I spent the last few hours preparing tomorrow morning’s Reader Mailbag column. The Mailbags require a ton of work, as I have to read through a small mountain of reader questions, eliminate some of them, give one or two of them a personal reply (because they genuinely need some help but they have far too much personal info to share their story in any recognizable form to a large audience), reply to everything, and format all of the messages.
Two of the emails I read were almost identical. They were both rather long. Each was written by a married man with two children under the age of ten. Both families had mortgages. Both families were facing student loan debt and credit card debt, too.
Both families were really struggling with what the next steps were. They each had a debt load that was about double their annual household income as well as expectations of having at least some money to spend.
The big difference? One family had a household income that I would estimate totaled $35,000, while the other family had a household income that I would estimate totaled $250,000 or so.
The problems the two families had were essentially the same problems. The only difference was the dollar amounts.
Even more, the steps that both families should take are nearly the same steps, too. The solutions don’t change, just the dollar amounts.
It doesn’t matter how much or how little you make, debt in multiples of your household income can feel completely overwhelming. If you’re sitting there thinking that you’ll still have this debt for years and years and years no matter what you do, it can feel as though you’re stuck and nothing is going to change. That feeling of being stuck – that feeling of hopelessness – happens regardless of your income level.
It doesn’t matter how much or how little you make, the personal finance success you want comes from spending less than you earn, period. If you make $30,000 a year, you will never improve your situation unti you learn to live on less than $30,000 a year. If you make $250,000 a year, you will never improve your situation until you learn to live on less than $250,000 a year.
It doesn’t matter how much or how little you make, carrying high-interest debt is devastating to your future. The interest you pay eats away at everything you’re hoping or planning on doing. The longer you carry it, the lower it will pull you. The credit card debt needs to go away as soon as humanly possible – and you can’t add more credit card debt while paying off what you already have. That doesn’t solve the problem.
It doesn’t matter how much or how little you make, not having a cash emergency fund will cost you. If you don’t have at least $1,000 sitting in cash in your savings account, something is inevitably going to happen in your life that is going to cause you intense difficulty. It will probably force you to take on more debt. It might cause you to have to make an incredibly painful decision.
It doesn’t matter how much or how little you make, you’re extremely likely to be spending more money than you should on wants rather than needs. Virtually everyone does this. We buy things because we want them in the moment and don’t really appreciate until later how this has become a completely normal routine in our life and that living without these “wants” now somehow seems really difficult. Usually, it’s not all that difficult – it just requires establishing a new routine.
It doesn’t matter how much or how little you make, you can change things. There is no hole too deep to dig out of. There is no life that can’t be altered in big ways and in little ways to make it possible to financially recover. You can do this.
All of these statements applied to me once upon a time. My income level was between the two extremes mentioned here, but I found myself buried and hopeless. It’s a situation that’s common across many, many income levels – and it’s a situation that anyone can resolve if they’re willing to make changes in your life.