A long while back, I wrote an article discussing class warfare and personal finance advice. In short, my conclusion was that you’re making a mistake by mistrusting financial advice from someone just because of an income gap. Financial advice given to someone making $100,000 a year isn’t useless to someone making $25,000 a year because the core principles are the same.
That isn’t to say that there isn’t some personal finance advice that applies better to certain income levels than others. Someone who is completely unemployed, for example, is going to be much more interested in advice relating to government programs and resources than someone making six figures. At the same time, someone making six figures is going to be more interested in investment advice than someone who is unemployed.
Here’s the thing: all of those are just specifics. They’re just different ways of implementing the same principles, and those principles drive financial success regardless of whether you’re unemployed, you’re making minimum wage, you’re retired, or you’re earning a mint.
We’re all in this together.
I’ll give you three examples of exactly what I’m talking about. Here are three key personal finance principles that show up in all of our lives.
Spend Less Than You Earn – The Bigger the Gap, the Better
It doesn’t matter whether you’re making minimum wage or you’re making six figures, you need to spend less than you earn. If you’re not doing that, your financial situation will never improve. If you’re simply hoping that your future self will take care of it, you’re banking your future on an unreliable image. All of this is completely true regardless of your income level.
You can spend less by simply being more frugal and looking seriously at your spending. Are you paying for satellite or cable television? Is your cell phone package expensive? Are you eating out a lot when you could eat at home or at community dinners for much less? At the same time, you can earn more by looking for more revenue streams. Are there side jobs you can do? Can you find another, better primary source of income?
If you do have a gap, you can apply that money toward paying off debt or toward building an emergency fund (see below) or toward saving up for a goal you have in mind.
All of those things apply to basically everyone, regardless of income level. The tactics of cutting your spending and looking for more ways to earn money are the same for everyone.
The Cost of Living of Your Area Is Going to Shape Your Choices
Let’s say you live in Norman, Oklahoma. You earn $25,000 a year, which isn’t too much more than minimum wage.
Let’s say another person lives in San Francisco, CA. How much would that person have to earn each year to match the standard of living of that person making $25,000 in Norman?
The San Francisco dweller would have to bring in $49,138. Why? Comparing San Francisco to Norman, groceries cost 36% more, housing costs 311% more, utilities cost 17% more, transportation costs 20% more, and health care costs 36% more, according to this data.
If you can find a job that pays $40,000 a year at the University of Oklahoma in Norman, you’re going to live better in terms of groceries, housing, transportation, and health care than someone making $75,000 a year in San Francisco.
That’s just a specific example, but it’s one that repeats over and over and over again when comparing places to live in the United States. Someone making a lot of money who is locked into living in an expensive area by their job isn’t really doing much better than someone earning substantially less in a lower cost-of-living area.
Regardless of your income level, it makes sense to live in a lower cost-of-living area as long as your career is supported there. All of us are in that same boat.
You Need to Have an Emergency Fund
It doesn’t matter whether you’re earning a ton of money or you’re earning just a few bucks an hour. If you lose your job or your spouse falls ill or your transmission falls out of your car, it’s going to financially hurt.
Again, regardless of your income level, the only real way to handle sudden emergencies like that is with an emergency fund. You’ve got to have some cash on hand.
Life hands all of us bad cards sometimes. Every single one of us has unexpected obstacles to overcome. Having some cash in the hole makes those obstacles much easier to deal with.
It makes sense for all of us to take a little bit out of our pay and put it aside for those emergencies. It doesn’t matter whether we’re making a mint or making a pittance, having a little money set aside is eventually going to be a life saver.
We’re All Fighting the Same Fight
These are just three examples – of many – that make it clear that, in most regards, almost all of us are fighting the same financial battles.
We’re all tempted to buy things that we shouldn’t. We all struggle with spending less than we earn. We all want to make sure that the rest of our lives are secure and that we can do everything possible for our children.
We all make mistakes. We all fall short of our goals sometimes. We all fall into traps and pitfalls – and sometimes those traps and pitfalls are quite deep.
We all succeed sometimes. We all struggle sometimes. We all have opportunities placed in front of us. Sometimes, we pick up the ball and run. Sometimes, we miss the boat.
Yes, some of us earn more than others, but so many of our choices and so many of the challenges and pulls on our life are exactly the same.
The next time you pass judgment because someone is making less than you or you ignore the difficulties of someone making more than you, stop for a moment and recognize that almost all of us struggle with the same exact things when it comes to our money. Just because someone didn’t have an opportunity or a trap put in front of them at a key moment in their life – or just because someone did – doesn’t mean that they aren’t struggling in many of the same ways that you are and that they aren’t fighting for successes in their own life.
We all want a better life.