How to Feel Rich on a Low Income
It’s your mindset, not your salary, that makes the biggest difference
I have never been wealthy, but I no longer feel poor.
There wasn’t a whole lot of money to go around when I was young. I was never in real poverty: I’ve never lived on the streets, and I don’t remember ever having to go without a meal because there was nothing to eat.
That was purely down to luck. I was lucky enough to be born in England, where we have a welfare state. If you’re a single parent, have a low-paying job, or are unemployed, the state will stop you from reaching total destitution. They provide subsidized housing and some extra money to help with buying food and other household bills.
God bless the council house.
Despite our reliance on the state for help, I grew up in a home where our outgoings regularly outpaced income. Sometimes that was a result of paying for necessities: a broken-down car or a high gas bill. Other times, it was frittered away on things we didn’t really need: a subscription to a satellite TV package or a new mobile phone — oh Nokia 3210, what a frivolous joy you were.
When I got my first taste of freedom at 19, I followed those same patterns. I very quickly fell into debt, first in an overdraft — that’s okay, it’s a student overdraft with no fees, it’s basically free money. Then a credit card — it’s just to tide me over through the summer. Then another credit card — I can use the 0% balance transfer to give me more time to pay off the first credit card.
I was buying lots of things — food, gadgets, clothes — but I always felt poor; because I was. In technical terms, I had a big fat minus symbol following me around. My net worth was sub-zero. I made frantic phone calls to the bank, begging them to extend my overdraft so I could make this month’s rent before my next student loan payment came in.
Then later, after university, I rode the big-dipper of debt repayment. Each month, a big chunk paid off, only to be spent again by the end of the month. My glass was full of lemonade, but every month I would convince myself it was champagne. Despite the money I was spending, none of it provided any value. None of it increased my self-worth.
It was only natural that I was in this position, right? I was in a relatively low-paying job; after all, how could I possibly expect to live on those wages without getting into debt?
And then I moved in with my partner, only to discover that they managed to save money every month despite earning less than me. I watched how they spent — or rather didn’t spend — their money, the choices they made, and how they still had money left over at the end of every month.
And I realized I could do that too. So I cut back and started paying off my debt, and 6 years down the road, I can honestly say that I no longer feel poor.
To get here, I had to make a mental shift in my attitude towards money and the things I bought. Gone were the days of mindlessly spending — it was time to get serious.
Drill down to the basics
I had to have a stern word with myself and be honest about the absolute necessities required to keep my head above water. Those were housing and bills, food, commuting, and minimum debt repayments.
For me, that looked like:
- Housing and bills: £500 p/m
- Food: £125 p/m
- Commuting: £80 p/m
- Minimum debt repayments: £180 p/m
That left me with around £300 per month to play around with. Old me would have seen that number and thought: cha-ching! More money for clothes and coffee! New me was different. The new me realized that I needed to keep some money aside for unexpected expenses each month. If I used the remainder to pay off more of my debt, I would benefit in the long run. So I kept £100 aside each month for the occasional birthday gift, or an unexpected catch-up with a friend at a coffee shop, and put everything leftover into paying off my debt.
My partner was desperate to get on the property ladder. We realized that at this rate, it would be a very long slog before we’d get anywhere close to saving a deposit, so we decided to move back in with his parents. This move cut my housing and utilities cost down to just £85 per month — rent and mobile phone bills, and that was it.
Take a long hard look at your expenses and figure out what your absolute basic necessities are. Then work out what you can afford to either save or use to pay off debt, leaving a little aside each month for unexpected expenses.
When I started to live my life this way, disregarding my wants and focussing only on my needs, I felt completely different about money. It stopped being a ball and chain around my neck, always dragging me down. I felt free. Being able to live within my means made me feel wealthy, even on a relatively small full-time income.
Cost-benefit analysis
It can be tricky to get a firm grip on our spending when we’re constantly bombarded with adverts telling us that this or that product will add to our lives.
Adverts regularly play with our emotions and make us feel like something belongs to us, or will benefit us in some way, and add value to our lives. Consider the difference between Pan-seared, succulent chicken breast, nestled on a bed of rocket, and drizzled with a balsamic glaze and chicken salad. The first, you’ll happily hand over £10.50, and feel like you made a reasoned choice. The second is something you knock up at home for £1.50 and eat, begrudgingly, because you’re dieting. But there is no actual difference between either of these; the first is a chicken salad by another name. A very fancy name for good reason: words have an emotive power. When we feel emotional about something, it seems to have more value in our minds.
How to get around this? It takes a shift in mindset. First, you need to analyze what is really on offer. What are the ingredients, and are they actually worth the amount being charged, or do they just sound like they’re worth more.
Second, you need to do a little cost-benefit analysis of everything you buy. If I purchase this chicken salad, will it add at least £9 of value and happiness to my life, compared with if I just made it at home and saved the difference? The chances are it won’t.
Similarly, if you spend £100 on good quality leather boots that will last at least 10 years, the initial outlay might seem too high. But then compare that to buying a cheap pair of £30 plastic-leather boots. They were probably manufactured in a sweatshop where the workers are paid abysmally and treated even worse. Then factor in the cost of the boots falling apart within a year, which means you’ll have to spend time searching, shopping, and paying for another pair. Overall the benefits of the leather boots outweigh the lower up-front cost of the plastic boots. And they cost you less in the long run in both time and money.
Feel the pain of spending
To stop yourself from spending beyond your means, which prevents you from feeling rich, you need to feel the pain of every spending decision you make. It should be difficult to spend your money.
I did this by taking my credit cards out of my purse and shutting them away in a drawer at home, which removed the temptation for me to just pop something on my card when I was out and about. I also removed my card details from my online shopping accounts. It’s amazing how that extra couple of minutes it takes to enter your details when you’re making a purchase makes all the difference. More often than not, I’d feel the pain of spending that money and choose not to go through with it. It’s why Amazon’s 1-click purchasing was so powerful: it eliminated those painful moments.
When you feel the pain of spending, it means that when you do spend, it’s on something that has more value than the pain of the outlay. You spend your money on things that enrich your life and bring real joy. You genuinely appreciate the value of the items you purchase, and you feel richer for having them in your life.
Feeling rich isn’t about having buckets of money. It comes from living within your means and saving and investing everything you don’t spend. This takes a change in mindset and total honesty, but your future self will thank you for it.
This article is for informational purposes only. It should not be considered financial or legal advice.
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