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If you are making 40k a year and still choose to live in San Diego than you have bigger problems than your expenses... you are horrible at making decisions.
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Free registration at the forum removes this block.Let’s look at what Greg did.
Let's look at what Greg didn't do: the dishes.
Maybe there's a relationship.
Amen. At least he has a job, nowadays that shows some level of competence and work ethic.
It's not you, it's GregApologies for disappointing you, dear Sir!
Hi guys,
Just had a discussion with one of my mates about JOBs and salaries. He sent me an interesting case study that I will share with you all:
Meet Greg. He’s 25-years-old and lives in San Diego, California. He graduated college in 2013 with a useless degree in communications from Cal State Fullerton and has bounced around from job to job over the past 4 years to where he now makes more than he ever has—$40,000 a year salary. He’s also as broke as he’s ever been, albeit he has a roof over his head, food in his belly, and running water and electricity. Should he be grateful?
Let’s break down Greg’s finances:
His income is $40,000 and he gets paid on the 1st of every month. This means he gets 12 paychecks a year. This puts Greg’s monthly income at $3,333.33
Every paycheck, however, he has deductions taken out…
Health Insurance: $76.24
Dental Insurance: $44.76
Federal Income Tax: $331.15
State Income Tax: $88.07
Social Security: $206.67
Medicare Tax: $48.33
This is a total of $795.22 taken out of each paycheck before he ever sees a penny of his earnings. This is $9,542.64 taken out for the year. You can see that Greg doesn’t make $40,000, he “makes” only $30,457.36 because he only gets $2,538.11 deposited into his checking account each month.
Here’s how Greg, who lives very frugally, spends his money:
Having racked up debt for delaying his career and going to college for 4 years, he has a monthly student debt loan payment of $227 he’s dealing with. (National average is $280/month)
Here’s Greg’s updated financial picture after this expense: $2,538.11- $227 = $2311.11 left over.
Instead of splurging on a studio, he roommates with 3 other dudes in a small run-down house. His rent, which includes cable, internet, trash pickup, and utilities, is $750. This allows him to live in an “average” area (not a nice neighborhood but it’s not the ghetto). At least he has his own small bedroom, right? There’s no dishwasher though, so the sink often looks like this with 4 dudes:
Here’s Greg’s updated financial picture after his housing expenses: $2311.11 - $750 = $1561.11 left over.
To get to his job in La Jolla, Greg needs to have a car. Riding a bus is too time-consuming and besides, who wants to live in southern California without a car? His old 1994 Toyota Camry he purchased 3 years ago finally broke down after it hit 220,000 miles and he was forced to get a “new” car. He settled on a 2004 Chevy Impala that costs him now $84 a month, but the big expense is the insurance which sets him back $170 a month. Add in $150 he spends on gas and suddenly he’s spending $404 a month on transportation expenses.
Here’s Greg’s updated financial picture after transportation expenses: $1561.11- $404 = $1157.11 left over.
He likes to go to the gym to keep his body in shape, so his gym membership sets him back another $50. His monthly cell phone brings another $87.34 out of his pocket. This adds another $137.34 in monthly reoccurring expenses
Here’s Greg’s updated financial picture after accounting for all reoccurring monthly expenses: $1157.11- $137.34 = $1,019.77 left over.
You can see that Greg has just over $1,000 of money each month left to “spend” as he chooses once the monthly reoccurring expenses are paid for.
Can you live on $1,000 a month for food and drinks, clothes, recreation, sports, birthday gifts, doctor copays, repairs, unexpected expenses, furniture, travel, etc.?
Let’s look at what Greg did.
He goes to WalMart and loads up on Ramen Noodle, and generally eats cheap. He wants to eat healthy but never sets foot in a Whole Foods. “Eating out” means a $5 turkey sub which he splurges on a couple times a week. All in all, Greg manages to only spend about $500 a month in food, which is only $16 a day.
You can’t really take a girl out for steak and lobster for $16 a day, nor can you feed a family. That’s why Greg isn’t focused on dating or marriage at this point, he struggles to take care of himself, much less a family. Can you imagine how a guy making $40,000 a year with a stay-at-home mom and a couple of young kids does it?
As you can expect, Greg easily spends the remaining $500 on various life expenses that come up each month. This past month he was able to save a penny, literally. After all, isn’t a penny saved a penny earned? At that rate, Greg will become a millionaire in 100 million months—or 8,333,333 years. Yes, that’s over 8 million years. By then, a million dollars just might be worth a penny.
The reality is Greg will probably not save a penny a month and have a nest egg of $3.60 in 30 years because one of these months he’s going to have more unexpected expenses and he’ll have to go into debt. To ever get out that debt, he’ll have to cut even more into his monthly expenditures or he’ll need to increase his income or create more income flows or do both!
Hi guys,
Just had a discussion with one of my mates about JOBs and salaries. He sent me an interesting case study that I will share with you all:
Meet Greg. He’s 25-years-old and lives in San Diego, California. He graduated college in 2013 with a useless degree in communications from Cal State Fullerton and has bounced around from job to job over the past 4 years to where he now makes more than he ever has—$40,000 a year salary. He’s also as broke as he’s ever been, albeit he has a roof over his head, food in his belly, and running water and electricity. Should he be grateful?
Let’s break down Greg’s finances:
His income is $40,000 and he gets paid on the 1st of every month. This means he gets 12 paychecks a year. This puts Greg’s monthly income at $3,333.33
Every paycheck, however, he has deductions taken out…
Health Insurance: $76.24
Dental Insurance: $44.76
Federal Income Tax: $331.15
State Income Tax: $88.07
Social Security: $206.67
Medicare Tax: $48.33
This is a total of $795.22 taken out of each paycheck before he ever sees a penny of his earnings. This is $9,542.64 taken out for the year. You can see that Greg doesn’t make $40,000, he “makes” only $30,457.36 because he only gets $2,538.11 deposited into his checking account each month.
Here’s how Greg, who lives very frugally, spends his money:
Having racked up debt for delaying his career and going to college for 4 years, he has a monthly student debt loan payment of $227 he’s dealing with. (National average is $280/month)
Here’s Greg’s updated financial picture after this expense: $2,538.11- $227 = $2311.11 left over.
Instead of splurging on a studio, he roommates with 3 other dudes in a small run-down house. His rent, which includes cable, internet, trash pickup, and utilities, is $750. This allows him to live in an “average” area (not a nice neighborhood but it’s not the ghetto). At least he has his own small bedroom, right? There’s no dishwasher though, so the sink often looks like this with 4 dudes:
Here’s Greg’s updated financial picture after his housing expenses: $2311.11 - $750 = $1561.11 left over.
To get to his job in La Jolla, Greg needs to have a car. Riding a bus is too time-consuming and besides, who wants to live in southern California without a car? His old 1994 Toyota Camry he purchased 3 years ago finally broke down after it hit 220,000 miles and he was forced to get a “new” car. He settled on a 2004 Chevy Impala that costs him now $84 a month, but the big expense is the insurance which sets him back $170 a month. Add in $150 he spends on gas and suddenly he’s spending $404 a month on transportation expenses.
Here’s Greg’s updated financial picture after transportation expenses: $1561.11- $404 = $1157.11 left over.
He likes to go to the gym to keep his body in shape, so his gym membership sets him back another $50. His monthly cell phone brings another $87.34 out of his pocket. This adds another $137.34 in monthly reoccurring expenses
Here’s Greg’s updated financial picture after accounting for all reoccurring monthly expenses: $1157.11- $137.34 = $1,019.77 left over.
You can see that Greg has just over $1,000 of money each month left to “spend” as he chooses once the monthly reoccurring expenses are paid for.
Can you live on $1,000 a month for food and drinks, clothes, recreation, sports, birthday gifts, doctor copays, repairs, unexpected expenses, furniture, travel, etc.?
Let’s look at what Greg did.
He goes to WalMart and loads up on Ramen Noodle, and generally eats cheap. He wants to eat healthy but never sets foot in a Whole Foods. “Eating out” means a $5 turkey sub which he splurges on a couple times a week. All in all, Greg manages to only spend about $500 a month in food, which is only $16 a day.
You can’t really take a girl out for steak and lobster for $16 a day, nor can you feed a family. That’s why Greg isn’t focused on dating or marriage at this point, he struggles to take care of himself, much less a family. Can you imagine how a guy making $40,000 a year with a stay-at-home mom and a couple of young kids does it?
As you can expect, Greg easily spends the remaining $500 on various life expenses that come up each month. This past month he was able to save a penny, literally. After all, isn’t a penny saved a penny earned? At that rate, Greg will become a millionaire in 100 million months—or 8,333,333 years. Yes, that’s over 8 million years. By then, a million dollars just might be worth a penny.
The reality is Greg will probably not save a penny a month and have a nest egg of $3.60 in 30 years because one of these months he’s going to have more unexpected expenses and he’ll have to go into debt. To ever get out that debt, he’ll have to cut even more into his monthly expenditures or he’ll need to increase his income or create more income flows or do both!
I love getting people to analyze their incomes like this (so few do) but this really just "Personal Finance 101".
Honestly, California and other absurd living choices aside, $40k is a perfectly fine amount of income for most people to live on with a budget and some discipline. It'll put a roof over your head, food in your belly, pay all the bills, and give you some reasonably monthly entertainment. You have to save up for the things you want and Christmas probably sucks and vacations are mostly a "one day" thing but most people can be perfectly happy on that amount of money, assuming they don't ask too much out of life and properly budget, anyway. It's basically bordering lower middle class and middle class. I suspect most people fall in this range
IMHO, if you want to live the way most people try to (and go in debt for) in North America you need to be making around 80-100k. That's around the point where you can go on a 2 week vacation every year, save for retirement, pay all your bills, not worry about things like minor car and house repairs, go to restaurants, and in general feel pretty 'good' about things without worrying about money unless you are just a die-hard consumer who can't wait to spend every time you get - and at that point no amount of money will fix this (just ask most lottery winners). You'll want more at this income range, but it's a good, honest life.
Lucky for most people here we're not worrying about these two situations because we're too busy swinging for the fence.
40k is different from 40k / year. title is a bit click baity
Expected a boss post where a forgotten bank account with $40k is found but it means nothing because #fastlaneballin
Instead I found Average Greg.
As you can expect, Greg easily spends the remaining $500 on various life expenses that come up each month.
This piece is not written by me (as mentioned previously)
title is a bit click baity
The most important question for me at least: is this guy trying to find a way out of this financial disaster?
Can you please credit the author with a link?
I love getting people to analyze their incomes like this (so few do) but this really just "Personal Finance 101".
Honestly, California and other absurd living choices aside, $40k is a perfectly fine amount of income for most people to live on with a budget and some discipline. It'll put a roof over your head, food in your belly, pay all the bills, and give you some reasonably monthly entertainment. You have to save up for the things you want and Christmas probably sucks and vacations are mostly a "one day" thing but most people can be perfectly happy on that amount of money, assuming they don't ask too much out of life and properly budget, anyway. It's basically bordering lower middle class and middle class. I suspect most people fall in this range
IMHO, if you want to live the way most people try to (and go in debt for) in North America you need to be making around 80-100k. That's around the point where you can go on a 2 week vacation every year, save for retirement, pay all your bills, not worry about things like minor car and house repairs, go to restaurants, and in general feel pretty 'good' about things without worrying about money unless you are just a die-hard consumer who can't wait to spend every time you get - and at that point no amount of money will fix this (just ask most lottery winners). You'll want more at this income range, but it's a good, honest life.
Lucky for most people here we're not worrying about these two situations because we're too busy swinging for the fence.
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