When it comes to money management tips for those on a lower income, you could rightly question my authority on the matter. I am not that guy who became a millionaire by 25.
I’m not even that guy who makes an ‘average’ salary.
I’m just a guy who gets by comfortably enough through the various plates I have spinning around me. Put it this way — if you saw my bank balance, it wouldn’t make you green with envy.
I spent many years of my life post-graduation building a company I co-founded. During that journey, there were many spells in which the income dipped to some pretty extreme lows. My bank account resembled a barren desert with some tumbleweed blowing around in the wind. When I read over my statements to sort out my tax returns, some of it made grim reading. Thankfully, as I began writing and took on an editorial role at a publication, my wage is at least up to living standards these days.
As someone who has spent most of his 20s ‘just getting by,’ I’ve still managed to consistently pay my bills, accrue very little debt, go on amazing holidays around the world, and even recently get engaged and plan a wedding. In short, I’ve never wanted for anything, despite having to budget with a low and irregular income.
How? I’ve learned some methods to keep my head above the water, and make my money go a long way.
If you have to live off a modest-to-low budget and need help making the most of it — I’m your man. Here’s 3 money management tips that have served me well, no matter how low my income has been.
Pay Yourself First? Sure, If You Earned Enough
I like this well-touted money tip a lot. Even some of my favorite writers like Tim Denning preach this one.
“My rule is that every deposit into my bank account must pay me first before it’s spent elsewhere.”
The problem is that, in reality, it doesn’t always work.
What happens when you only earn enough to cover your overheads? What happens if you have outstanding debts or things that need to get purchased? We can’t all make a million dollars in a year from a startup.
I’ve lived most of my adult life working to the opposite of this mantra. When my money comes in at the end/start of the month, I immediately carry out my ‘life admin.’ I move the money around so that my rent and bills are covered, I’ve paid off any outstanding credit card debt, bought anything essential, and, when it’s been a better month, I put a little money away for savings.
Only then do I consider paying myself.
Call me crazy, but this has worked wonders for me my whole life, and I recommend you do the same. By paying everything you need to first, you carry as little debt and miss as few payments as possible. You also avoid the temptation of dumping it all on credit for the next month, which can quickly spiral into a big problem.
If your earnings fell short, take on the chin, and live with what you’ve got. It’s a good exercise in self-control, and understanding the value of money itself.
Do Big Purchases Make You Feel Sick?
If a ‘major’ purchase doesn’t put a slight knot in your stomach, I would question whether you appreciate the value of that money enough.
When you’ve lived a lot of life with little to live on, the thought of a big purchase can quickly bring on cold sweats.
I learned to welcome this feeling. I realized that it’s the last barrier of defense to ensure you don’t spend your money on stupid shit.
Previously, I used to commute to work. All in, I was three hours a day between trains and walking. A good pair of headphones seems like a worthy investment, right? Yet, you should have seen me outside the Apple Store — I genuinely had to pluck up the courage to go in and spend £160 on headphones that I would use for hours a day. Even after I bought them, I still stalled on opening them in case I changed my mind.
While it might seem ‘tight,’ it’s served me well throughout my twenties.
Take a note from the first point and evaluate your incomings — do you even have enough to cover this spending? Next time you consider buying something substantial, listen to your gut instinct and ask yourself, “do I really need this?” It could stop you from spending your money on regrettable purchases.
Start a Slow-Grow Savings Account
Even when I earned laughably low money, I was aware of the importance of savings, both in terms of having them, and developing the habit of saving them in the first place.
But when you don’t earn much, how can you save?
I have an account that I — as much possible — pay £50 a month into. That works out at an incredible, mind-blowing amount of £600 a year. Yes, it’s not a number to shout about, but it builds up fast, and you never notice it leave your account in the first place.
I’ve used this account to buy my fiancé expensive presents and pay for holidays, and I never even noticed it build up.
Of course, once you earn more, you can dive deeper into savings. These days I have a ‘grown-up’ savings account and a Lifetime ISA (that pays extra 25% of what I put in) which is locked for a deposit on a house.
But, when it comes to money, you have to learn to crawl before you run. No matter how small an income you make, you can develop the habit of saving, and gain the pleasure of watching it grow (albeit, slowly).
When you play in the small leagues, money advice is surprisingly simple. It just requires self-control and discipline.
The key money management tips are to avoid debt as much as possible and ensure your outgoings are covered every month, no matter what income you earned. Then, once you’ve paid yourself what you can afford to, do your best to spend it wisely, and tuck a little away.
And sure, you might not have become a millionaire by 25, but there’s always 35, right?