The secret to living well on $40K a year
If broke folks are making fun of the way you live, perhaps you're doing something right.
This post comes from partner site U.S. News & World Report.
As Washington politicians debate whether earning $250,000 a year makes a family rich, special education teacher Danny Kofke has come up with a much lower threshold for wealth: The father of two says that his family of four can live well on his $40,000 a year salary -- and you can, too.
He explains how in his new book, "A Simple Book of Financial Wisdom," a follow-up to his first book, "How to Survive (and Perhaps Thrive) on a Teacher's Salary." US News spoke with Kofke about how he manages to stretch his income and his tips for others trying to do the same. Excerpts:
It's pretty impressive that you have supported your family of four on less than $40,000 a year. How did you do it?
This took long-term planning. Raising a family of four on my teacher's salary would be next to impossible if we had a huge mortgage and a lot of debt. Before we had children, my wife, Tracy, was a teacher, too. We had a plan for her to be able to stay at home once we had children. We weren't exactly sure when this would happen (this is for The Man Upstairs to decide), but we had an idea on when we would start trying.
We ended up being married four years before Ava was born. During this time, we tried to live off one of our teaching salaries and used the other one to pay off debt and establish an emergency fund. We were not sure how long Tracy would be able to stay home -- we initially aimed for one year -- but were able to have her stay home for six years and work part time for one. We were able to do this even after having our younger daughter, Ella, three years after Ava. The key for us was the long-term planning.
Can anyone really succeed at this?
I do feel that almost anyone can. I know there are some that earn a lot less than I do or have more debt but I feel they can work towards this, too. I am not a financial major or a chief executive of a company. I have never even taken a financial class in my life. If this 35-year-old school teacher can learn the basics of money management and finances, then others can, too. Post continues after video.
Tell us some of your more unusual advice, that we might not have heard before.
I think the biggest thing I have learned is, if broke people are making fun of you and laughing at your ways, then you are doing something right. It was difficult to get mocked when Tracy was working and we chose to live off one salary while others were spending like there was no tomorrow. Many people told me to get off my wallet and spend money.
Pride is sometimes a hard thing to swallow, but I knew that many of these people were not making smart financial decisions and these decisions would eventually come back and hurt them. I don't know if it is unusual advice but, when making financial decisions, you have to do what is right for you and not be influenced by the many temptations that surround us.
What's the hardest financial rule for you to follow personally?
Living below my means is the toughest rule for me to follow. There are so many temptations -- Madison Avenue spends billions of dollars each year to get our money -- and sometimes I want to buy things I know I should not. When this occurs, I allow myself a 24-hour breather and, if I still feel strongly about buying that object after this time, I will discuss it with Tracy. The great thing is, after I let the emotional aspect have time to go away, my more rational side speaks to me and I make a sound decision.
How are you teaching your children about money?
Once my older daughter, Ava, turned 3, we had her do simple household chores so we could teach her how to handle money. I am not a fan of rewarding others for things they should be doing anyway, but I did make an exception with Ava since my initial goal was to teach her money management skills.
We started with chores that were easy for her to complete: cleaning her room, brushing her teeth. Every night, we would check off the chores that were completed, and every Friday we added them up and she was paid. We called this money what most parents do: an allowance. No matter what you call it, make sure your child does the work to earn the money.
After Ava got paid (she could earn up to $1 each week), she had three jars: Give Away, Savings and Spending. She first put 10 cents in the Give Away jar, 25 cents in the Savings jar and the remaining amount in the Spending jar. This worked so well for us. When we were at the store, often Ava would see something she wanted. We never had any arguments; we would simply say, “We’ll have to go home and see if you have enough money in your spending or savings jar to buy it.”
Ava has used the money in her Give Away jar in numerous ways. One year there was a little girl at my school who lost her father shortly before Christmas. Ava used her Give Away money to buy this little girl a stuffed animal. Ava actually came to my school and delivered this to her personally. Another year, Ava used this money to buy canned food for needy families in our community. This past Christmas, there was a family at her school that was struggling. Ava used the money in her Give Away jar to buy them a gift card to a local grocery store.
If Ava continues to apply these lessons in life -- gives away 10% of her money, then saves 25% of it and uses the remainder for spending -- and goes above and beyond in her job, she will be wealthy in more ways than a fat bank account can show.
You can also listen to an interview with Kofke: "Surviving on a Teacher's Salary."
More on U.S. News & World Report and MSN Money:
My wife and I have never made much more than $40,000 a year. We live pretty well. It boils down to priorities & living within your means.
We don’t smoke or drink, don’t buy a new car every couple years, and don’t buy the newest/latest and greatest TV’s, phones, and such. We are able to eat out a couple times a week, take vacations twice a year.
Who cares what the neighbors have? LIVE within your means!
To be truthful, I think Danny should rename his book, "How to live in rural Georgia for $40,000 per year" or "How to do TV & Radio Interviews While Taxpayers Pay for Substitutes"
In the rural South, living $40K per year is something almost anyone can do since the cost of living is so low. For instance, the average blue-collar worker in his county only makes $25K per year. Danny makes more than most 2 income families living in the same county...
Doing 5 minutes of research I learned that Danny Kofke lives just 2 miles from the school where he works in a very affordable area of Georgia. Therefore his standard of living & commuting costs are much lower than the national average. For instance, his house has 1,545 SF on almost an acre and only cost $144K in 2006. Due to the recession, his home is now worth just $125K. The same home in some parts of California or New York would have cost over $600K in 2006, so part of living on $40K per year is where you live.
I also noticed on his website that he has regular speaking engagements for radio & TV shows scheduled throughout October. However, according to his school's website he is still employed by the school district. Many of these shows are listed during school hours. For instance, many speaking engagements are on Mondays and Fridays. I would like to know how often he has called-off from teaching to travel the countryside and promote his book. In our area, substitute teachers cost the district $150 per day, so it looks like the tax payers are paying for Danny to take-off & promote his book.
Don't get me wrong, I am not against what Danny is teaching, we follow most of his principles ourselves. My wife and I both teach and we own a home business. I am against the fact that it is NO LONGER HIS LIFESTYLE, yet he promotes it as such. He hasn't lived on $40K per year since he started selling his books. He now gets paid for the books AND for his speaking engagements AND he somehow has retained employment at his school even though he is MIA over 8 working days per month...
According to his own website, Danny is taking a lot of time off from teaching to do do TV & Radio interviews - scheduled during school hours. We believe it is unethical to take sick days unless we are really sick. We have never taken time off from school to promote our business - we have other family members helping us and we handle our responsibilities on the weekend or during the summer months.
Shame on you Danny. You also promote being an ethical Christian and are supposed to be doing an interview with The 700 Club. I hope you repay the school district for taking so many days off to be on TV & Radio. We work with special education and those students do not do well with substitutes or inconsistency. They need to see the same teacher each day to thrive and you are no longer giving those kids your best... Stop calling yourself a teacher or a Christian since you are doing neither very well IMO.
No brainer for me:
No Cell, No Cable, No eating out, No unnecessary purchases, No Vacations, No Credit Debt(re unnecessary purchases). Work lots of OT. Cheap use car, VA Med, Company Dental.
Basically, live within my means...Oh Snap!...what a Novel Concept..!
One caveat, though: Our kids, while they have a college fund, will probably have to work or earn scholarships (which is probably a good thing). On the down-side, we don't exactly have a lot of money socked away for retirement. Medical care? Yeah, that's a different debate...
My spouse and I live well above the poverty line. Our disposable income is significant. But after reading this article I intend to get his book and apply a more frugal fiscal policy in our household. It may mean a lifestyle change but if we can do a better job of identifying and hitting financial goals, it will be well worth it.
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