How Much Money Do You Need to Live Annually? Lower Than You Think

Calculating how much money you need to live is an important part of money management. Moreover, knowing how much money you need to live provides a foundation for where to spend, save, and invest your money. In other words, it helps you build a budget.

Budgeting is great in a sense that it can offer peace of mind and a sense of control over your life. Peace of mind because once you know the numbers, you’re no longer in the dark. And once you know exactly what you’re dealing with, you can take control of your income and (hopefully) manage your money in a direction that moves you forward in life.

So, how much money do you really need to live?

Essentially, you can determine how much money you need to live annually by listing all recurring expenses in a year, calculating each bill’s monthly cost, and multiplying one months worth of bills by 12.

How to Determine How Much Money You Need Annually

Now, I’ll review what you should include in your list of bills, how to calculate their monthly cost, and then finally, we’ll solve for an annual expense. This will allow us to determine how much money you need to live annually.

From there, you can build your budget and assign funds where you want to spend, save, and invest.

I’ll also include examples for us to work through, just to make things crystal clear.

Step #1 – List All of the Bills You Have in a Year

The first step to knowing how much money you need to live for the year is to list out all of your regularly occurring bills. Now, this list varies person-to-person, so only you’d know what would go in your list.

That said, here are some common expenses shared among most people:

  • Auto Insurance
  • Rent/Mortgage
  • Car Payments
  • Electricity 
  • Water
  • Internet
  • Cell Phone Service
  • Memberships/Subscriptions (Gym, Amazon Prime, Netflix, etc)

The important part to remember here is to write down any bill you know you’ll need to pay for within a year. This means monthly bills, like a phone bill, or car insurance that might be billed semi-annually. Even yearly bills, like an Amazon Prime membership that is billed once a year should be included.

Basically, if you know a bill is scheduled to come, put it in your list.

Step #2 – Calculate Each Bills Monthly Cost

Next, now that we have a list of every recurring bill we’ll receive in a year, we can break them down into a table. This table should give us how much each bill would amount to each month.

Monthly recurring bills are easy, no math required. Just write it down.

Other bills, like car insurance, may occur every 6 months. In this case, just divide that bill by 6 and write it down. We can calculate the monthly cost of a yearly bill the same way. Just divide the bill by 12.

Here’s a example breakdown (not a complete list of bills):

BillMonthly Cost
Gym membership (billed monthly)$25
Car insurance (billed $700 every 6 months)$116.66
Amazon Prime membership (billed $119 annually)$9.91
Total Monthly Expenses (Incomplete List)$151.57 

Step #3 – Calculate One Months Worth of Bills and Multiply by 12

Finally, we can look to our last step to see how much money we’d need for the year.

Now that you have your list of bills and their respective monthly cost, add them up to find the total months worth of expenses.

After you’ve added everything up, you can multiply your total monthly expenses by 12 (total number of months in a year). This would give you the total amount of money you’d need to live annually.

A Real World Example


John is a young twenty-something who lives alone in a one bedroom apartment. He likes to go to the gym, drive his paid off car to the beach to relax, and order his favorite protein powder from Amazon. John also likes to Netflix and chill with his new boyfriend Jake. Lastly, since John is living away from his mom, he likes to call her at least once a week to catch up.

Given the above information, we can assume that John’s list of expenses looks like this (Step #1):

  • Rent
  • Renter’s Insurance
  • Internet
  • Electricity
  • Water
  • Gym Membership
  • Car Insurance
  • Food
  • Gas
  • Phone Bill
  • Amazon Membership
  • Netflix Subscription

Now, we can break down each bill into their respective monthly costs (Step #2).

BillMonthly Cost
Rent (billed monthly)$1,100
Renter’s Insurance (billed $115 annually)$9.58
Internet (billed monthly)$55
Electricity (billed monthly)$115
Water (billed monthly)$20
Gym membership (billed monthly)$25
Car insurance (billed $700 every 6 months)$116.66
Food (rough monthly estimate)$175
Gas (rough monthly estimate)$100
Phone Bill (billed monthly)$50
Amazon Membership (billed $119 annually)$9.91
Netflix Subscription (billed monthly)$12.99
Total Monthly Expenses$1,789.14

Finally, we can complete Step #3 using the example above.

In our example scenario, John’s monthly expenses add up to be $1,789.14. From here, we can multiply that number by 12 to get the amount of money John would need to live for the year.

So, if we multiply $1,789.14 by 12, we would get $21,469.68.

Now, we know John needs roughly $21,469.68 to live for the year.


If you’ve made it this far down, you’ve learned how to use simple math to calculate how much money you would need to live annually. This 3-step process would probably take most people about an hour, more or less, to complete.

From here, you have the information and powder to go on to make your own money plan (budget). Whether you need to get out of debt, want to save for an emergency fund, or invest in the stock market – you now have a foundation from which you can work from.

The opportunities to accomplish your financial goals start here.

Recommended Reading: If you’re in debt and want to learn the strategy I used to get out of debt, I recommend reading The Total Money Makeover book by Dave Ramsey. As well, you can read my review of The Total Money Makeover and learn what I did to become debt-free.

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