Living on $10k a Year

My plan for this year is to keep my expenses under $10k and so far I am on target to do that.  Of course there is a lot of time left in the year for something to go wrong.  I was curious how much a $10k a year budget translates to as a daily amount.  My calculations put the daily budget for $10k a year at $27.40 rounded up.  This does not seem like very much money to live on and the daily budget number could be a little intimidating when first making plans to live on a $10k budget.

On the other hand the daily budget number looks great when you look at it from the perspective of how much income you need to make.  I have a goal of making $10k a year in alternative and passive income. Earning an average of $27.40 a day looks pretty easy.  I don’t make that much money from my blogging and alternative income now but the figure certainly seems attainable.  My blogging income from last year would cover about 40% of the days in a year.  My dividend income would cover about half a month.  That puts me close to having half the year covered. I just need to find some additional sources of income and/or increase my current income streams to cover the rest of the year.  I probably won’t reach the $10k level in alternative/passive income this year but the goal is close enough that it seems realistic that I’ll make it in the next few years.  Being able to see progress and knowing I don’t have to wait too long for the payoff should make it easier to stay on track towards my goal of having $10k a year in alternative and passive income.

14 thoughts on “Living on $10k a Year”

  1. Actually this is very possible. You really don’t have to buy cd/dvds anymore and could end TIVO and cable to cut down on entertainment expenses. All of these are on the internet now.

  2. Hi:

    I am interested in having alternative streams of income such as dividend income from stocks. Approximately, how much money do you have to have invested in stocks to receive monthly income?

    I have about $1K worth of stocks but they don’t pay enough in dividend to live off of.

    Thanks Kami

  3. DGI – I would definitely consider that. I lived in Guatemala for 3 months several years ago and really enjoyed it. Living on $10k a year there would be easy and provide a nice quality of living.

    Kami- I don’t have enough money invested in stocks to live off of yet. I’d say the bare minimum needed to live off of would be $85,000. $250,000 is a more conservative estimate that would probably be more realistic for most people.

  4. TFM,

    In most eastern european countries nowadays you could live pretty comfortably with less than $1000/month. If you are willing to live in the country instead of the main cities, you might also be able to live on much less than that. Of course you might have to learn the local languages otherwise you might get ripped off in everyday life ( oh he is an american, let’s charge him extra :-) )

    Kami,

    Assuming that you earn a 5% dividend yield on your cost of shares, and you could live with $10K/year, a $200K initial investment will be necessary. If you could postpone needing the $10K in say 12 years instead of now, and pick up shares with average dividend growth of 6% annually, you would only need to invest $50,000 in stocks yielding close to 5% on average.

  5. DGI- I’ve never been to Eastern Europe but I would like to visit a lot of places once I’m semi-retired. If you avoid the tourist areas traveling becomes much more affordable. Thanks for giving Kami a better answer also.

  6. Is buying dividend paying stocks straight from the company a solid idea? I currently use Sharebuilder and I am not happy with the monthly fee.

  7. Buying straight from the company can save you money but not all companies offer direct purchase plans. It also makes your record keeping more difficult having different accounts for every stock. I know there are some other low cost alternatives to Sharebuilder. Whether they’ll work for you depends on how much you’re investing. I currently use Zecco but since they are raising their account balance requirement for free trades to $25,000 they are no longer a good choice for the small investor. You might check out Dividend Growth Investor’s website and see if he has some information on this.

  8. Andy,

    Actually you said it all – buying straight from the company requires a tedious record keeping if you plan on holding shares in more than one company. The price that you get with most companies direct investment plans is not the market rate, so theoretically you could end up paying more.

    Zecco is pretty decent if you have the $25K. It’s commissions are 4.50/trade but get to enjoy real time market/limit orders. Zecco does offer automatic reinvestment, but you can only buy full shares.

    Sharebuilder is great as you could simply buy partial shares for a set dollar amount and it would reinvest forever. The lowest commission to buy is $4 to buy a stock at an unknown price on Tuesdays, which is an opportunity for a rip off. :-)

  9. But why leave all of your friends and family and move to the middle of nowhere in Eastern Europe just to live cheaply? At some point, you have to figure that living your life is worth making a little extra money.

  10. Eastern Europe was a suggestion of one of the commenters. I would more likely live in Mexico or Central America. This would allow me to easily come back to see friends and family. Even living here in the U.S. since I don’t live in the same area as my family I don’t see them too often. Wherever I move I plan on meeting people and making new friends and the Internet will make it simple to keep in touch with current friends. Also I hope that a significant other or a friend will travel with me. I think I would be living my life even better in a foreign country.

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