The Secret to Living Well on $40,000 a Year

This teacher explains how he can afford everything he wants for his family on what some might consider a modest salary.

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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:

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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.

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.

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How are you teaching your children about money?

Once my older daughter, Ava, turned three, 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 percent of her money, then saves 25 percent 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.

Twitter: @alphaconsumer