Marjorie wrote in recently:
I used to enjoy Money360 until I read about your recovery from credit card debt. You paid off $17,000 in credit card debt in a little over a year? You’re not a poor person, you’re a rich person. You don’t have financial problems and you can’t relate to my situation. I will have to find another website to read.
I receive a comment like this once a week or so. Usually, I brush off the negativity and move on with life, but Marjorie’s comments really struck a chord with me, so I thought I’d address them.
Money360 has very little to do with “rich” or “poor.” It’s all about spending less than you earn, regardless of how much you earn.
Whether a person makes $20,000 a year or $200,000 a year, a person can save money by following the same basic frugal steps. The high-income person saves just as much at the store clipping coupons as the low-income person does. The low-income person puts just as much cash in their pocket from turning off light switches as a high-income person does. For both, it’s a struggle to overcome the temptation of spending money unnecessarily. For both, it’s a challenge to put away money for the long term when there are so many potential uses in the short term.
Naturally, there are some opportunities available at each income level that aren’t available at other ones. Families with $20,000 a year in income are going to be eligible for certain types of aid. Families with $200,000 a year in income are likely going to be choosing among purchases that aren’t available to the lower-income family.
But the principles don’t change a bit. Both families should seek to spend less than they earn. Both families should always strive to get the most value from their dollar. Both families should always seek to improve themselves using every opportunity available to them.
Here’s another truth: if you don’t understand the basics of managing your money, it doesn’t matter how much you make – you’ll wind up deep in debt. If you don’t manage your money well, it’s very easy to spend significantly more than you earn, no matter your income level.
People at every income level have difficulties managing their money. Simply having a strong income doesn’t mean you suddenly have the ability to manage that income well. I’ve had people write to me earning minimum wage and wondering how they’ll ever pay off a $6,000 car loan. I’ve had others write to me making $500,000 a year but having more than a million dollars in total debt. Both of those people are going to have a difficult road ahead and both are going to have to make some very difficult choices in the coming months.
To say that people at other income levels don’t have financial problems is a class-based insult. People at all income levels have financial problems. Similarly, to say that people at other income levels don’t understand the “plight” of your income level implies that a person at a certain income level has never experienced anything else, which is nonsense. I grew up near the poverty line – I know what it means to not have a lot of money and to have to really stretch to make ends meet. Luckily, I now earn more.
But if there’s one truth I’ve found from writing Money360, it’s this: almost every good money-saving idea I have I can easily share with my parents. They’re in a completely different financial state than I am with a much lower income, but we constantly apply the same tactics. We clip coupons. We garden. We read because it’s fun and cheap. We drive late model used cars until they’re about to fall apart. And on and on and on.
What are the differences? My mortgage was almost ten times more than the one they took out in the late 1970s. I had more credit card debt than they ever had by a factor of at least five. I had $40K in student loan debt – neither of them ever had a dime of it. I may earn more, but my debt situation was far worse.
What’s the message here? It doesn’t matter how much you earn or how much debt you have, the basic principles of getting your financial life in shape are the same. Spend less than you earn. Resist temptations. Learn how to cut your spending. Create a debt reduction plan and execute it.
We’re all doing this, together. It’s not about rich or about poor – it’s about getting our financial lives back on track, and we all use the same tools to get there. That’s something everyone can strive for.