My $19,000 credit card is almost paid off. I am slowly but surely managing to get ahead on a low income. Looking back at how far I’ve come, it’s hard to believe that I now own a home, that I have investments, that I am easily keeping up with my budget. And I don’t feel like I’m making any sacrifices anymore. I love the life I’ve built. All of this is thanks to some hard work and two core financial principles that I apply to my entire life. This is what I want to share with you. I hope if they make sense to you, you may be able to implement them to get ahead of your own finances too.
These other posts about my journey so far may be of interest to you. Check them out too!
Goal Based Spending
Putting your money where your dreams are.
Even when we are struggling to get ahead on minimum wage, we still dream of our futures. Prior to Covid I dreamed of having my own home. I dreamed of having the money to travel. I dreamed of not having to work so much, or doing a job I loved. But I liked eating at restaurants, shopping and buying nice things sometimes.
We were living in an absolutely terrible apartment. It was the lower level of a duplex, and while we made due with the dark space, inefficient heating, driveway flooding and a number of other small complaints, it was the upstairs neighbours who made living there unbearable. I won’t get in to that here, but suffice it to say we wanted out of there, badly.
We were paying $600/month, and in terms of space and amenities our needs were mostly met. My partner and I scoured facebook and kijiji for available rentals in our area, and everything we found that was suitable would have cost double. This is where our philosophy came from. We knew we could move to a better house but it would be hard on our finances. We also worried that a new house and landlord could turn out even worse in an unexpected way. In the end we decided to stay put until we could buy, and use the savings from our low rent towards our own home.
I knew that we didn’t have a lot of money to put towards our house buying dream. But even more I knew that my dreams would never come true if I didn’t prioritize them, with both my energy and my money. So I spend my free time learning about how to qualify for a mortgage, low income programs available to me and ideal debt ratios. With what I learned I started putting as much money as possible towards my credit card debt. And the best part is that every dollar I put towards my goal motivated me to keep it up.
Set new goals as your dreams come true.
Now that I have achieved my biggest goal, it’s time to turn to the next. Based on the financial goals I set for myself, becoming free of consumer debt is the next to tackle. I have a number of short term goals that I will keep working towards over the next few years. But after making an actual dream come true for my family, I decided I’m not ready to stop. I have always loved seeing the world, being by the water and having plenty of free time to enjoy life. Combining these, I would love to retire abroad somewhere near the ocean with a low cost of living and a high quality of life. This is my new dream.
In my old life it would have stayed as a dream forever. But now that I prioritize my goals in the way I budget, unnecessary spending doesn’t tempt me much. As a minimalist so many of the things people often spend money on don’t matter much to me. It helps me start practicing for the simple life that I envision somewhere else. I know that this is no longer a pipe dream, but a matter of how much I want it. If short term temptations can throw me off the path to achieving my dream, I am subconsciously making the choice not to pursue it after all.
None of this means that I never treat myself to small luxuries. It just means I ask myself regularly if my spending habits are in line with my goals. And really, the biggest goal is and always has been to have a good life, now and in the future. So the little things that bring me happiness will always remain, while the frivolous spending habits I used to employ are gone for good.
Reduce your biggest expenses
As I mentioned above, we made a deliberate choice to put up with bad conditions in order to save a ton of money on rent. Recommendations are generally to keep housing costs to less than a third of your total budget. At the absolute worst I once paid closer to 80%. After that terrible experience, I have gone to great lengths to prevent such a high expense. Currently our housing costs account for about 18% of my income. These are a few ways to potentially reduce your housing costs.
If you want this summed up a little faster, check out the video. I’m playing around with branching out a bit to make smaller, easily digested videos for people who like that format. A like and subscribe would go a long way to helping me make more content, both on the blog and youtube.
For very many years while living in a city, I had roommates. And I’ve probably tried every possible arrangement from being the main lease holder, one of many, to illegally subletting a room. And I lived with some amazing people of vastly different backgrounds, although there were a few duds in the mix. The one thing that remained the same throughout all these experiences was that rent was cheap. I generally paid $400-$500/month, which often included utilities, and lived with up to three other people. As a single person in a city, I would definitely recommend this route for saving money.
2. Stay at home
This option did not appeal to me because I wanted more freedom, but I also wanted to get out of my small town. But many of my friends, particularly those with more affluent families, lived at home all through university and sometimes well beyond. They had to travel further to get to school or work, but all graduated with little or no debt. Some friends moved back in with their parents after school until they could afford to go out on their own. I lived with my sisters family for over a year while I established myself in a new province. If your family has a safe and cheap or free space for you, and you can make yourself useful so as not to be a burden, this might be a great option for you.
3. Get out of the city
It took me a long time to get to this conclusion. I loved being in the city. When I first moved there I made minimum wage of $6.85. But because there was such a large job market, I changed jobs several times and within 9 months was making over $11. These opportunities would have been much harder to come by in a smaller town. But over the dozen years I lived there minimum wage went up and up and up year over year, and so did rents. I found that my earnings growth, which had been so rapid to begin with, slowed down to barely keeping pace with minimum wage. By the time I left, I was a retail manager making only a few dollars an hour more than my staff. It occurred to me at that time that I could live anywhere in the province, and earn relatively the same, while paying significantly less.
If this is you, I encourage you to look at your options. Leaving cities may be a viable option to stretch the same income further. It can be a lot to start over, find a new job and make new friends, but the literal payoff could be worth it.
4. Room and board
While I’ve never gone this route, I do regret not giving it a go. There are many types of employment that include room and board, allowing you to save most of your income if you are frugal. All across Canada, but particularly in Alberta and British Colombia there are resorts that provide housing to their employees. I loved the time I spent working in hotels, and the pay and benefits were great. I would have loved to move “out west” for a few years for the experience as well as the money. Cruise ships are another option, or nannying. And the North West Company has an abundance of retail management positions that include housing if one is brave enough to embrace arctic issolation.
Paying exorbitant rents is not the best or only option for most people. I encourage you to have an open mind and explore the options that make the most sense to your situation. Even a short term sacrifice might be enough to save the money you need to make big life choices for a better future.
When I lived in a city I decided that having a vehicle was not an expense I could afford. Between a car payment, insurance, gas and parking fees I would have been spending a ridiculous chunk of my income just to get to work. Instead I bought a bus pass for roughly $100 per month. I occasionally used the Greyhound bus to go to my home town for visits. And I had a few friends with cars who were able to help me out when public transportation was not an option.
Even once I moved to Nova Scotia I took 7 years to get my driver’s license. There happens to be rural bus service here for very cheap, so most shopping and services are still accessible. Taxis are available but somewhat less reliable than in a city. But mostly I made it work by living on a bus route or within walking distance to my work place. It has limited my family in some ways, and I am happy to now own a vehicle for the first time, but not having any of the associated expenses was a huge benefit when I was saving so aggressively.
Check out my recent post about owning a vehicle to see if it’s the best choice for you: Owning a Car – The Pros and Cons – Loving Life With Less
This is where my two bits of advice contradict a bit. Rent is less outside of cities, but it’s harder if not impossible to access public transportation. I have been fortunate to find homes in locations that met both needs, but only because I had no choice but to make it work.
If owning a car is the only option that makes sense, there are ways of making this purchase much less expensive. First off, never lease. This type of transaction benefits people who want to frequently upgrade, but does not make financial sense for the frugal. Next, don’t buy new. We all know cars are devalued the minute they leave the lot. If you can afford it, buy a slightly used car and drive it until it’s dead. Better yet, buy an older, well maintained vehicle with cash and keep up on necessary repairs. And in terms of size, go for the smallest car that is practical for you. 5 tall people might not be comfortable in my Kia Rio, but for my family it’s just enough. And I am loving the higher gas milage.
Can you stretch your low income to get ahead too?
Absolutely! If you are struggling right now because your low income doesn’t stretch far enough, there is almost certainly room for you to make changes. What makes the most sense is up to you, but doing the same thing will never give you a different result. And waiting until the world changes to make a fair wage with leave you unhappy for a long time. There are many low income earners who live wonderful, debt-free lives with the ability to work towards their dreams. I hope one day that a simple lifestyle becomes the standard for everyone until they reach a financial level where they can truly afford more.