An MSN Money reader took issue with one of the couples I profiled in "How to become a one-income family." The couple had lived on $30,000 for a while but were now bringing in as much as $70,000 because of a successful at-home business.
"Please write an article that shows what a real family living off of $40,000 a year can do," the reader scolded.
So I did. In fact, I'll show you two:
  • Tracy and Danny Kofke, an at-home mom and a special-ed teacher, live near Atlanta with their daughters, ages 3 and 6. Adjusted gross income: just over $36,000.
  • Amy Halloran and Jack Magai, a freelance writer and an arborist/choreographer, live near Albany, N.Y., with sons ages 7 and 12. Adjusted gross income: about $30,000.


A lot of people live on less than that. In fact, both families are still well above the current federal poverty guideline of $22,350 per year for a four-member family. I chose them because they live in or near large cities, rather than in the deep (and cheap) countryside.
If you can own a home and raise kids in metro Atlanta on $36,000 a year, as the Kofkes do, you obviously have something to teach. And even though Halloran and Magai lucked out with cheap housing, their annual income is slightly less than the federal minimum wage for two people.
Savvy spending and a certain amount of sacrifice let them live in ways that mirror their personal values -- and they do it debt-free. Here's how the two couples make it on a lot less than some people think you need to survive.

Strategy 1: Know where every dollar is and where you want it to go.
The families chose to live on less -- the Kofkes so that Tracy could be home with their children, and Halloran and Magai so that they would have more time for family and artistic pursuits.
The biggest tool in their frugal arsenals is careful attention to spending. Danny Kofke clears about $2,200 each month. Major monthly expenses include:
  • Mortgage: $850
  • Food: $466
  • Roth IRA: $250
  • Internet/TV/phone: $160
  • Utilities: $150
  • College funds for their daughters: $100
That leaves about $200 a month for everything else, from gasoline to new shoes. The Kofkes are OK
with that.

"We may not have it all, but we have enough," says Danny, 36, the author of "How to Survive (and Perhaps Thrive) on a Teacher's Salary."

Amy and Jack have similar expenses:
  • Mortgage: $900
  • Food: $400
  • Retirement: $833
  • Internet/phone: $170
  • Utilities: Heating and cooking are wood-fired


When the Kofkes want something special -- a 50-inch HDTV, two diamond bands for their 10th anniversary -- they tighten their belts, save up and pay cash. Both families manage some travel to see relatives. Amy and Jack own cellphones and iPods. The Kofkes have satellite television service for that HDTV.

Tracy, 39, earns money here and there by painting murals and banners, providing child care and teaching art classes. Half goes to savings and half shores up the budget. But since that income is unpredictable, they budget to live on Danny's salary alone.

"We know where every single dime goes," Tracy says.

Strategy 2: Start with cheaper housing.
Housing is generally the biggest drain on any budget. After two years of teaching abroad, the Kofkes bought a home in Florida. A couple of hurricanes later, they moved to Georgia. They bought a three-bedroom place: less house than they qualified for, but big enough for their needs and small enough to be affordable. A 15-year mortgage helps them pay it off faster. (Assume that's always better? Read "The 15-year vs. 30-year mortgage debate.")

Amy and Jack left expensive Seattle in 1999 and headed east in search of a duplex with some land, figuring that a tenant and a garden would lower their costs. They found an old triplex set on three-eighths of an acre for a scant $38,000 -- and financed only $18,000 thanks to a generous first-time homebuyer grant.

Their original mortgage was $125 a month, far less than the property taxes. That changed recently when the couple took out a home equity line of credit to do major renovations. (See today's home equity rates.) The mortgage is now $900, but two tenants kick in a total of $550.

Inexpensive housing is a must for people with irregular income. It also lets the couple divert one-third of their earnings to retirement accounts.

Strategy 3: Get creative about meeting needs.
The books stay balanced thanks to a mix of old-time and modern frugality:

Tracy gets a ton of children's hand-me-downs from friends. She makes some of her girls' clothes and all of their Halloween costumes, and sometimes does a little sewing for pay.

She watches sales carefully and estimates she saved $1,600 last year by using coupons. Danny carries his lunch to work every single day. The family will enlarge its garden plot this year.

They hang on to their vehicles, a car bought new nine years ago and a used minivan they got when Tracy went back to work briefly in 2005. Both will be driven until the wheels fall off.

Jack and Amy buy only used vehicles, including one truck for work-related tools. His arborist business provides all the wood they need to heat their home, a huge advantage in their cold, snowy region. Most clothing comes from thrift or consignment shops. They buy health insurance from a state program that offers coverage for small-business owners.

The family has a large garden and supplements it with fruits and vegetables from an Amish produce auction. (Sample price: butternut squash, 50 cents each.) Sometimes Amy stops by a farmers' market at the end of the day to propose a trade: the couple's unsold strawberries or bok choy for some jars of homemade jam or kimchi.

The couple forages (with permission) from fruit trees in their area, pressing their own cider and cutting up and dehydrating apples. The older son, Francis, taps trees and produces up to a gallon of syrup per year.
Weasels killed off the family chickens, but they plan to buy more.

Amy cooks from scratch -- including bread, yogurt, ketchup and chutney -- and cans and freezes excess produce. "We eat fairly high on the hog (because) we can get great ingredients cheap," she says.
The way they live is the way that I (and perhaps you) grew up: Most clothes handed down through cousins and then my two older sisters; two pairs of shoes a year (bought a size too big so we'd "grow into them"); a few toys at Christmas, but never during the rest of the year; a garden that yielded many summer meals and whose surplus was frozen or canned for winter; all meals prepared from scratch and eaten at home.

Everyone I knew lived that way. That's probably why I was able to cope as a broke single mother, washing diapers on a scrubboard because I couldn't afford the quarters for the laundromat -- and again when I left my marriage and returned to college, packing the same bagel-and-apple lunch each day.
Both couples have a more modern frugal hack as well: the rewards credit card, which both use and pay off in full each month. The rewards are taken as cash, naturally, and funneled back into their budgets.

Strategy 4: Get even more creative about meeting wants.
The Kofkes are fans of their city's recreation department, whose benefits include tumbling classes for Ava and Ella, free entertainment such as magic shows, and of course the library for books and free DVDs. Tracy is about to start a two-day-a-week preschool teaching job that includes free tuition for 3-year-old Ella.

They rarely eat out, but once a week the girls spend the night with their grandmother. That's "date night" for their parents: a dollar movie rental and a sub sandwich from the grocery store.
Amy and Jack barter their skills to get music lessons for the boys. They get a lot of useful items for free thanks to word of mouth, discards left by the side of the road (the source of cabinets and a sink for their kitchen remodel) and The Freecycle Network.

They've also developed their own network of like-minded individuals interested in reducing, reusing and recycling. Almost any need can be met within the group.
"I don't like to see useful things going to waste," says Jack, 47.

Strategy 5: Stay true to your goals.
Living this way is not easy, but it is satisfying. Amy sometimes tires of spending so much time hustling for jobs (the freelancer's curse), and occasionally wishes she could travel more. Even so, she's very happy with her life.

"It's not like I want other, better things," she says. "I don't feel deprived."
In recent months, the Kofkes have had to deal with a major auto repair, the medical co-pay for Ella's tonsillectomy and a furnace breakdown on a Sunday (much more expensive than on a weekday). Money siphoned out of the emergency fund had to be put back in.

And then there's the occasional "what if?" moment, such as watching a flashy car zoom past your 9-year-old beater.

"Of course I want it," Danny says.

But to get it, he'd have to take a second job, or his wife would have to go back to work and put their younger daughter in day care. "So far, there has been no item that has been worth (the trade-off)."

Tips from the pros

This lifestyle cannot succeed without a budget: Lower earnings mean less margin for error. Start with the absolute minimum you need for food, shelter and utilities. Finding out how little you need is actually liberating, says CPA Sally Herigstad.

"You have a lot more options when you're not a slave to high living expenses," says Herigstad, the author of "Help! I Can't Pay My Bills!" and a frequent contributor to MSN Money.
New to budgeting? The "50-30-20" plan is a useful framework. Financial management sites such as
Mint and Bundle let you easily track spending.

That budget should also include irregular or unpredictable expenses (class pictures, traffic tickets). "Leave some room for that so you're not putting your income all the way down to zero," says Kimberly Palmer, the author of "Generation Earn: The Young Professional's Guide to Spending, Investing and Giving Back."

A few more suggestions:

Stuff happens. An emergency fund is vital. For tips on setting aside cash, see "9 sneaky tips for saving more," and "8 quick ways to slash your bills."

Planning a change? Start saving now. The Kofkes chose to start living on Danny's salary even before Tracy stopped working. The trial run proved they could do it and also yielded an emergency fund.

Think outside the mall. Brainstorm ways to meet needs for little or nothing. When relatives ask what to give the children as gifts, Tracy suggests things like ballet class. Jack and Amy visit a nearby university at the end of the school year, when students discard everything from bookcases to canned goods.

Educate yourself. Personal finance sites like MSN Money's Smart Spending blog, online urban homesteading resources and plain old library books have plenty to teach.

Look for extra income. Neither couple relies on a single paycheck. "Diversity is the name of the game if you're not going to have one big funding stream," says Amy.


Remember what frugality gets you. "Time to spend with your child, or the freedom to start your own business," author Palmer says. "If you love your life, it's worth any $200,000-a-year job."