Living on a Tight Budget- Earning $30,000 a Year

by Jennifer Long
4 years ago

U.S. Census Bureau estimates state that those with solely a high school diploma earn an average of $28,645 a year (Anas, 2006). Unfortunately, a state of dampened economic activity has rendered some college graduates unable to bring home much more than their peers without degrees. There are, however, job opportunities that allow workers to bring home $30,000 a year, which is a substantial amount off of which to live if one budgets correctly.

Affording Housing on a $30,000 Salary

Perhaps the biggest step in engaging in an affordable lifestyle, finding reasonably-priced housing is an imperative part of any budget, regardless of one’s salary. Banks will typically lend home-buyers an amount that will result in mortgage payments that do not exceed 28% of their monthly income, according to Marc Roth of Business Week. Such a number is based upon the National Association of Realtors Housing Affordability Index, which states that a quarter of a person’s monthly income should go toward housing expenses.

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What do these numbers mean for someone earning $30,000 annually, which translates into a monthly income of $2,500? If he or she is purchasing a home, a monthly mortgage payment of $700 would represent 28 percent of his or her monthly income. Given a 30-year mortgage with a 7% annual interest rate, this converts to being able to afford a $125,000 home with a 20% down payment, as determined by Bank Rate’s mortgage calculator. Of course, the purchase price will need to be slightly lower than this to account for taxes and insurance expenses.

Renting may be a better option for those earning only $30,000 a year, as renter’s insurance is substantially lower than home owner’s insurance in cost. The yearly price of renter’s insurance, according to the Insurance Information Institute’s spokesperson, Jayna Neagle, can range from $150 to $300. Because renter's insurance is cheaper than homeowner's insurance, renting can cut monthly expenses significantly. Those living on a budget then, should consider renting, as being able to afford housing is a key component of financial stability.

Paying for Food and Other Necessities on a $30,000 Salary

Housing is certainly not the only expense to be taken into consideration when planning a strict budget. Understandably, living off of $2,500 a month while fighting the effects of inflation requires that one live a modest lifestyle. Simple changes, though, can have a positive impact, leaving budget-conscious individuals with enough money to pay for necessary living expenses.

For example, foregoing a weekly meal at a restaurant, or a daily takeout lunch from Applebee’s, can significantly reduce monthly food expenses. As Business Week’s Ben Steverman notes in his article “Lean Times for Restaurants,” it is cheaper to eat at home in most cases. A recent U.S. News and World Report article has also suggested that preparing meals at home can save more than $100 a month (Judkis, 2008).

That being said, buying food from the grocery and preparing it at home is clearly a wise option for those on a limited budget. By refraining from spending money at restaurants, one can plan to spend a reasonable amount, around $175 a month, on food.

Not only does preparing meals at home decrease the monthly food budget; it can also reduce healthcare costs. Fast food and restaurant meals are infamous for being loaded with fat, sodium, and calories, which can contribute to obesity hypertension and diabetes, hypertension, and diabetes, all of which raise healthcare costs.

By avoiding unhealthy fare, consumers can maintain a healthy lifestyle and expect to spend less on monthly health insurance costs. In fact, Aetna offers savings of $60 a month on certain insurance plans for those who score well on a personal health examination.

By saving money on health insurance and food expenses, those earning a mere $30,000 a year can set aside money for savings and prepare themselves for a financially stable future. It is important to note, though, that those who have accumulated substantial debt will have a difficult time supporting themselves on $30,000 annually, and they would be wise to find a part-time job or another source of income augmentation.

References

Anas, B. “Degrees’ value adds up.” Daily Camera. 2006, Nov. 8.

BankRate.com. “Mortgage Calculator.” (Accessed July 18, 2010).

Judkis, M. (2008, May 19). A guide to money-saving tips. U.S. News & World Report, 144.

MoneyCentral.MSN.com. “The Basics of Renter’s Insurance.” (Accessed July 18, 2010).

Roth, M. (2009, October 9). How much house can you afford? BusinessWeek Online, 17.

Steverman, B. (2008, April 8). Lean times for restaurants. BusinessWeekOnline.

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