“How Charles Paid Off $70,000 in 3 Years” “How Anna Saved Her First $300,000” “How Dorothy and Timothy Bought Their First Home in Cash” These…
These kinds of headlines can make anyone feel less than, after comparing their finances to the subjects of the articles. Much of the time, however, the subjects make 6-figures or close to it.
They may also live with their parents and don’t contribute to paying rent or a mortgage. Perhaps their parents even gifted them money to assist with buying a house or the down payment for one.
That’s all well and good, but where is similar advice for those who have average salaries, live on their own, and are drowning in debt? Don’t they deserve representatives whose stories won’t inspire an eyeroll, but will inspire them to start the road to FIRE at the level they’re currently at?
I’m proof that it can happen. I had had loan debts for years (one student loan was for almost a decade) and hadn't made a dent in them at all. I had a savings account with no money in it because I kept having to use it for bare necessities. I was divorced and nowhere near being able to buy a house, let alone in cash. That was three years ago.
While I still can’t afford to buy a house in cash, I’ve made some significant strides in my FIRE journey. I have paid off nearly $40,000 of debt and saved more than $7,000 in my emergency fund. I’ve also negotiated raises to increase my salary by $25,000.
Before the criticism begins rolling in about that last part, note that I’m still nowhere near 6-figures. I would love to make $80,000 in the future – but I’m not near that either. In other words, my salary is very, very average.
So, these money moves can indeed be made with the average salary. How? Start with where you are. Sure, I make more money now than I did in 2017. Three years ago, I started with where I was.
I didn’t have much, but I knew enough to realize that something had to give. I didn’t want to be paying debt off for the rest of my life. Now, I’ve paid off a huge chunk of it, but there’s still another chunk left to obliterate.
Last year, my goal was to be debt free by 2024. Now, I know that won’t be possible because I intend to get my first investment property next year. A mortgage is a much larger debt than I’m used to, so I’ll be paying that for a while unless I choose to sell after a few years. In the meantime, I’ve amended my goal to be free of my original debts by 2024. That, I can ensure will happen.
The snowball method has been my saving grace. If you’re a student and/or participant of the FIRE movement, you should be very familiar with this term. It works! I started out “attacking” smaller debts first, like my credit cards and Perkins loan.
I focused on one debt and added a little more than the minimum while only paying the minimums on all other debts. With a low salary, I couldn’t afford much. It was more important that I start doing it than what the amount was. I knew I had to increase my income but that was another project. When you have more, you can do more.
Before I could increase my income (which actually led to more debt first), I knew that I had to continue setting the ground rules for my financial success. As I mentioned earlier, debt wasn’t my only issue. I couldn’t save a penny to save my life. I had tried the automated $25 per paycheck rule over the years to no avail.
The result was always a negative one. Not soon after I deposited the money, I would take it out and spend it on things I needed. While they were necessities, part of the problem was that I hadn’t learned how to properly budget.
I had been using a budget for years, but I only listed my income and major bills. I didn’t include savings in the budget, so I had no real idea of what was being spent and in what areas. In 2017, that changed. I began listing takeout, savings, and a slew of other things I hadn’t before.
I allocated all the money to every category, creating a zero-based budget before I knew what it was. That’s what showed me that I only had enough for $40 a month in savings.
I was wary about it, though. How would I be able to consistently save $40 a month when I couldn’t swing $50 a month all those years prior? Sure, it was $10 less but that’s not a significant figure. So, I decided to trick myself. Instead of $20 per paycheck, I broke it down to just $10 a week.
I figured that if I could swing the $10 a week, it would prove that part of my issue was mental. Surely, I could part with $10 a week. If I couldn’t, then the remedy would be to cut it down to $5 a week. The test was on, and I’m proud to say that I still haven’t touched any money in that account. Of course, once I did increase my income, I began to save a lot more than what I used to.
This is why it’s imperative to start where you are. If I had kept waiting for my income to increase, I wouldn’t have achieved the milestones I did. Definitely not in the short timeframe that I have. I effectively learned how to save while attacking my debt, and that has made all the difference in my journey. I didn’t put it off.
I created a much more realistic budget that showed me what was possible to save. Then, I used the snowball method to pay my debts down. But first, and perhaps the most important step, was to change my mindset. I couldn’t wait for something else to be different in my life. I had to be the change that I was seeking.
You can follow my journey on Instagram