How a Small Salary Can Help You Avoid Debt

small salaryIf you make a lot of money, all of your financial concerns will magically go away. That’s what most people think, at least.

This is what I believed for many years. I didn’t have a lot of money for a long time.

I worked my butt off to pay for college on my own while I was earning minimum wage and paying thousands to get my college degree.

I couldn’t help but think that life would be different with a lot of money. I dreamed of meeting someone who would offer me a large fortune, but I never met this person.

My fortune never came, but I received something much more valuable: Financial discipline. While many people believe that a large salary is the key to success, avoiding and getting out of debt has nothing to do with the size of your income.

I know this to be true because my wife and I are debt-free at an early age — without making a lot of money. Not only is it possible to avoid debt with a small salary, but it is much easier in many ways.

How a Large Salary Can Be a Bad Thing

About 8 years ago my older brother graduated from college with a decent engineering job. His wife worked as a teacher and between the two of them they were making a pretty sizable income.

They didn’t have kids at the time and had a bright financial future. That is, until their confidence got the best of them. They bought a house less than a year out of college. It was a pretty nice house too.

But they didn’t have a down payment, so they ended up taking out a second mortgage. The monthly payments were still within their ability to pay. Then things continued to get worse.

They started carrying a balance on their credit cards because there was never a question of them being able to pay it off. This was also around the time when the housing market crashed and their variable interest rate mortgage pushed their payments to extreme heights.

Before they knew it, they were unable to pay the regular bills. While their high salaries did not directly cause this financial disaster, it gave them a false sense of security and pushed them towards disaster.

How a Small Salary Can Be a Good Thing

As I hinted at the beginning of this post, my wife and I have a completely different story. We graduated college and a few months later took a couple low-paying jobs that we could secure.

I wanted to go to a particular graduate school, so there were only so many jobs that were available to us. Working low-paying jobs made us more conscious of our spending because it meant more hours working to make-up for any unnecessary spending.

While the first two years were extremely difficult financially, as I look back on this, I am quite grateful for the challenges that we faced.

One of the first things that we learned from all of this is how to limit our spending. In this day and age, controlling your urge to splurge is a rare skill.

You can make a million dollars each year, but if you don’t know how to control your spending, it doesn’t mean a thing. My brother and sister-in-law were great examples of this. Learning this lesson early on, saved us a lot of pain and agony.

We learned how to be resourceful with the limited funds we had. For example, by not eating out, we saved hundreds each month. Many of these cost-saving efforts were out of desperation, but they became habits over time. We still find it difficult to eat out more than twice a month.

While it may not seem like the case, earning a small income can actually help you avoid debt. Many of the finer things in life are much easy to give up when your back is against the wall.

While I understand that not everyone is able to avoid debt like my wife and I were able to do, I do know that a small income is no excuse to dig yourself into a hole.


CoreyAbout the Author:

Corey is the owner of 20′s Finances, a site dedicated to helping young adults manage their personal finances.

  • Abby Moore Garner

    Corey, can you share some insight on how your brother and sister-in-law recovered? Or have they recovered? Sadly, I am in their boat and not yours.

    • 20sFinances

      Abby, I’m sorry to hear that. The first thing they did was get a new mortgage with a fixed rate mortgage. After making sure that their mortgage wouldn’t skyrocket again, they sold their second car to pay off a credit card balance. Then, they cut back their spending. It’s impossible to fix your finances if you are spending everything you bring in. Now, they are in the debt-payoff mode. It will probably take them another year or so to pay everything off. But, at least they are on the road to recovery.

  • Jeff Ehrlich

    Corey, Congrats to you and your wife for starting off your financial life on the right track. We were in your brother’s situation until we got smart in our 50′s. We want to help others not make the same mistakes we did. Your readers might appreciate our “Flying the Coop” project to prepare 20 something’s to move out on their own.

    • 20sFinances

      Thanks Jeff. I’m glad to see others as interested in helping young adults.