How to Live the American Dream on $50,000

No example is perfect, but by looking carefully at what you can control, costs for the American Dream come down dramatically.

Aug 9, 2014 at 9:05AM

How much does the American Dream really cost?

Last month, USA Today made waves by putting a price tag on the American Dream: $130,000 per year. That number seemed inordinately high to me. After I dug into how the paper arrived at that number, it became clear that there were numerous mathematical errors, none more egregious than overstating taxes by over 50%. I concluded that the average American family could live happily on an income of about $88,000.

But would it be possible to live the American Dream on an even smaller income? What about $50,000? Probably not for the average American. But if you're willing to change you're internal narrative surrounding "wants" and "needs" -- and perhaps radically change your behavior -- such a lifestyle is entirely within reach.

Screen Shot


There is no single definition of the "American Dream," nor should we automatically assume that it's something everyone feels is worth pursuing. Furthermore, even if we all had the exact same thing in mind when it came to the American Dream, the costs would show enormous variation depending on where we lived.

But it's hard to ignore the depressing implications of the $130,000 price tag. While it's always prudent to over-estimate how much something might cost, it's also worth focusing on the power of optimism and the factors that are under our control.

How much is your American Dream?
In that vein, I set out to see how much the American Dream would cost if I started from scratch -- knowing that the exact number wasn't important but rather the spirit behind finding it.

I decided not to use government statistics or databases to come up with my numbers. I understand why most people think using the average household value or spending habits makes sense.

However, as I alluded to above, I'm not discussing the average American. This is because -- by and large -- the average American is terrible with their finances. More than one-third of us have debt collectors on our tails, we are woefully underprepared for retirement, and we tend to over-spend when we have the chance to sock away more money.

I'm not concerned with how much the average American Dream would cost because I don't think we should aim to be in the average American's financial situation. Instead, I want to see what's possible. But how can we do that?

Enter our hero
The hardest part of finding out how much financially savvy Americans spend each year is that they don't generally keep detailed notes on every little expense. And even when they do, they rarely broadcast the results publicly.

But that's where one of my favorite Internet celebrities, Mr. Money Mustache, a.k.a. MMM, comes in. MMM retired at the age of 30 and finds time to do pretty much everything that makes him feel purposeful and alive. He resides with his wife and son in Colorado.

Screen Shot

Mr. Money Mustache at FinCON12. Source: Jeremy Vohwinkle via Flickr. 

And he keeps copious notes on his spending habits, which he releases for the world to see.

If you already follow MMM, you'll have a hard time arguing that this man isn't living the American Dream. He gets ample time both outside and with his family, he has taught himself everything from carpentry to alcohol distillation, and he sets his own construction work schedule (sometimes he gets paid, sometimes he doesn't). So how much does he spend every year?

Last year, the total bill came to $25,182. And that includes paying for health insurance in its entirety. If you subtract the unnecessary extras in his family's budget -- e.g., donations, travel, gym membership, organic food, and home renovations -- the number drops all the way down to $19,295. Check out the breakdown of these numbers here.

Could you live on that number?
For many of us, chances are that this number is too low. MMM doesn't have to save for retirement (he's already retired), nor does he pay a mortgage (he's already done paying it off). But what if we took his expenses and factored those costs in -- along with a little savings for junior's college expenses?

Let's assume you keep all of the extra goodies MMM had, like the summer vacation, organic food, and gym membership. Let's also assume you buy a $200,000 house with 20% down at today's going rates, put away $3,000 per year for college, save 15% of your income for retirement, take standard deductions and exemptions, and pay 7% in state and local taxes. In the end, your annual budget would look like this:



MMM budget


Mortgage  and maintenance


College savings


Federal and local taxes paid


Retirement savings






The American Dream for $50,800?
Chances are, if we surveyed everyone who read this piece, had them calculate what they needed to live their American Dream, no one would have exactly this number. Some would be lower, and many more would be higher -- especially for those who live on the coasts or in popular urban areas.

More than anything, MMM keeps his costs low because he loves learning how to do things for himself. Instead of going to fancy restaurants, he cooks home meals with his family. Instead of paying for cable, he takes advantage of the world around him -- friends, family, libraries, and public parks -- for entertainment. He also bikes practically everywhere and encourages his family to do the same.

In short, he's hyper-aware of when he might be spending money on something unnecessary.

We might view these decisions and say: "I could never live a life of such denial and sacrifice." But most of us don't have any idea of what that's really like. To him, his way of living is simply "slightly less ridiculous than average," with "average" being the family that constantly strives to keep up with the Joneses.

Does that mean we should all be able to live our dreams on $50,000? Not necessarily. That begs the question: If this number isn't reliable, why figure it out at all?

The answer: Because it's about the spirit in which we arrived at the number, the ability to view life optimistically, and the empowerment that comes from realizing how much control we have over our financial lives.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers