Your Ideal Budget: Family Of Four |$40,000 Income

Your Ideal Budget: Family Of Four |$40,000 Income

I love all things budget. And having put together quite a few budgets over the years, and worked with many people on this very site to create a financial plan, I have seen a few trends. I have also been able to find ways to save money in almost ANY budget category for our family, and for the family of those who I have coached.

I have found that most everyone has unique goals and aspirations for their life, but there are a LOT of commonalities for ways to reach those goals. So I have decided to create “Your Ideal Budget“, a place where I put together the IDEAL BUDGET for individuals and families that I have created.

Come check it out, and PLEASE leave a comment with your thoughts and suggestions to create the Ideal Budget!

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Ideal Budget Family Of Four

Today’s ideal budget is the Smith family. The Smith family is your typical, American, single-income household, with 2 kids and a golden retriever. Actually, let’s make that a labradoodle (this isn’t the 90′s!). The Smiths have a 4 year old daughter, and a 2 year old son, and both just turned 30 themselves. Like I said, typical. :)

Mr. and Mrs. Smith have some big dreams in life, but their income is just below the average American household income. They feel a bit trapped by their income, and don’t know if they can ever really hit their goals.

Let’s look at the stats:

Assets

  • 401k – $25,000
  • Emergency Fund – $5,000
  • College Savings – $5,000
  • Car 1 (Honda Odyssey) – $5,000
  • Car 2 (Honda Accord) – $3,000

Debts

The Smiths are debt free, due to their frugal living choices.

Goals

  • Buy a house
  • Retire by 55
  • Pay for kid’s college

Priorities

  • Family
  • Fun

The Smiths goals seem pretty typical, but with a $40,000 salary, let’s see if they can get there:

 SMITH FAMILY BUDGET MONTH NOTES
Total Income  $   2,250.00  
Total Expenses  $   2,200.00  
Projected Ending Balance  $         50.00 Savings toward buying a house
     
Income    
Paycheck 1  $   1,125.00 After taxes, 5% 401k match and medical
Paycheck 2  $   1,125.00 After taxes, 5% 401k match and medical
Total Income  $   2,250.00  
     
Bills    
Mortgage/Rent  $       850.00 This family is currently renting a 2 bedroom apartment. If they get a mortgage, it should NOT exceed this amount.
Electric  $         50.00 Electric heat and lights keep this bill up. Air drying laundry, using efficient CFL or LED lights and keeping it cooler will help bring it down.
Water/Sewer  $         40.00 The sophisticated budgeter is going to use cloth diapers to save money, but the water will may be a bit higher than normal. Reduce usage by doing less laundry (re-wear clothing), don’t shower every single day and only run completely full dishwasher.
Garbage  $         25.00  
Internet  $         40.00 Hi-speed internet can be found for cheap. Sometimes less than $40 for the first 6 months. Just make sure you keep an eye on your bill to make sure they don’t jack up the rate on you.
Car Insurance  $         80.00 2 cars with minimal coverage should run $80 or less. Make sure to shop this around at Geico or Farmers for great deals.
Cell Phone  $         55.00 Two Republic Wireless Cell Phones only cost $25 a month per line for unlimited data, text and talk. Add in some taxes, and you’ve got smart phones for under $60 per month.
Total Bills  $   1,200.00  
     
Necessities    
Food  $       500.00 Yes, this number looks low. Yes, it can be done. With the help of eMeals meal planning, you can feed your family of four VERY WELL for $500 per month. Just pick a few of the meals per week and make enough for leftovers.
Gas/Commuting  $       100.00 This family of four has a few options for commuting. As a single income household, the breadwinner can take the bus or drive to work. The ideal family would live close enough to even bike to work (ala Mr. Money Mustache). They budget $100 per month, but try to beat this number each month.
Date  $         80.00 Parents with multiple kids keep their sanity and kindle their love by budgeting for AT LEAST two date nights per month. This can get expensive, but by splitting entrees, passing on desert, using Groupons and finding free things to enjoy, they get time away
Spending Cash  $         80.00 Contrary to logic, budgeting in spending cash can actually save you money.
Pets  $         20.00 Fido needs food, at their income they need to find good/natural dog food for $20 per month. I recommend buying in bulk.
Household  $         20.00 Odds and ends for basic living needs.
Total Necessities  $       800.00  
     
Savings Buckets    
Christmas  $         25.00 Christmas is a great time to enjoy giving, but set a reasonable budget. This gives them $300 to work with, which is plenty to have fun with
Clothing  $         25.00 Clothing is a line item we have removed from our budget, but every now and then clothes are needed, especially with growing kids. I recommend keeping this low by STAYING AWAY FROM DEPARTMENT STORES. Go to clothing swaps, enjoy hand-me-downs, and shop the occasional thrift store.
Bday/Anniversary  $         20.00 Anniversaries and birthdays are IMPORTANT. Remember it’s the thought that counts.
Beauty  $         20.00 Beauty products and haircuts are needed occasionally, make sure you have the cash ready to go.
Vacation  $         50.00 This family knows how to stick to their budget well, and has taken advantage of my Free Travel lessons to get travel and hotel stays for free. But food and outings still cost money, so they need to save for their yearly vacation.
College Fund  $       100.00 Goal #3 is to pay for college. At their income level, I only  recommend setting aside $50 per month for each kid in an ESA or other college fund savings. This should help fund community college and an in-state undergrad degree
Car Maintenance  $         20.00 This ideal family chose wisely, getting two well-loved Hondas with a lot of life left on them. Oil changes and tune-ups happen, need a small amount of cash set aside for basic maintenance.
Total Other  $       260.00  
     
Total Expenses  $   2,230.00  

 

Whoa, that’s a lot to take in. Might want to bookmark this for reference later ;)

Summary

The Smiths are doing great. They don’t have any debt, they are funding college and saving toward retirement. But their #1 goal is to buy a house, and saving a $20,000 down payment for a $100,000 home would take them a mighty long time at $50 per month. Even if your re-routed college savings, vacation fund and bday money, that would still take them 7.5 years!

So I recommend the Smiths find a single family home to rent at the $850 mark. They are out there, but may take quite a bit of searching, depending on where they live. They can use this time to enjoy the home, while building their income and working toward the other two goals: retirement and college savings.

Goal Timelines

Let’s put the “buy a house” goal on hold, and work with the other two goals.

Goal #1 – Retire at 55

With $150 per month in 401k investments, and a $150 match by the company, the Smiths are putting away $300 per month. Add in another $50 into a Roth IRA, they are saving $350 per month. That amounts to $420,000 by age 55, assuming a 7% return. If they do end up purchasing and paying off a house in that time (assuming some pay increases to save down payment), their expenses should be about $1,500 per month, which means they only need $450,000 to retire on ($1,500 x 12 x 25). So I recommend putting off retirement one more year to get to their 25x annual spending savings goal.

Goal #2 – Pay for kid’s college

Saving $100 per month will net a bit about $45,000 – $50,000 for college. This can pay for community college for both kids (or, as I would recommend, Running Start in high school). But to pay for the second two years of an undergrad degree, this may not be enough.

I recommend applying for any grants that they could qualify for, and the kids to apply for scholarships as a part time job their Junior and Senior years of high school.

Final Thoughts

The Smiths are pretty rockin’ on their less than average income. They have savings buckets, are investing for the future, and can even pay for a decent chunk of their kid’s college. They don’t have a lot of margin, but this only forces them to be more creative. And that creativity brings out amazing free and inexpensive ways to have fun.

The Smiths don’t have a lot of excess, but with a roof over their heads, good friends, good family and good food, they don’t need anything else. Their happiness is not derived by numbers in a bank account or shiny trinkets in their possession, but by the memories made and relationships forged during their fruitful life.

Take Action

If you are a young family looking to get your finances together, take this family as your model. Grab a copy of their budget HERE and bookmark this page for reference. If you are in debt, just take ALL the above savings buckets and extras and throw them at your debt immediately. Then start working toward YOUR family goals.

This is a great starting point. But if you find yourself wanting more specific help on your financial situation, I do offer 1:1 private financial coaching sessions. Please contact me if interested.

photo credit: aussiegall via photopin cc

Disclosure: A few of these are affiliate links, and I do receive a small commission if you use my links to connect with these products and services. I promise I will NOT recommend something I don’t believe in, and will do my best to explain HOW to use these recommendations to their best potential. Don’t feel the need to spend any money on something unless it will truly help you meet your financial and life goals.

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Comments

  1. You really do have to own your situation, and this proves you can live an excellent life without a high salary. They could also find ways to earn more money if they decided to increase their budget at some point as well. I would strongly suggest adding renters insurance for the home and life and disability insurance for the wage earner. You’d hate to see them have to drain their retirement or rack up credit card debt if something bad happened.
    Kim recently posted..Fun Things You Get To Do After Paying Off Credit Card DebtMy Profile

  2. I like what you are doing here, but $50 for electricity is highly dependent on them living somewhere San Diego where the weather is pleasant all year. If they lived anywhere form the midwest to the northeast this year, there is pretty much zero chance they hit $50 a month this winter. But then again you did say this was an ideal budget. I would also like to see you change their budget once both kids are in school full time and the stay at home spouse could pick up a part time job (which of course could have their entire salary directed towards savings goals!).

  3. Thanks there are a lot of great ideas here.

    I know it varies but I don’t know any family where someone is not on some type of medicine.

    I live in Texas. My electric bill last month was $90 which was $100 less than last month. My water/garbage was $60. Car gas was about $80 a week I own a paid for Honda ;-).

    • Prescriptions are covered, but you’re right, could be a copay or two. They can adjust that into their food budget.

      In the hotter climates, the electric bill may be a tough one, but any adjustment upward means it needs to come from somwhere else in the budget. The Smith’s are pretty savvy at that :)

      We pay $25/month for garbage (reduce, reuse, recycle), and $125-$150/month for gas. The Smith’s use alternatives for transportation, and are much more conservative than we are :)

  4. Great stuff as usual, Jacob. My one concern is that there doesn’t seem to be any provision for replenishing their emergency fund when, say, a car inevitably breaks down and needs a $500 repair. They could use the money they’re saving for a house or college, but this would set them back. Any chance they could become a one-car family? That would save on insurance, maintenance and repairs, especially if Mr. Smith can take public transportation (of course, there’s a cost to that as well).

  5. Saving for their own home should be a top priority.
    Single income family doesn’t need 2 cars.
    $500 a month for groceries, is too generous. $350-$400 is plenty, and they can still eat VERY well.
    College fund should be scrapped. Inform the kids from a young age, if they want to go to college, they must pay for it themselves. They will appreciate it much more (we did this in our family)
    Find a cheaper place to live.
    The wife can find a part time job and work around her husband’s schedule or take in a child or 2 to care for during the day for extra income (we did this in our family)

    • Thanks for the awesome suggestions. The Smith’s do enjoy a bountiful harvest, and could cut the food budget a bit more, that’s true. With the cost of organics and growing kids, they choose to keep $500 in there, but don’t always spend that much. Paying for college is their goal, so it stays, but hard work and responsibility are at the top of the list for characteristics to pass on to their children. And if they want to do post-grad or private school, their kids will work and pay for it themselves.

      Part-time job is an option, but not until both kids are school age. Mrs. Smith enjoys this developing time with her children, and they’ve both decided she take on extra work AFTER they are both in school.

      • Sorry, but I need to reply.
        This is the trouble. People make all kinds of excuses as to why they can’t seem to get ahead. They aren’t willing to do what is necessary.
        The children are small and will not remember much from this time. This is when you can cut a budget to the bare bones, and save like crazy.
        Having 2 cars is crazy.Saving for college, for kids who may decide never to go, is not within their income, at this time.
        Get yourself in the position now, to help them in the future, if that is what you still want to do. Plenty of ways to do that. One is to buy a house, pay it off. Remove the equity to finance rental properties (that is what we did) and then you have multiple income streams. Living expenses are the biggest part of going to college.More than one way to live free, going to college.
        When the dad is home, it doesn’t take away from the development of the children if she is away for a few hours to work.
        This family is doomed to rent for the rest of their lives.

        • The Smith’s are hard workers. They are being realistic with their numbers. One car is not out of the cards, though, I agree.

          I wrote this with specific goals in mind, that being “buy a house”, “retire” and “pay for college”. If they curb college, it’s doesn’t put them too much closer to buying a house, and puts them 100% off course for paying for college. A house will come with pay increases if they keep this lean budget.

          I hear where you are coming from, and the Smith’s aren’t opposed to extreme frugality. But right now, they’ve chosen to stay the course because their goals are set.

          Now, if we’re arguing the merits of their goals, I agree, maybe they shouldn’t be putting away for college until income increases. But it’s their goal, and I wanted to honor that (and enjoy compounding returns). And maybe instead of the driving car #2, they can pull it off insurance and park it. Still only saves about $70 per month (gas and insurance) since most of the cost is commuting.

          Now, when the income increases, i LOVE the idea of paying off the house and buying rentals. Not a better investment out there, IMO. Stay tuned, as the follow up budget will come out in the future (maybe a few months out).

  6. Inspired by this post, I threatened to cancel my Comcast internet service today and they gave me a 6-month promotional rate which should save my fam $200. The first rep I talked to wasn’t interested in giving us a deal, but I called back and got a different one who was happy to give us a discount. I also bought a used modem so I won’t have to rent theirs; that should save us another $100 over the rest of the year. Looking into Republic wireless, that will likely result in another $250 saved over the year. =)

    • Dude! Nice work! Just an FYI, the current Republic Wireless deal is on $299 phones. There are $149 phones coming out soon, so may want to hold of until then. But either way, in the long run, you can save a TON

  7. That’s a great breakdown of the essentials that go into a budget. I think with two growing kids their date money will eventually go into the clothes or food line item. I know ours has. :)
    Brian @ Luke1428 recently posted..My Fight Against Bandwagon Consumer SyndromeMy Profile

    • Haha, very true. I’ll be sure to do a follow up down the road. Let’s also hope that Mr. Smith doesn’t stay at $40k for the rest of his working career.

  8. I don’t know if I can handle this post. I’m going to say that a family of four with a dog living on $40k a year in more typical living situations (i.e. they’re not Mr. Money Mustache and living walking distance from work or have all low costs of living) is going to have rough spots in life. I’d say that even in their ideal situation as they avoid debt, these peeps are going to most likely spend more on either a) rent to live closer to work or b) gas to live in the low-rent section that’s probably not near even their $40k annual salary job. You’ll probably need about $30 per month for dog food, unless you make it yourself. You can probably bring down the food cost though to $400 comfortably. Then, if their rent is low, their electricity costs like another reader mentioned is probably high. For example, in TX electricity is quite expensive, and not as cheap as places with hydro power (OR) or plentiful power like CA. I doubt they can hire a babysitter for two nights and go out on two dates at $40 a pop. Only if either the date or the sitter is totally free. I don’t think $40k a year is a bad number, but I don’t think you can have it all. I would focus on saving some cash and starting a business.
    Sally recently posted..Humblebrags Heard ‘Round the World (What It Feels Like Being Not Rich in a Sea of Rich People)My Profile

    • I know we tweeted back and forth about this, thanks for entertaining this fun budget. It may seem improbable, but this budget can happen. Location may play a part, but all budgets are flexible, and when one cost rises, you go and lower another. Otherwise you’d just end up digging yourself into debt, which is NOT ideal.

      And, yes, the long term assumption in this budget is Mr. Smith never gets a raise. But that is also improbable, and the follow up budget will show them at a later date, with older kids and an update life situation.

      I think instead of looking at this and thinking “this is impossible”, maybe say “this is a great goal” and use it as motivation to work toward a style of frugality that allows you to enjoy life as well as optimize all areas of your budget :)

  9. - Do they live and work near DC, NY, CA, Chicago, Boston, or Seattle? $850 will get you maybe a small one bedroom far out of town. Transportation costs will be upwards of $300 per month just to get to work on the metro/train.
    - Emergency fund used for an accident or medical emergency. $5,000 gone. Extraordinarily thin margin for savings each month to rebuild it.
    - Budget Goal #1 *assumes* they can find the cash to buy a house in the next 25 years, even though you’ve put that goal “on hold.” Retirement does not seem an option for these two adults.

    • We’re on the Eastside of Seattle, and paid $850 a month for rent in a 2 bdr. You just need to search a bit :)

      DC, NY, or LA may be a bit tougher, but the ideal family will find the appropriate housing because that’s all they can afford. If they were living in the heart of a HUGE metropolis, I would hope Mr. Smith would have a much higher salary to support their lifestyle choice.

      And yes, the EF would take time to rebuild, but they would put all Savings Buckets on hold and dump $310 per month to replenish it. And their medical is great, no need for LARGE emergency bills.

      And the house assume Mr. Smith isn’t a dud, and gets a raise or two within the next 25 years, all of which he can dump into a down payment, and then mortgage payoff.

  10. I like the spirit of this post, but I think some of the assumptions are unrealistic. The $25k in a 401k already? Is that doable for someone who is earning that amount at age 30? Perhaps, but I dunno.

    And with no debt (which is great!) how did they save up enough for those vehicles? And there’s no vehicle replacement fund. Personally, I’d cut the college savings for more immediate savings needs.

    Some apartment rentals don’t have the same utility requirements — when I rented, I only paid gas and electric for instance. And, living in Indiana and Pennsylvania, it was usually more than $50/month, except for the rare times when I could keep the heat or AC entirely off.

    I think in these types of situations, a lean budget is key, but even more importantly is raising that income.
    Kacie recently posted..How to save money while babywearingMy Profile

    • If Mr. Smith started contributing at age 22 to age 30 at 7% rate of return he would have $39,000. $25k is easily attainable at 30.

      They bought them before kids when they had more disposable income. They are Hondas, so will last a LONG time. Also, if they need a new car, they can sell the old ones and upgrade for $1,000. Mr. Smith has read through all my posts on used cars and has a handle on how to get the most bang for his buck.

      Utilities can vary, but they have optimized. The budget is flexible, and can accommodate those fluctuations.

      And yes, Mr. Smith is definitely toward a higher salary. :)

  11. Great post. It would be difficult to maintain that discipline particularly for those of us who are not frugal by nature but your statement “Their happiness is not derived by numbers in a bank account or shiny trinkets in their possession, but by the memories made and relationships forged during their fruitful life” is very true and inspirational. Thanks.
    Affording Happiness recently posted..Financial MistakesMy Profile

    • Glad you enjoyed! I hope to inspire those who think it may be too difficult to live on a smaller salary. There will be many more of these for all life situations :)

  12. While I appreciate the intent, I think this budget is totally unrealistic, especially in or around a larger city.

    With a child of 4, beginning to approach Kindergarten age, school districts are crucial. Any 2 bedroom home (be it apartment or condo or townhome) in a decent school district is going to run over $1000.

    Car insurance is going to be around $100 a month at a bare minimum, assuming that there is no comp or collision coverage (Fulton and Dekalb county are some of the highest insurance rates in the nation).

    The babysitter alone will cost $40 for a kid-free “date night” … so there’s not much after that the parents will be able to do other than a walk in the park in the dark.

    $25 for clothing for a 2 and a 4 year old is absolutely and utterly ludicrous unless you have family who are able to donate used clothing for free. Kids that age are growing so fast that you need new outfits every season. Even at Goodwill or thrift store prices, you are going to exceed that budget for kids of that age.

    I see nothing in the budget there for medical costs – kids at 2 and 4 need regular checkups, inoculations, are going to catch colds and get ear infections and so forth. Even co-pays are going to add up.

    $20 a month for car maintenance is also completely ludicrous. I’m assuming that those cars need to be registered/renewed every year, plus oil changes, plus new tires, plus tuneups. Even if you buy the cheapest tires possible (at maybe $30 a tire) that’s still $240 year just in tires for 2 cars. $20 a month doesn’t even cover that.

    This type of uninformed budgeting just makes people who are in that situation feel inadequate for not being able to stick to these numbers or live according to this budget.
    Kara recently posted..Southern Style Pinto Beans (& Ham)My Profile

    • I’m sorry if this post is having the opposite of it’s intended affect. I wanted to show how even those on lower income have hope of working toward BIG goals. Let me address your concerns line by line:

      - $850 was achieved by my wife and I in a very nice city (Redmond, WA) with great schools. It is possible, just requires research.
      - Our car insurance is $80 per month for a Honda and Toyota, liability + fire/theft/towing
      - Community is key. Kid-free date night happens with friends trading off watching kids, and/or relatives babysitting. We have done TONS of $40 date nights including dinner/movie or dinner/activity. Split meals, skip desert and use a Groupon for 50-70% off your date.
      - We have a $20 per month “kid” budget (2 kids). We get free hand-me-downs, trade in old clothes for credits at consignment, and have joined a “Buy Nothing” Facebook group for free EVERYTHING, including kids clothing and toys. Again, community is key.
      - I’ll have to agree on medical, co-pays do happen, sorry for the miss. I’ll update the budget accordingly.
      - Car maintenance is VERY rare on good, reliable used cars. See this post for more info. New tires are NOT needed every year.

      Again, did not mean to frustrate those who haven’t made these kinds of moves in their financial life yet. It is meant to inspire.

      I would say the attitude of “it’s impossible!” is much more damaging than an example budget with the thrifty “Smiths”

  13. So even if you discount tires every year. I’m going to stick to ONE item that I can speak on with 100% knowledge.

    I own a 2002 Acura, which I bought used. I have no car payment and it’s in excellent condition. Here’s what it costs me to run this car:

    Annual Registration: $114 annually ($89 tag fee + $25 emissions inspection)
    Oil change every 3 months (with coupon): $100 annually ($25 x 4)
    Tires and tuneup: $160 annually (4 new tires every 2 years, plus one full tuneup a year)

    Total annually (not including fuel or any other emergencies): $374

    Multiply that by 2 cars, and that’s $748 a year or $62.50 a month. Even if they ditch one car, they are still well above your budgeted amount.
    Kara recently posted..Southern Style Pinto Beans (& Ham)My Profile

    • You are spending far too much on maintenance. Here’s what we do:

      1994 Honda Accord, 1995 Toyota 4runner.

      - 4 oil changes total (we do every 5,000-ish miles) = $60 (O’Reillys special $15 for filter and oil)
      - Tabs = $130
      - Extra Cash = $50 per year, to save for other maintenance. Plus, they have an emergency fund if needed.

      You don’t need tires every year. Last time I got tires on my Accord was over 3 years ago.

  14. Oh, and my insurance, liability only, no towing, no comp, no collision, minimal miles (since I work at home), is $21 a month.
    Kara recently posted..Southern Style Pinto Beans (& Ham)My Profile

  15. I also like this discussion, even if we don’t agree :)
    We live in Canada, and travel 7.5 months in Australia, each year (we retired 4 years ago at aged 46 &50) so we do know a thing or two about living frugally. We now live on approx $1000 total per month., plus $3400 yr total in flights.
    We raised 4 children, and for the most part, one parent stayed at home, and we earned $30k a year.

    In the budget example above you state the family’s income is $40k, but their net is $27K.
    Is there a tax refund or any other other income return to them each year..if so, how much?
    What type of job does Mr Smith do? Does he travel a lot, work in an office, work from home?
    This will impact on how close to work, they need to live.

    Even though a lot of people have mobile phones, they aren’t necessary. We don’t even have one for 7.5 months a year.You can get a magicjack for $99 total for 5 years.

    The family could search for a Vendor Finance home (we have bought 3 properties this way). A 3 bedroom trailer/mobile home is another cheap option. Getting away from renting as fast as you can, is the best way. Keep trading up.

    • Kathryn, you guys are ROCKING IT! Well done!

      And great question. I am having them withhold taxes, but with medical and 401k and 2 kids, they will probably get all that money back, you are correct. I haven’t crunched the specific numbers (to split out Federal vs. SS vs. Medicare), but say they get $1,000 back. That is definitely “extra income” they can use. I also did not include the 2 “extra paychecks” each year, as they are paid bi-weekly. So there definitely is some extra savings not accounted for that would help in the long run. But just goes to show that this budget is not as minimal as some people keep saying.

      Mr. Smith is in a cubicle farm at a big Corp, slowly working his way up. They live 12 miles from work, though traffic is pretty poor.

      Good call on magicjack, that is something we’re looking into currently as well. The Smith’s appreciate the convenience of their smartphones, though like you said, they are not 100% necessary.

      And I’ll have to do some reading on Vendor Financing. Very interesting option.

      Thanks again for the fun debate. Stick around, your expertise can definitely help people around here (including me!) :)

      • Thanks :)
        We own a magicjack…it has its limitations, but good value for the price.
        We use it mostly for the free long distance.

        Vendor Finance is basically the owner of the property, providing the mortgage, instead of a bank.On one occassion , we bought a cheap property, and just made monthly installment payments at no interest. (for 20 months)

        Properties that are ‘unique’ or have been on the market for a long time, you may have the best chance. On one property, Vendor Financing was used on the downpayment, and we got the mortgage from the bank. We just offered the owner a higher interest rate, than they would get at the bank.

        Consider buying a duplex (or larger). Use the rent from one unit to make the mortgage payment.
        Our 4 kids are all young adults. We co-purchased a 5 unit building, and each of us took a unit. (we now rent out our 4 bedroom family home) It is nothing fancy. We installed one service of phone, cable, internet and share it throughout the building.

        Don’t mean to hi-jack your blog.
        Just trying to offer some ‘outside the box’ suggestions.

        I don’t consider your Smith family even close to extreme frugals. :)
        They don’t use reusable cloth toilet paper, hankies, napkins.
        Groceries would be around $200-$250 per month, because they would be canning, gleaning, growing, sprouting, baking bread etc

  16. Do they not need passive income to generate money for their retirement? How to retire a millionaire with a job. Do they not need a side hustle so they can retire with the lifestyle that they choose. Also what if they get sick after age 60 and need expensive medicine. People change and the things/hobbies change as well don’t you think so?
    Jeff @Project Ikonz recently posted..Retirement plans for dummies step 4 – When will I die?My Profile

  17. Nice job, Jacob!
    It just goes to show how little you can live on if you’re debt-free!
    Holly@ClubThrifty recently posted..How to Pay Your Mortgage With a Credit CardMy Profile

  18. Tarynkay says:

    If this family lives in WA, they would qualify for WIC (max income is $44K for a family of four.) They might also qualify for help with things like utilities and possibly even phone service. So my first recommendation is to check out and apply for every bit of help they might be able to get. Second, lower that grocery budget. $500/month is really high for a family of four with two small children and with a stay at home mom. If she is not working at all, this gives her more time to cook from scratch, find coupons, build and cook from a pantry, strategize around sales, etc.

    A lot of other parts of the budget seem too low, but there are parts that they can probably lower even more. I agree that they probably don’t need two cars, and having two cars is dragging their budget down.

    I would also move to free or much cheaper dates. I agree that dating is really important, but you can have a nice date at a coffee shop or even the library. You don’t need to spend $40 a pop. I think they can definitely do this, though I agree- community is key. Things like having friends to swap babysitting with, having hand-me-down connections, etc are going to help them be able to achieve this.

    • This budget definitely has some flex in it. And good call on getting all the “free” assistance available, if they qualify. I’m trying to show how much a family can do on not too much money, so I left that part out, but it’s definitely an option for those getting back on their feet :)

  19. I think that the Smith’s could do quite a bit more for their situation. One, I would get rid of fido, if you can only afford to save $350 a month of retirement then fido has to go. I think they should focus on retirement more than anything else. If they increase their savings there they might be able to retire by 50, or maybe 45. Also I would say maybe they focus on helping their kids excel in school and then go to a super affordable community college. Take the money they are saving for college and put it toward retirement. I understand saving for college is important but retirement is more important. Their kids can own their education when the time comes. Sounds heartless I know but that is what I would do.
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  20. See I LOVE my child and I want her to succeed but I would never ”jeopardize” (i use that term loosely) my life and goals for their potential post secondary goals when they will have the rest of their life to pay it off, assuming they even need loans. I’d cut post secondary savings in half for kids. There are SO many way to go through university saving when they start work at 15/16 yrs old and scholarships. Once they reach a savings goal for home, assuming they need what 5% down min?, they could up the post sec savings again.

    Could they move in with either set of parents possibly for 6-12 months to get savings a huge kick?

    Also, why do so many ppl focus on homeownership? Can I please just say renting is not a waste of money!

    I also have to question the two cars. If one parent is stay at home could they not deal with one vehicle? Pain in the butt sometimes, but bug savings especially if something were to go wrong with said vehicle.

    Also pet food can be expensive!
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  21. This is great! Taking a look at what can realistically be done while achieving goals is a great method to navigating your own financial health. Thanks for working this up for us!
    The Wallet Doctor recently posted..How to reduce your food costsMy Profile

  22. Great post. My husband was making only a little bit more than this when we had our first son and I became a stay-at-home mom. By the time we became a family of four, his income had increased a bit, but it’s still a lot less than most people would be comfortable with. It IS doable, and we feel that we live pretty comfortably. We purchased our home with an FHA mortgage, which required a very small downpayment. The big downside to that, however, is the required PMI for five years.

    A few more thoughts after reading through comments:

    We have two cars. I definitely considered being a single car family, but my husband works almost 30 miles away, and there isn’t public transport in our area (other than taxis). We did it for a little while, and the inconvenience wasn’t something I could do longterm.

    Our grocery budget is $400 per month. Meal planning keeps it in check, but I can do a lot better than that when I really work on couponing and following sales.

    We have over $46,000 in our 401ks. I contributed during the 4 1/2 years I worked, and my husband has been contributing all along, too. It’s not at all unrealistic for this family to have $25,000 saved up.

    We decided we don’t need data plans and we spend $200 per year for our prepaid cell phones. We basically keep them for emergencies or quick phone calls and texts. I remember what life was like before cell phones, so it’s not a huge thing for me.

  23. If Mr. Smith is grossing 40k, why does he only have a $2,250/mo income to work with? Shouldn’t it be a lot closer to $3k/mo? (I’m assuming that his paycheck deductions are proportionally similar to mine– about 10%, give or take).
    Mr. Fund recently posted..I’m Not Rich, Guys.My Profile

    • 401k invested at 5%, taxes (Fed, SS, and Medicare) and health insurance.

      • Hm. I just pulled out one of my old pay stubs and looked at the proportion of deductions to gross– I had $601 gross and $69 deductions (taxes + health insurance), which is an 11.5% proportion. If he’s contributing 5% to his 401k (pre-tax, right?), that leaves him with a gross of 38k; which, minus 11.5% ($4,370), leaves him netting $33,630 which works out to be a few dollars over $2,800/month. Right?
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        • ETA: I looked at a couple more pay stubs, and my ratio (deductions/gross) averaged closer to 13%, though even that works out to $2755/month.
          Mr. Fund recently posted..More Money.My Profile

          • His health insurance for the family is MUCH more expensive. About $200 per check. So $40,000 / 26 weeks per year = $1,538 – $200 (health) – $76 (401k) – $135-ish (taxes) = $1,125 * 2 paychecks per month = $2,250.

            They do get 2 extra checks a year, which they invest.

  24. Ah, okay. I’m kind of surprised that his employer doesn’t provide cheaper health insurance (I work for a Kroger chain store, and pay just shy of $100/mo for family coverage through them), but if he’s paying that much for health insurance, then that makes your $2,250 figure sound more realistic.

    • That’s pretty sweet, actually. Most employers (that I know and have asked about) don’t provide full family coverage for less than $400-ish. Consider yourself lucky :)

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