Live off Half Your Income and Tackle Debt

Live off Half Your Income and Tackle Debt

Do you make a good salary, pay bills on-time, have a small mortgage, but wait!, also have a lot of credit card debt. What’s a girl to do? Live off half your income. 

In 2010 I was making a good salary, had almost no debt and lived in a rented house, went on the occasional vacation, and went out to dinner most Saturday nights. Life was going well, no complaints, I was healthy and had a 3-mile daily commute. The quality of life was pretty darn good. Looking back I sure was happy.

Fast forward to 2012; I was recruited into a higher paying job with more responsibility. The pay increase was a whopping 40%, so I said yes to a 50-mile daily commute and said goodbye to my old lifestyle and walking shoes.

Looking back, this was one huge mistake. Yes, I made a lot more money, but now I had to buy a new car to commute. My car payment, insurance, gas, etc. cost roughly $700 a month. A pretty big chunk of my shiny new wage increase would magically disappear, every month for five long years. My friends told me not to buy a new car, but I ignored their advice,  I now had a long commute and deserved a new comfy vehicle. I guess you could say I sold out for a Honda CR-V. The Honda is paid off now, and I swear I will never again have a car loan! A few months ago I joined a Vanpool, and now my transportation expenses are under $50 a month. I highly recommend anyone who commutes to look into joining a Vanpool or Ridesharing program.

The stress of the new job caused me to eat more, shop more and exercise less. However, it did also give me a few promotions and pay raises along the way. Before you could say WTF, I had credit card debt and was 50 pounds heavier. Geez, what happened to me!

I look back on how I’ve wasted so much money, and frankly, I feel a tad ashamed about it, I have not been a good steward of my money. That old saying “the more you make, the more you spend” sure rang true for me.

The time has come to leave the pity party and get to the work of getting back to a debt free and healthy lifestyle.

First order of business is to stop using my credit cards, check and done.
Second, make a budget, check and done.  Read Living on $2700 a month
Third, stick to a budget, hum, work in progress.
Fourth, look for a job close to home, and lay off the cookies and late night snacks.

I’ve learned a few things about myself, and the most important one is I don’t like being “the boss.” I long for the day when I can go into the office, do my work for the day, and then go home. My passion is my blog, not my day job.

I did a few calculations and figured out how much I need to live on if I had no debt. Surprisingly that amount is exactly what I made back in 2010. Instead of trying to figure out how to make more money, I’ve switched gears into how to live happily with less, so I can take a job making half my current salary.

I’m feverishly paying off my debt. I’ve stopped spending on everything except things I need. I look for ways to save on what I do buy. Every couple of months I’m reviewing the utility bills to see if I can shave a few bucks off here and there. Shopping yard sales and thrift stores have become my new shopping routine instead of Nordstrom and J Crew.

Ways I Live off Half My Income

I’ve split my current salary in two. Half goes into my living expenses account to pay for utilities, housing, save for vacation and holidays, buy groceries, etc. If I need something I pay cash; credit is no longer an option.

The other half goes into a bank account that pays for all those nasty little credit cards. I have it all set up for auto pay and once the balances are zero I can start looking for that new job close to home. At the end of the month, funds I have left over in my living expenses account I use to pay a little extra on my credit cards. Every little bit counts.

Each Friday I withdraw $60 out of my living expenses bank account for miscellaneous expenses or Mad Money to play with, buy makeup, or going out to breakfast or dinner on the weekends (I brown bag my lunch during the work week). Using cash is so much harder to part with and spend, so once you hand over the cash, it’s gone. Cash also forces me to analyze my potential purchases. Furthermore, using cash makes me feel in control of my finances.

Understandably using cash only can be hard for some, I get it, especially if you’re an online shopper. If you’re an Amazon shopper, you can always buy a gift card with cash and use it to make your purchases or buy a Visa gift card you can use anywhere online.

How to live off half your income:

  • Calculate how much you need for the necessities and a few extras like the occasional night out or coffee with friends. Deduct this amount from your current take-home pay. The remaining is what you will use for bill repayment.
  • Open up three bank accounts – one for all your essential bills (housing, utilities, etc.), the second account for your personal use cash, everything in this account is what you can spend without worry for clothes, gifts, entertainment, whatever you want. The third account is used strictly for your debt repayment and should not have an ATM card. You will use this account to pay all your consumer debt every month automatically.
  • Have your pay direct deposited into each of the three bank accounts.
  • Consider balance transfer to take advantage of zero interest promotional rates.
  • List all your bills and how much you will pay each month.
  • Set up Autopay for your consumer debt. Use your bank’s bill pay or the creditor’s site, your preference.   Most credit cards calculate interest on a daily average,  I suggest paying the bill a day or two after the closing date to minimize interest charges. If using your bank’s bill pay service make sure to check on the status to avoid any possible glitches with the payments.
  • If you’re paid every two weeks, you will have 26 paychecks a year, and any extra should be applied toward your bills.

In conclusion:

At this point, you have isolated the debt monster and allocated half your income to debt repayment. Every month your debt is less and less.  When you spend, you’re only spending what you can afford, and it feels great.

When the debt is repaid, it will be time to decide if you want to find a lower paying job with a higher quality of life or just continue to live off half your income and save for the future.

6 Ways to STOP Spending Money

the urban kitten
the urban kitten

Find me on: Twitter