This would include $40 per month water (enough for cooking, cleaning and bathing though not heated), $50 per month in property taxes, and $100 per month on food (rice, beans and vegetables only), and $10 per month electricity (enough to turn on the stove 2-3 times per day).
In fact, after reading Bill Bryson's At Home, I think that this modern first world austerity would be quite comfortable and even luxurious in the whole scope human history. Generations upon generations failed to meet these needs, yet today I earn several magnitudes more money than I could ever spend on my finite needs. If I lived in 1800, or in an undeveloped country where GDP per capita was something like $3K, then needs and wants would be a very real question. However, I could lose 90% of my money (more actually) each year and still not worry about meeting my needs (and my family's needs).
Since our needs can be met at such a low cost, I think it's silly for us to continue to talk about needs verses wants as if these are in direct competition for our dollars. In my personal world needs and wants is a useless paradigm, since it does not reflect what actually competes for my dollars.
In reality, the huge majority of our money deployed in three different categories: luxury, tools and creating opportunities. At any given time, these categories are in direct competition with each other, and weighing them against each other is a truly fascinating exercise in what will theoretically make you happiest.
Category One: Luxuries
You receive a shot of pleasure every time you indulge in a luxury, and after you are done consuming, you are left with a pleasant memory and importantly, the desire to consume again soon.
Luxuries don't address your higher order desires, but they provide instant gratification. Some people will argue that they also convey status, but I disagree. Consumption that conveys status is actually a tool.
Consuming luxuries does not always cost a lot of money. For example, sex, naps, internet browsing and a good cup of coffee are luxuries that I often indulge at a fairly low financial cost. However, consuming these luxuries has an opportunity cost in terms of my time in addition to the financial cost that I incur from indulging.
Category Two: Tools
People use tools to address "higher order" desires such as the desire to build and maintain relationships and community, to provide stability to your loved ones, to make the world a more beautiful place, to alleviate poverty, to make people happier, and to make themselves and others healthier. Since our world is rife with obstacle to human flourishing, it is certainly helpful to have some tools to help you achieve your goals.
Tools require money (or another form of capital) to procure and to maintain, and there is no way to guarantee that you will use the tools that you procure for good purposes. For example, you may simply spend a bunch of money on achieving "status" which is unlikely to make you or anyone else happy. On the other hand, you could spend a lot of time and money building and funding an orphanage for children whose parents died of AIDS. This will make you very happy.
Tools could be anything from a hammer and raw building materials, to a computer, to a building or undeveloped land. A car or a bicycle are transportation tools, and cell phones are communication tools.
Category Three: Creating Opportunities
Technically, this is true, and you could go into bankruptcy a dozen times if you wanted to. Serial entrepreneurs do that all the time. Even Dave Ramsey did it, so there's that.
A better example of creating opportunity without any money is probably William Kamkwamba, The boy who Harnessed the Wind. Living in Malawai at level barely above starvation, he salvaged for resources to build a windmill that provided electricity and further opportunities to his village.
However, there's a very real problem with "barriers to entry" with most opportunities. Most of the time, you have to have something to achieve what you want, and if you have to scrounge around to get money from creditors or financial backers its a distraction from your real goals. By the time you have the money the window of opportunity may have passed.
People who are super into "FIRE", Financial independence to Retire Early focus on rapidly investing and lowering expenses as the best means to create free time which they classify as the best opportunity of all since time is the most finite of all resources.
On the other hand, you could be so focused on creating opportunities that you never actually do anything.
Finding our balance
Our first category is the $2400 in needs that I outlined up top, but that is a given, so what follows is addressing the money we spend after that point.
For example, two years ago, my husband took an 85% income hit to become a graduate student at the same time that we had our son. The opportunity cost of his education is really high for us, but its also a huge priority which is why we are happy to "spend" on this "tool."
We spend a lot of money on childcare, so that I can advance in my career and so that my son can learn and grow in one of the best possible environments I can imagine. We spend on medicine and bicycles and healthy foods, so that we can be healthy people. We spend on entertaining which I think of as a tool for building relationships. We spend on supporting kids through World Vision so that we can do a small part in alleviating poverty throughout the world. We spend money on internet, electricity, cell phones with data plans and calculators to help both me and my husband understand and grow in our knowledge of the world.
People often talk about "paying yourself first", but I don't think I would forgo any of that spending that I just listed to invest in future opportunities. However, we don't spend all our money on every single tool that fits with our current goals and priorities. We use our adult brains with fully developed frontal lobe to determine if the tool is likely to help us achieve what we want it to achieve. We don't spend today on tools that we need tomorrow (where tomorrow is a figure of speech meaning eventually but we don't know when). And we make every effort to utilize the tools that we have at our disposal right now rather than buy a new tool.
If we were earning so little that we couldn't even meet all our tool spending, we would need to reevaluate our approaches to our goals to find a way to keep moving forward at a lower cost.
Near term opportunities second
Some people would say we are crazy for investing in real estate before investing in our tax deductible retirement accounts, but I disagree. My husband and I take the middle part of our life pretty seriously, and we value maximizing our flexibility. As a result, we don't want to short ourselves by investing only in retirement accounts. Shannon at Financially-Blonde calls this preventing the financial barbell. It might be short sighted, but it is our priority. Our goal with these investments is to maximize cash flow so that we could drop our jobs for a time and not struggle to pursue new life-enhancing and income generating activities (like freelance or entrepreneurial work).
You might be surprised to learn how many people accidentally prioritize this middle investment bucket. Typically this comes in the form of buying too much house or holding to much cash. I guess that technically covers the near term future opportunities, but the opportunity that we are hitting hard is the ability to maximize cash flow.
In the event of an income drop, we might slow our near term investments, but we would continue to prioritize these investments over retirement investments as long as we thought (reasonably) that our income would improve in the future.
Long term opportunities third
Our goal is to max out all of these retirement accounts because that will make us millionaires eventually. At $35,650 this isn't too bad of an amount especially because its tax advantaged. We are set to do max these out this year, provided that my income remains steady eddy or grows. Our strategy for this is to max out our Roths at the beginning of each year, steadily contribute to my 401K to exactly get the max and no more, and to get somewhat close to the max on the HSA, and then dump on the contributions at the end of the year. This is a new strategy, so we'll see how it goes.
Since we're forward thinkers with a lot of income, we're also investing in after tax brokerage accounts. If we don't actually use that money in the near term (as mentioned above), then it actually enables us to take advantage of opportunities in the long term.
That's one nice thing about money, it translates nicely over time thanks to the power of compound interest (though its still only useful when used).