Getting by on a lot less money: 3 ways it's easier than you think

Photo: Philip Brewer

I spent my whole adult life trying to figure out how to get by on a lot less money, because I wanted to be a full-time writer and knew that it wouldn't pay enough to support the lifestyle I was living. Now that I've made the transition, I can see that I was worrying needlessly--there are three sources of big savings that come along almost automatically when you start to get by on a lot less money.

What prompted me to write this piece was finding an old notebook that had a page of notes I'd made in 2004, trying to figure out if it'd be possible to retire at (by odd coincidence) the end of 2009.

The brief notes weren't a full analysis, just a quick sketch of a couple of ideas. You see, I knew I had certain retirement resources that would become available at certain dates--a small pension from my former employer, 401(k) and IRA accounts, and Social Security. A full analysis would integrate all of those items into a unified plan; my notes were just a one-page sketch looking at a simplified version: Could just my non-retirement savings support me from 2009 until 2024 (by which time all those retirement-specific resources would have become available)?

The quick sketch in my notebook suggested that it wasn't going to be possible--and yet here I am, having already made shift a full two years earlier than my most optimistic scenario.

The mismatch turns out to have been the amount of income replacement I was planning for. Even the "low" figure from my notes was about double what I've actually been living on these past two years; my baseline target figure was almost triple.

So, why did I imagine that I'd need as much money as that? A quick look shows three big sources of savings.


The first is taxes.

If the reason that you're getting by on a lot less money is that your income is much lower, you'll have automatically reduced your income taxes--possibly by quite a lot. (In the United States, the income tax is rather progressive, especially for people with low incomes. A married couple can earn almost $20,000 and owe no taxes at all, simply due to exemptions and the standard deduction--and the tax rate on the next $16,700 after that is just 10%.)

You save money on some other taxes as well when you get by on less money. In particular, the amount that goes for sales taxes drops as you buy less stuff. Further, in many states (including mine), the sales tax rate on groceries and pharmaceuticals is lower than on general merchandise--so, as you spend relatively more on necessities, your average sales tax rate drops too.

If course, if any of your money for getting by comes in the form of self-employment earnings, you're stuck paying both halves of the Social Security tax, a terribly regressive tax that hits low-income self-employed folks pretty hard. Still--if you're getting by on a lot less money, you're probably paying a lot less in taxes.

Saving for retirement

Another big drop in expenses is that, once you retire (or semi-retire, or start getting by on a lot less money in whatever form you do it), you can quit saving for retirement.

During my period of peak saving, I was putting 15% of my gross income into my 401(k) and putting about as much again into regular (not tax-advantaged) savings and investments.

When I took the time to track my spending, this was already clear. But even then--and especially when I tried to just do a back-of-the-envelope calculation--it was hard to get past imagining that I'd need to replace most of my take-home pay if I wanted to maintain my standard of living. In fact, though, once I'd saved enough money to support myself through retirement, I didn't need to keep stuffing large amounts of money into savings.

With 30% of my gross going into savings, and about as much going to taxes of one sort or another, the amount I had available for spending was already only about 40% of my gross. The old rules of thumb that you'd need to replace 70% or 80% of your pay in retirement are just crazy--at least for someone who's preparing to retire early.


There's one more big source of easy cost savings that comes along almost automatically once you quit working at a regular job: efficiency.

Someone who's working full time ends up spending a lot of extra money just keeping the household running. Over and over again, the person working a full-time job pays extra to get things done in a way that integrates as smoothly as possible with the demands of full-time work:

  • You hire people to do stuff that you could do yourself, except you're at work.
  • You pay extra to get things done at the last minute because you're too busy working to keep track and plan ahead.
  • You buy things you wouldn't even need, except that you don't have time to be sure that you don't need them--and you won't have time to come back and get it later if it turns out that you do.

The efficiencies that come from having an entirely flexible schedule are huge: You need less, and those things that you do still need are needed less urgently. This gives you a chance to wait for deals, to seek out substitutes, and (most importantly) to simply wait and see if you can't get by without it. After all, if it turns out that you really do need it, you can go get it then.

Once you're past the need put aside big bucks for a future retirement--and pay the taxes on earning those big bucks--and no longer have to pay extra to make everything fit your work schedule, it's not so expensive to get by as you might imagine.

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Guest's picture

you'll definitely find ways to live less expensively.. been there and still doin' that :(

Guest's picture

Yes! Yes! Yes! My husband's job (very stressful) was eliminated and when he found a new on it is paying almost half of what he was making. Two good things have happened. He is happy and finding time to garden and cook and enjoy life (no, there is not more time but more energy) and we are paying all our bills and eating well and enjoying our life. Money isn't the only answer!

Guest's picture

Thank you for posting this! I came to this realization from the other direction. After many long years of graduate school, living on $3000/yr each (late 70s-mid 80s), my husband and I finally got jobs--in different states. We continued to live as we had done, because we were very busy--I did not have a car and my husband bought a clunker for $200--and we saved more than half our combined salaries. Without even trying. This was not a life of deprivation. Eventually, we bought a house, car, had kids, etc--and we always took expensive vacations--but our financial security began with that first year of work.

Knowing that makes me less fearful of the future.

Again, this is truly inspirational.

Guest's picture

Great post! It's so true. People often wonder how in the world we get by on our limited income and your post explains it better than I ever have.

Guest's picture
David C

Great post. I find myself fretting too much about how much income that I will need in retirement. This instills the hope in me that I can pull it off with determination and maybe a little luck. Thanks.

Guest's picture

Retire on Less Than You Think: The New York Times Guide to Planning Your Financial Future does a good job of debunking the 70-80% of income replacement figure.

Of course, I'm reluctant to plug this line, since most Americans save far to little and are praying for a miracle to bail them out. But for WiseBread readers who are already good savers but scared about those numbers, this book should be reassuring.

Philip Brewer's picture


I've actually written a review of Retire on Less Than You Think.

Frankly, I'm not worried about this message tempting people to save less--you can retire on less than you might think, but if you want to retire early, you're still going to have to save a lot (or else earn quite a bit of money, even after you retire).

Guest's picture

One thing you have to consider is health insurance. I was laid off last year, and I thought I had budgeted pretty well. But I had assumed that I'd be able to buy health insurance without a problem - I'd always been healthy, and I calculated how much it would cost to buy insurance. But then I got sick, completely unexpectedly. Although my prognosis was good, I was almost completely uninsurable, and I had to pay for COBRA - 8 times as expensive as the health plan I had expected to use. If my COBRA had run out, I would have been stuck with the state "high risk pool", which is also insanely expensive. That really threw off my budget. Unfortunately you never know when you might get sick, even if you have always been healthy.

Philip Brewer's picture


Boy, do I know where you're coming from.  After the site where I'd worked closed down, my severence package included cheap health insurance for almost a year.  It was a pretty anxious year.  Using the cheap insurance saved us several hundred dollars a month, so we didn't want to give it up.  But we also knew that we were taking a risk--if either of us had become seriously ill during those months, it might have made it impossible to find affordable insurance.

I've written a post on exactly this topic:  Not free to be poor

Guest's picture

I am gathering information regarding living on less because after reading many articles about how much a person needs in order to retire have scared me to death.
I have worked full time my entire adult life and have had a terrible chronic illness to deal with the last 20 years. I still have 10 years left to go before age 62. I hope and pray I can keep working 10 additional years.
I will have Social Security.(According to some that will be gone but I don't go there mentally) Not a lot of SS and even less retiring at 62. At 65 I will have an additional 600 per month from 2 pensions. ( If they don't find a way to steal that money as so many companies do)
I have never made over 16 dollars an hour and am making less than that currently. Except for contributing to my 401K I have been unable to save money. Each time I save I need dental work or medical care or repairs to my 17 year old car. At one time I had good medical insurance paid for by my employer. Now the insurance is still paid for by my employer but the deductible is very high.
I cannot get health insurance on my own due to pre existing conditions but it doesn't matter as I could not afford it if I could get it.
I enjoy simple things. I am rarely bored, there always seems to be something I am interested in doing or learning that is not expensive. I am lucky in this respect.
I keep telling myself that I have always managed to keep a roof over my head and food in my stomach so don't worry as I will be fine. However some days I do become frightened of how I will manage.
Thank you for articles such as this. They do give me hope.

Guest's picture

It is true that the key to surviving on less is planning ones finances well.It is amzing how we can save so much by careful planning . Great post,. Thanks

Guest's picture

I am 28 years old and hope to retire around age 50. This was an interesting read and I hope to share a similar experience when I am ready to retire. Currently my wife and I are living off of my income and I cannot believe how comfortably we are living. My wife quit her job after we had our third child, and she was making just as much money per year as myself. I though we would never survive, but after very minor lifestyle changes, and changing the number of tax deductions I claim in my paycheck, we are still able to save 6% for my 401k, 10% into our savings, and $50 a month per child for college savings. It makes me wonder where all our money was going when she was working!

Excellent post and it gives me hope for an early retirement.

Guest's picture
J Harn

We have retired on less what No one ever says is it SUCKS! It does you never go anywhere or spend any money doing anything and it still runs $60K to live one year!

So cut all you want do things all you like it changes your quality of life!