breakdown, etc.). If that’s no longer a need, one vehicle can meet our family’s needs almost all of the time, as redundancy is far less vital. Our day-to-day quality of life would barely be impacted by the elimination of a vehicle.

  • Related: The Dead Minivan Experiment: Our Attempt to Become a One-Car Family

Improve the fuel efficiency of your remaining vehicles. Taking little steps to make your current automobiles a bit more fuel efficient can save you a surprising amount on fuel costs, making each and every drive a bit less expensive. Naturally, using your cars as little as possible is the best strategy, but when you do use your car, it should burn as little gas as possible.

You can improve fuel efficiency by keeping plenty of air in your tires, by minimizing the weight you’re carrying in the vehicle (except under winter weather conditions, where extra weight can sometimes help with traction), by driving at the speed limit, and by driving in a fuel efficient manner — that means not overly accelerating and coasting and minimizing brake use when possible and reasonable.

Is this a big loss? Most of these strategies result in no real change whatsoever in a person’s day to day life. It simply means that when you do drive, your car isn’t eating as much gas, which is going to end up saving quite a bit of money over the course of a year.

Use alternative methods of transportation. Even better than using less gas is simply using no gas at all. When you have to do something outside of the house, consider using other methods of transportation to get there such as walking or riding a bicycle.

Take our current situation, for example. We live within a couple of miles of a grocery store and a library. It might be tempting to just drive there, but the truth is that riding a bike to both places doesn’t take much longer, gives me some exercise, and doesn’t burn any gas at all. I can hit the library, hit the grocery store, and get back home in not too much more time than I could in a car and it’s basically free.

Is this a big loss? It does require some changes in the types of transportation that you choose to use and if you’re not used to walking or biking a mile or two, it can be challenging at first. However, most alternative transportation methods at short distances don’t take significantly longer than using a car, provide some exercise, and have virtually no cost associated with them.

Strongly consider moving. While our current home is paid for, we are still facing a significant property tax and insurance bill each year. A smaller home – one that eliminates a bedroom, for example, and perhaps eliminates one of our “family rooms” and has a more efficient layout – would serve our family perfectly well.

Making that move would create some revenue from the home sale, enough to buy the new home and leave us with some leftover money. It would also cut our property taxes and insurance costs, which would lower our annual burden.

Is this a big loss? Honestly, it’s not that big of a loss. We essentially have two living rooms in our home, making one of them practically redundant, and we could easily trim a bedroom and reorganize our sleeping arrangements. I would no longer need a home office, which frees up even more space. While a move wouldn’t be a guarantee, I’d describe it as fairly likely if we were on a limited budget. Our day-to-day quality of life wouldn’t be significantly reduced by a move to a smaller home.

Eat mostly at home. We already eat mostly at home, but this would become even more frequent. Our biggest reason for eating out at this point in our lives is our need to stack a bunch of family appointments and activities together onto the weekends which sometimes leaves us out and about during a mealtime. With more flexible scheduling, which is what would happen with one or both of us stepping away from our careers, we would rarely find ourselves in that position.

For many families, this can be a steep threshold to climb. As I’ve noted in other recent articles, the average American family eats out more than they eat at home and the primary reason for that shift is a growing lack of comfort in the kitchen. Many people resist making food at home – even though it’s incredibly obvious how much money it saves – simply because they’re intimidated by how much time and effort it will take as an addition to their busy lives. The truth? Cooking at home actually isn’t that hard, especially with tools like a slow cooker, and the amount of money it saves is tremendous. Plus, if you start cooking and get more comfortable cooking at home, it starts to seem easier than going out to eat (I’m not kidding in the least – I’d rather make a simple meal at home than go out most days, even if the cost were the same).

Is this a big loss? For our family, it’s not a major change, so I wouldn’t describe it as a major loss. Eating out would become even more of a treat, of course, and we’d make almost everything at home (and plan picnics for our excursions). For other families, this might be a tougher challenge, but it’s one that becomes easier the more you eat and prepare meals at home.

Find free or extremely low-cost hobbies and sources of entertainment. When I look at three of my primary hobbies – reading, playing tabletop games, and walking on trails – all of them could easily fold into a completely free hobby. I can fully sustain my reading hobby at the library. The hiking hobby is already basically free. The tabletop game hobby could be sustained by playing what I already have and trading for other games and attending community game nights. So, luckily, if our income were suddenly sliced, I would not have to make major changes to my hobbies, though I would have to cease many of my hobby purchases.

This might not be true for others. Many hobbies, like golfing and hunting, have a constant upkeep of expenses. Any hobbies that constantly require new supplies (golf balls, ammo, etc.) or constantly require entry fees (like greens fees) are naturally expensive hobbies and should be looked at very carefully for anyone struggling to find financial success on a tight budget.

Is this a big loss? For us, it’s not a big loss. Sarah’s primary hobbies largely overlap with my own, so we’d just utilize the library all the time for books and movies and we’d hit all of the local parks for trails. For others, it might be more of a challenge.

Expand gardening operations and consider raising chickens. We currently have a small garden and that’s something I’d love to expand greatly with an increase in my free time. Our garden, as it is, is an income-positive hobby already, as we reuse seeds from previous years and plant them again for more produce. The only real cost is time and I find that time to be very meditative and valuable for my mental well-being.

When I was a child, my family raised chickens primarily for their eggs, though occasionally for eating. If you have a good location for it, chickens are actually pretty easy to raise. I would happily raise a few chickens again in order to enjoy the eggs they produce.

Is this a big loss? It would push gardening (and perhaps chicken raising) more to the front of my list of hobbies, but is that a big loss? I don’t think so. Gardening is already something I enjoy in a narrow timeframe, so giving it more time actually seems really appealing.

Buy almost exclusively store brands. This is something we already largely do, but perhaps not as universally as we could. What we’ve found is that for our purposes, most store brands are functionally identical to the name brands, with the only difference being that the store brands have a lower cost and the name brands have flashier packaging and a more familiar name. There are a few rare exceptions (

trash bags come to mind), but this rule holds almost universally true for us.

Many people perceive a decline in quality when using store brands, but most of the time that decline in quality comes from not paying close attention to the name brand but suddenly looking for flaws when buying the store brand. Often, those same flaws exist in the name brand, too, but people aren’t looking for flaws in the name brand.

Is this a big loss? For the vast majority of products people buy, buying a store brand is going to have zero impact on their life versus buying a name brand. The only difference that it will make is in an occasional product where you’re already very sensitive to product performance. Most of the time, they’re truly identical, and in the cases where store brands and name brands aren’t exactly the same, you won’t notice a difference the vast majority of the time.

Cut vices down sharply. Many people have a vice of some kind that helps get them through their life. Alcohol. Tobacco. Marijuana. Maybe something else entirely. Vices often form a psychological crutch that people rely on to take the edge off of their stress and challenging feelings.

The problem is that vices are an expensive psychological crutch when a cheap one will do. Smoking might take the edge off of stress and create a brief bloom of good feelings, but so do many other practices in life (like meditation or vigorous exercise). Not only that, those alternative methods of bringing about positive feelings and de-stressing are often far cheaper than vices. There might be a case for occasional social use of vices, but when you’re using them when at home alone, there are better methods for de-stressing that are more effective, less expensive, and have much better long term health consequences.

Is this a big loss? Cutting a vice out of your life is hard, particularly when you have daily routines built around them or they’re physically addictive. However, finding new ways to handle daily stress and negative feelings, particularly ones without a constant financial cost, is going to reduce your expenses drastically while also making it easier to deal with those feelings.

Make your home as energy efficient as possible. Your home gobbles energy, as witnessed by your monthly home energy bill. One effective way to continue leading a great life on a low budget is to find every possible way to trim that energy bill, and one great way of doing that is to make your home incredibly energy efficient.

There are lots of methods for doing this. You can replace all of your light bulbs as they burn out with LED bulbs. You can air seal your home by caulking your windows and adding weatherstripping around external doors. You can add more insulation to your home, too. The list goes on and on.

Is this a big loss? Since you’ll essentially not notice any of the energy-related changes at all around your home, it’s a very big stretch to suggest that any such changes are a loss at all.

Maintain your home, your car, and your expensive appliances. One big expense that often hits many people when they’re trying to live a great life at a low income is the unexpected expense of something that you rely on breaking down. A car breakdown or an appliance failure at an unexpected moment can thrust a huge expense at you at a moment when you least expect it.

The best solution that a person can apply to this is to simply keep your stuff maintained. Follow the maintenance schedule for your automobile as closely as possible (you’ll find it in the manual) and do as much of the maintenance yourself as you can. Look into common steps for maintaining your home and your largest appliances and follow them on a schedule as well. Put things like replacing the furnace filter or vacuuming behind the fridge on your calendar and set aside a little time to do those things and your home, car, and appliances will last far longer and result in far less unexpected expense.

Is this a big loss? It takes time, sure, but it’s time that you’re not spending having to figure out how to deal with a broken-down car or a failed appliance. It’s time you’re not spending shopping for a new car or a new appliance. I’d far rather spend some time doing a little low-cost or zero-cost maintenance than to spend time shopping for a new appliance and dropping hundreds or thousands of dollars.

  • Related: 11 Simple But Vital Home and Auto Maintenance Tasks That People Often Forget

Final Thoughts

Almost all of the strategies above have little real impact on a person’s life, particularly if they have a bit of extra time available. I consider these strategies to be the key part of anyone’s plan to deal with life changes that result in a lower income, whether that change is by choice or otherwise. They can help you through adjusting to a period of unemployment, an early retirement, a lower-paying job, or any other shift that may lower the stress and challenge of life but decrease one’s income.

In the end, lower income is not a ticket directly to misery. Instead, it’s an opportunity to look closer at the life routines we all take for granted and adjust them in a way that enables us to skate right through the harder part of life’s changes and embrace the benefits.

Good luck!

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Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.