Many people scoff at those numbers.
“Is that all they pay you?!”
“I would never work a job for such low wage.”
Well, I’d love someone to pay me that. The truth is I’m yet to even earn the average salary once in my 10 years of working since graduation. The yearly returns for my hard work usually sit closer to the minimum wage bracket, which is approximately £15,000/$20,000.
And in my earlier years, which involved a mix of part-time work and trying to build a business, my wage frequently dropped below minimum wage. It’s a depressing thought. I would routinely dedicate 12 months to working all day, every day, trying to get my business off the ground while juggling the demands of other jobs, and my financial rewards would equate to less than a figure that was deemed the very bare minimum required to live off.
But rather than be embarrassed by my money struggles, I’ve instead embraced them. Those years taught me some hard lessons in money management and the value of money itself, that will stick with me for the rest of my life.
If your income is leaving your bank balance running low, take note of the following lessons to help you survive on minimum wage.
Set a ‘fun money’ account
When you don’t have a lot of income, you learn to live within your means. You have to — unless you fancy joining the average American in having 2.7 credit cards and a credit card debt of over $5000.
In a way, I got lucky that I earned so little; I didn’t qualify for a credit card. Even when I did, the bank set a laughably small limit on it to begin with. So for many years, I had to make do with what I had.
The best piece of advice I can give you is to open a ‘fun money’ account. This account is the money you live off after your outgoings are paid (see more below), whether that’s going out for lunch, or date night, or buying yourself a new pair of shoes. You set your monthly number — for me it was, and still is, £300 — and that’s your limit. When it hits zero, you better hope it’s close to payday.
Setting this limit keeps your spending in check and makes you disciplined with money. You also become far wiser in how you spend it. When you restrict your monthly allowance, you find you’re not so quick to drop money on purchases you’re not 100% sure of, in case it leaves you short at the end of the month.
You can still survive and thrive on minimum wage — just in a more sensible and controlled manner.
Pay your dues first
I understand why this piece of financial advice is so regularly touted. It’s important to get paid. But to me, it makes no sense, especially when you’re earnings are lower or inconsistent. I’d much rather decrease my ‘fun money’ amount for that month than skip out on rent, bills or any other payment I’m due.
Why would you pay yourself first, and then only be able to pay off the interest on your credit card instead of chipping away at the balance? Why would you pay yourself first, and then leave somebody you borrowed money off waiting in the wind? Do you think your landlord or mortgage provider will accept “oh, sorry I didn’t pay you, I decided to pay myself first this month and I didn’t have enough left over” as an excuse for a missed payment?
Of course not.
During a typical month in my earlier years, I divided my money as follows:
- Income: £1000
- Rent due: £300
- Bills due: £100
- Savings: £300
- The remainder (i.e., my wage): £300
Notice again. My pay was last on the list. To survive on minimum wage, you need to run your finances by a different mantra. I worked on the policy of pay what you’re due, pay what you owe, pay into your savings, and then pay yourself.
And I still follow this policy as my wages have increased. It keeps me regiment, and more importantly, debt free.
Be smart with your accounts
This is not permitting you to commit tax fraud, find some way to send your money to an offshore account, or start hiding all your money in cash under the floorboards (though that might not be a bad idea.)
What I mean by ‘being smart,’ is that to thrive on a low income, you need to get savvy with what you can (and can’t) declare as business expenses.
Having been self-employed for a long time, I’ve used this technique to help control the size of my tax bill at the end of the year. When your earnings are only just above the taxable level, you can easily bring them under the line.
I was a daily commuter for a long while and expensed the train costs. Recently, I bought a new laptop — essential for my writing work — and expensed the costs. I had to buy new pens and a notebook, and, you guessed it, I expensed it. Last summer, I went on a retreat to network with other writers and expensed the cost of my flights.
If you’re unsure what you can and can’t expense, I look at it this way. If you worked for a company, would they supply you with whatever it is you’re buying? I regularly ask my fiancee, who works for a company, “would your office give you this?” If the answer is yes, you can likely add it to your expenses.
Would your company pay for lunch every day or your weekly food shop? Highly unlikely. Would they supply the software you use on your computer? Very likely.
While I’m thankful for my earnings improving over the years, I’m equally thankful for the lessons I gained from having to survive on minimum wage.
The best lessons in life are learned the hard way, and your finances are no different.