I was asked recently about how the hubby and I are managing to pay off our debt on a low income compared to a pretty decent combined income from around 4 years ago.
We actually earn around half the amount of what we did previously due to job changes and family priorities.The short answer to how we’re paying off debt on a low income now as opposed to before is quite simple really.
We adjusted to the drop in our salaries and not only this but we learned to live below our means. At the same time, we made it our mission to pay off our debts once and for all. Carry on reading for the long answer!
Here’s how we’re paying off debt on a low income
Up until our daughter was born, I had a relatively well paid job here in the UK earning around £30K working in Marketing. My hubby was also paid in excess of £35K at his job. So together, we earned around £65K per year. We had the same sort of bills that most people have: mortgage; utilities; insurances; fuel; groceries; debts etc. Even though things were tight for us financially, we spent money on going out socialising to bars and restaurants, buying new clothes and going on trips away too. At this time, we were actually living above our means and we were accumulating debt!
Then a series of financial changes happened which resulted in our lower salaries and eventually led to us living below our means.
1. The hubby started a business
After we got married, my hubby decided to set up a business and almost instantly his salary dropped significantly. We started cutting back by shopping around for cheaper deals and we managed to be able to live on less money each month. Then I fell pregnant with our daughter and decided that I would take a year off work to be with her. I wasn’t very happy in my job anyway and so I was keen to re-evaluate my priorities.
2: We managed to save for the first time
During the time I was pregnant the hubby and I managed to save around £7000 which we worked out would be enough for us to get by on in addition to the hubby’s lower salary once my maternity package had finished. Of this £7000, we had to buy some things (which were mostly second hand) for our baby and the rest was earmarked for topping up our income when my maternity pay ran out. We managed to get our savings together by not going out much and we sold a lot of things on eBay. It was a surprise to us that we could actually manage to build up a pot of money despite our finances being tight.
3: Our debts became really scary
So our daughter was born and we naturally started spending less anyway. We didn’t have time to go out much even if we wanted to! Then we experienced a real blow with our debts where we incurred a lot more debt than before due to the hubby’s new business. It was a frightening time especially with me being on maternity leave and the hubby’s drop in salary.
As a result of this additional debt, to cut a long story short we had no choice but to enter into a debt management plan with most of our creditors. This meant that the monthly payments for the debts were reduced as we couldn’t afford to make the usual payments.
4. We started thinking differently about the way that we spent money
Although we then had a little more breathing space with our monthly expenditure, we knew that of course the debt would still need to be paid and it wasn’t long after this that we decided to make paying off debts a priority. We still didn’t have any spare income though, but gradually we began making more changes to our spending, like getting rid of luxuries like Sky. We also had private healthcare insurance which cost us over £100 per month. I still think private healthcare is good to have but here in England, we are lucky to have the National Health Service (NHS) which is free so it’s not a necessity.
5. Family life became a priority
When things started settling down a little, it was time for me to go back to work. After much consideration, I decided not to go back to my old well-paying job for three reasons:
- My employer wouldn’t let me go back part time and I wanted to spend time being there for my daughter whilst she grew up.
- The amount of money I would have to spend in childcare costs would leave me earning a part time wage, possibly less, with the added pain of not being able to see my daughter much.
- The thought of going back to my stressful job which involved very long hours filled me with dread.
So although we were suffering from some real financial problems, we decided that if I went back to that particular job, we wouldn’t be that much better off financially. Then there would be the side effects of me being stressed out and missing out on all those great things that kids do as they grow.
6. We relocated and cut our spending even more
We timed the decision to leave my old job with relocating to be closer to my hubby’s business. This resulted in us saving a lot of money on fuel, at least £300 per month. Our new place that we were renting was slightly cheaper than the mortgage on our old house which we in turn decided to rent out. The fuel saving and paying less for our home made a huge difference to our monthly budget.
I started applying for part time jobs near to our new home. There wasn’t much around because we moved to a countryside location so I decided to start up a local business from home which in all honesty still doesn’t pay much. However, I’m way less stressed now than I was before and I’ve managed to avoid childcare costs and be around for my daughter so in my mind it’s a win-win situation!
7. We had our lightbulb moment about the debts
When I started this blog, we became really serious about getting rid of debt because we knew just how much the debts were impacting on us and limiting the way that we wanted to live our lives. So we knuckled down and reduced our expenditure even more by planning meals ahead, buying in bulk and getting rid of anything unnecessary.
And now?
Our income is still pretty low but because the hubby’s business has now been going for four years and is generally quite successful, he can occasionally take a bonus which we’ve put towards the debts each time.
Due to the gradual changes that we’ve made around our finances, we can now safely live below our means and even have a bit of cash spare each month which we put towards the debts and a little into savings. I take on any extra work that I can find to top up our income a bit more. We also recently received a mis-sold PPI refund which has helped us to eliminate a good portion of our debt lately. As this blog has documented during the last year, we’ve managed to stick with our mission and keep on tackling our debt rather than spending our money on ‘stuff’ that we don’t need!
The fact that I don’t earn much right now actually means that I pay much less tax than I did before. So I get to keep more of the money that I earn, which is nice! The hubby and I don’t receive any government benefits like housing benefit whatsoever by the way, because our combined income exceeds the benefit threshold by around £5000 per year. That’s totally fine with us because managing on a low income now gives us real hope for the future, when we’ll no doubt be earning more and the debts are gone!
It turns out that we don’t actually need as much money as we thought to pay off our mountain of debt. We’ve learned to use the money that we do have more wisely and alongside a lot of willpower and motivation, we’re succeeding!
Have you achieved a financial goal whilst money has been tight?
*Photo credit – Alan Cleaver at Flickr
*Part of Financially Savvy Saturdays on Femme Frugality and Family Balance Sheet*
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42 Comments
This is great! I love to read the story and the time span when people start getting serious about paying off their debt.
My wife and I had $24,000 in consumer debt for a few years that never seemed to get any smaller and then one day, we got serious about it and had it paid off in less than 2 years.
I like how you said that you realized how much debt impacted your lives and limited you and your husband. I know what you mean! My wife and I had the same realization. Keep up the good work!
Kalen @ MoneyMiniBlog recently posted…Everything You Need to Know Before You Start Paying Off Your Home Early (Part 1)
Thank you Kalen! I’ll always remember the conversation that the hubby and I had when we decided to get real about our debts. Paying off the debt seemed like a dreamed, but I knew that we would not give up on this from that moment. The hubby wasn’t quite so sure but I can tell you that he’s a believer now. 🙂
Thanks for sharing this history and strategy with us Hayley! It’s great to hear more backstory on when, why and how people “got serious” about paying off their debts. Such an inspiration! Keep up the great work 🙂
Shoeaholicnomore recently posted…Are Pets Clutter?
Thank you Shoeaholicnomore! 🙂 Debt freedom is so going to be worth it when we finally cross the finishing line. I will still have my mortgages to contend with but that’s next on my list!
You two are doing so well. I loved reading this little backstory! It goes to show you what can be accomplished if you put your heart in it. I like that you prioritized family and your personal happiness. Sometimes well-paying jobs aren’t worth the stress. Both my boyfriend and I were earning lower wages before we moved, but we made it work by cutting expenses, working overtime and generally buying only what was needed.
E.M. recently posted…New Car Envy
Thanks E.M. I’m glad you enjoyed this post! It’s great that you and your boyfriend have common goals when it comes to finances. That’s something that the hubby and I never really paid attention to until a couple of years ago. Working as a team definitely helps!
Your backstory is so motivating and inspiring Hayley. Thank you for sharing. As you know I have a low-income as well (J and I currently keep complete separate finances) and it is actually very empowering to find out I didn’t need to be making mountains of money to start paying off my debt.
Girl Meets Debt recently posted…2 More Common Debt Myths Debunked
It’s so reassuring isn’t it to know that if we can get rid of debt now whilst not earning all that much, things can only improve going forwards. The whole debt journey is a real slog with many hurdles but once progress starts happening, it’s so worth it! I bet J is so proud of what you’ve achieved GMD. 🙂 xo
Great post, Hayley. I particularly love #4 – changing the way you think about money is so important. To me that is always a huge indicator as to whether you will achieve your goal to get out and stay out of debt. A lot of people get out of debt to immediately go back into debt (and I mean mindless spending kind of debt) because they haven’t changed how think about and use their money. I also love that you are demonstrating that it is possible to get out of debt when you don’t earn a ton of money. Too many people it’s impossible so they actually just keep on living beyond their means. You’re showing them that it can be done! Love it!
Shannon @ The Heavy Purse recently posted…How to Find the Right Financial Advisor for You
Thanks Shannon! 🙂 I told one of my friends the other day about the progress we’d made (she knows about our debt and our income). She was just gobsmacked because she couldn’t figure out how we were managing to pay our debt off. I explained about all the little things we do to save money and pay off debt and she was still baffled. I never thought this debt would lead to something positive, but it really has. It’s made me a stronger person, more knowledgeable about money than I ever have been before and best of all, my story might just inspire someone else to make some important changes in their lives about their debt situation too.
You’ve had quite the journey. I love that you didn’t let your debt make you lose sight of your priorities and the things that are really important to you.
Stefanie @ The Broke and Beautiful Life recently posted…Cost of Living Around the World
Thanks Stefanie! Debt held us back for a long time so I’m really glad that it’s under control now even with earning less.
Good on you both. You sound like such a good team and as though you’ve adjusted to your new way of living perfectly.
Debt Busting Chick recently posted…My Frugal Hair Do
Thank you! We are a good team (nowadays at least!) 🙂
I’m in a similar yet totally different situation. I used to have a good paying job (around 72k per year) and I wish I would have done so much more at the time to save, although I did an ok job and did not have any debt. But now money is VERY tight and fluctuating, but now I’m a much better money manager. I think necessity is the mother of invention and it’s amazing what we are capable of when we have to accomplish something.
Tonya@Budget and the Beach recently posted…Money and Family
Hindsight is a great thing, but even better is the lessons we learn when we absolutely have to! Necessity certainly is the mother of invention. I wasted so much money back then, it makes me cringe when I think about it. Yet knowing that I’m in the driving seat on a much lower wage is pretty liberating!
Hey Hayley!! Thanks for being so transparent in sharing 🙂
I love the fact that you are living on less and still managing to put money down on your debt. You are right when you consider that when all is said and done, you’ll all be living a better life with more free time for each other.
“My employer wouldn’t let me go back part time” – Pardon my language but…what a dick!!! Although, in retrospect, he/she did you a favor 🙂
Take care Hayley and all the best.
Lyle
lyle @ the Joy of Simple recently posted…Happy Holidays And A Guest Post 🙂
Thanks Lyle as always for your support! 🙂 Your comment did make me laugh! ‘She’ definitely did do me a favour. I have no regrets whatsoever! Have a lovely weekend Lyle and I will get my guest post topic to you shortly by the way! 🙂
I am in a similar situation now. After four months of unemployment I have found a new job but it is less money than my last job and a longer, more expensive commute. Thankfully my redundancy money has paid off a decent chunk of my debt which has reduced the minimum repayments so financially I am basically in the same situation I was in before unemployment. I am though in a better frame of mind and committed to clearing my debt and can see how I can pay something towards my debt each month, no matter how small unlike before when I was just frittering away my disposable income. Good luck with your repayments.
Victoria @thefrugaltrial recently posted…Money Mistakes & Money Magic
Thanks Victoria and good luck with yours too. I’m really glad you found another job and your redundancy payout helped you tackle some of your debt. Every extra payment really does count towards debts. I don’t actually think of my money as my own right now. It might sound strange but in my mind, any money I earn needs to go towards what I’ve already spent (any spare money!). One day, my money will be my own and that will be awesome. But I’m going to put it to good use, I can tell you! 🙂
You are doing so great! Isn’t it fun to own your financial life instead of it owning you? It’s quite an accomplishment to stick with your goals while everything was shifting around you! Thanks for sharing!
Thank you Kate! I really appreciate you stopping by! It definitely is fun to be in the financial driving seat for probably the first time in my adult life actually!
Thank you for sharing. I think you are doing a great job adjusting and paying down debt with less money.
I have a decent paying job but that didn’t mean much because I was spending it all right away. I started paying attention to my finances only a year ago and now I’m able to save a lot and I’ve been able to pay all of my debt, except for student loans, but even those are getting paid off this year.
I’m glad that I changed how I think about money sooner than later.
Keep up the good work.
Aldo @ MDN recently posted…The Powerful Force of Compound Interest
Thanks Aldo, I really appreciate your comment. I know what you mean about not paying attention to your finances, it’s so easy to fritter away money these days. I cringe when I think about how much money I’ve frittered away in the past. But better late than never! Really glad you’re sorting out your finances and congrats on clearing your student loans soon!
We’re right there with you– working hard to pay off debt even though the income is low. There are plenty of people with high incomes who have plenty of debt too. The income isn’t always the problem. You are so right– It’s living below your means that is the key! With some serious motivation, sacrifice and hard work it is possible. You guys are doing great Hayley!
Stephanie @ Six Figures Under recently posted…Debt in Hindsight: What Would You Do Differently
Hi Stephanie, good to ‘see’ you again and thank you for your kind comment! I can imagine that there of lots of high earners with plenty of debt to contend with. As I moved up the corporate ladder, I earned more and sometimes I’d spent my salary increase before it even happened if that makes sense. Not a good position to be in.
I work at a nonprofit, so make a low salary and continue to pay off debt. I find side hustling and eliminating most extras really helps. It’s so motivating to see what people can do with such little money!
Melanie@Dear Debt recently posted…5 Things That Will Help You Recover From Debt Burnout
Side hustles are great because once you’ve found something where you can earn money (and enjoy doing it), it’s possible to ramp up the earnings quite a bit! 🙂
Where there is a will, there is a way! Low income or not, and you are doing great Hayley! xo
Thanks Eva! We’ll be earning more in the future I hope so it’s great to get things sorted with our debts whilst our income is low. Hope all is well with you. 🙂 xo
Strangely, some of my biggest headway with getting out of debt came during the financial meltdown at the end of last decade. It forced me to wake up and begin to take a firm hold over my finances, and even though they were tougher times as I was on a lower income, it’s when I really kept my head down and tried to make as much progress as possible.
I’m so happy for you that you’ve had that lightbulb moment Hayley. That’s when you start living again isn’t it? Living life again regardless of your income.
Wealth Tortoise recently posted…How Much Should I Be Saving?
Definitely Wealth Tortoise. The lightbulb moment was the start of us accepting and dealing with our situation and for once being able to see that getting out of debt was indeed possible! Glad that you managed to make good progress with your finances!
This is awesome! I’m so proud of you guys! It’s not easy to pay off debt period, nonetheless when you’re getting by on less. Great advice.
femmefrugality recently posted…Financially Savvy Saturdays: Thirty-Fifth Edition
Thank you! If a person can survive and make the best of their finances on a smallish salary then really they have many options in the future because when their situation improves, they’re in a really great position!
Hayley ~ I really like that you decided to stay with your daughter as much as possible and have figured out ways to make it work, including frugal living. You are demonstrating that there really are no excuses when it comes to managing your finances and your family priorities. Such a shining example you are!
debt debs recently posted…My New Enlightenment Since Acknowledging our Debt Crisis
Thanks Debt Debs! It’s funny how priorities change when you have a family. You kind of have to do this juggling act and still keep your heads above water too!
Well said!
Two key principles of financial freedom – live below your means and save/invest the excess, and grow your income so you can save more, faster.
It’s great to see you living the path to financial freedom, especially now that your investment into your husband’s business is starting to pay off.
Jack @ Enwealthen recently posted…Protect Your Money Online
Thanks Jack! We definitely need to work on growing our income, things are in the pipeline though and the hubby’s business is doing well now as you say. I’m sure within the next year, our income will be a bit better! 🙂
Our finances were a little precarious after the birth of our first child. We went to one income and had some health scares, but the challenges just made us more determined to succeed. It sounds like all of your hard work is paying off.
Kristia {Family Balance Sheet} recently posted…Financially Savvy Saturday
Hi Kristia thanks for stopping by and for commenting! Hope everything’s ok health wise now? Kids do make a real difference to finances – going down to one income needs a lot of planning and measures putting in place!
Thanks for sharing that story. So many people make excuses about why they can’t do this or that. You show that it is possible to live below your means and pay off debt without a huge salary. Time with your daughter is so much more valuable than working all the time.
Kim recently posted…Saving and Wasting Money in San Diego
Thanks Kim! 🙂 Quality time is way more important than money in my opinion. It helps though to be in a place where you don’t need to worry too much about finances. We’re getting there. 🙂