14 Smart Money Moves to Make (When You Earn Less Than $50,000 A Year)

Not long ago I was starting my career as a public school teacher just outside of the Nation's Capital and my starting salary was a whopping $42,000 per year.

Fast forward ten years and combined with my wife’s salary, we are just about the household median income for where we live, but in the top 10% compared to the rest of the nation.

Which got me thinking about all the personal finance advice that is out there…

How applicable is personal finance advice if you don't make a lot of money?

In other words, what were some practical, smart money moves someone could be making, even if they were earning less than $50,000 per year?

What to do if you make $50,000 per year or less.

There are some smart money moves you can make that will either;

  • Greatly help your financial future or,
  • There are some money moves that could greatly jeopardize your financial future.

The first lesson we all must learn is that we can and should be SMART with our money, regardless of how much income we might bring in. Making more money is always important, but it's all about how you approach your annual salary, whether you make $50,000 or $500,000.

A 2013 Gallup poll estimated the annual household income for the world was just $10,000. So the first thing you must recognize is that even though you might not make all the money in the world… you actually kinda do.

Recognizing that a $50,000 salary puts you in the top ranks of one of the wealthiest in the world means you should start by being grateful!

Gratefulness will help you produce an element of appreciation for what you do have. Being appreciative can easily help us get through the tough times when maybe our money situation, “Isn’t the best.”

Making $30,000, $40,000 or $50,000 per year might not seem like a lot, however, in addition to being grateful, there are some smart money moves you can make that can set you up for some bigger wins down the road.


12 Smart Money Moves You Should Make ASAP.

smart money moves you should make

1. Be honest with your $50,000 salary.

If you’re someone who makes $50,000 you should first get a grasp of how much $50,000 really is, that starts with being honest.

Being honest means seeing how you stack up income-wise according to the IRS. If you make $50,000 annually you fall in between the $19,000 and $77,400 taxable income bracket. Thus you’re in the 12% tax bracket.

Factor in local taxes, social security, and a few others (Like retirement and insurance) and most likely your monthly take-home is somewhere around $3,000-$3,300 per month.

If you take home $750-$825 per week after taxes, when analyzing your salary always look at in term of percentages:

  • Spend $70 each week and that is 10% of your weekly income.
  • Spend $350 one week on a car payment – well you just spent 50% of your weekly income, on your car.

Simple translation – be really, really honest with what you make and don’t compare your salary or lifestyle to others.


2. Calculate your real hourly value.

So if you know you make about $750 a week, wouldn’t it be nice to know how much you make an hour?

Here is the catch, your real hourly rate is not how much you make when you divide your income by hours, it is how much you make when you factor in every single hour of your week work occupies.

For example: If you make $750 a week and you spend 45 hours working, 5 getting ready for work, and another 10 commuting, well you’re actually dedicating 60 hours per week to make that $750… or about $12.50 an hour!

At first knowing, this number will be a bit disheartening, but it will also motivate you to take action in terms of your finances, especially when it comes to making more money (See below) and doing your best at your job… so you can get a raise!


3. Figure out some ways to earn extra money.

Thank you, Al Gore, for the internet.

With the creation of online business models, phone apps, social media, and good old-fashioned side hustles, it has never been simpler (not easier) to earn extra money outside of our full-time jobs.

Our grandparents couldn’t offer their car up for ride-shares or start a blog to make extra money. Heck, they couldn’t even work a second job in most cases. So with the digital age and the internet, figuring how to make extra money is a must.

Whether you make $50,000 or $20,000, you don’t want to have all your eggs in one basket. Setting a small goal like making 10% of your annual salary on the side each year is an extra $5,000 per year.

$5,000 per year is only an extra $415 per month, so don't make it complicated. Here are some quick ideas to help you make extra money:

  1. Ask for a raise at work (the right way)
  2. Complete some surveys
  3. Walk dogs
  4. Rideshare
  5. Work as a caterer on the weekends.
  6. Use this list 21 Ways to Make $500 Fast.

4. Pretend you make $5,000.

Yes, you read that correctly. Pretend you’re 17 again and you’re back at your retail job making a couple thousand per year (If you’re lucky).

While we all know 17-year-old kids don’t pay rent or most bills millennials and most adults are faced with, they also don’t drop $150 going out each weekend. Simply taking out $20 to go to the movies would make you tense up.

On the flip side, sometimes when we were 17 we also spent money on some really dumb stuff like fast food and stickers for our cars (guilty!). Either way, with your $50,000 salary make sure you’re not overspending or letting your money quickly evade you every time you get paid.

Treat your hard-earned dollars like you worked hard for them… because you did!

See also, 10 Ways to Stop Overspending.  


5. Do not buy a new car!

Whatever you do, do not buy a new car if you make less than $50,000 per year.

In all actuality, the worst money move a person can make at any time (regardless of what they make) is to buy a brand new car. Buying certified pre-owned cars will save thousands in the long run and help you combat new car depreciation.

A new car can be a very costly mistake.

For one, tying up your income for 4-6 years for several hundred dollars a month really hurts your financial flexibility and chances of buying a home because of your debt to income ratio.

As a general rule of thumb, your car purchases should never be more than 25% of your annual salary. Therefore, if you make $50,000 per year your car should be worth about $12,500… no more.

Need to get a new car? To help you, use this car buying guide to help you figure out transportation budgets the right way!

6. Pay off bad debt, like credit card debt.

Want to know the quickest way to making more money? Free up money that is tied up each month to pay off debt.

Student loans, credit cards, and car loans account for over $3.5 trillion worth of debt in the United States – and growing. So while it might be pretty common to have debt, that doesn’t mean you should keep it around. But, you also always:

Prioritize your debt payments.

Should you save, invest or pay off debt? Financial experts recommend leaving the low-interest rate debt alone and focusing on bad debt. Bad debt is typically consumer debt or student loans with higher interest rates.

If you have bad debt, it is important to keep in mind the following:

  1. Paying off debt is simple once you get going
  2. Every situation is unique
  3. Targeted debt pay off works the best
  4. Start small

Sure, paying off debt is easier said than done, but with a couple of hundred dollars per month to spare, you can knock out $60,000 in three years using the debt snowball approach.


7. Start Investing, even if it is just $10 a month

Just like how we are constantly bombarded with online shopping deals, there is no shortage of investing promotions either.

Whether you happen to be listening to Spotify or scrolling on Instagram, you have probably seen advertisements from companies like Acorns, Robinhood, M1 and plenty more incentivizing you to start investing.

But just because the investing scene is crowded, doesn’t mean it is a bad idea. The bad idea is thinking that you’re going to hit it big investing in individual stocks if you have never invested before.

Just remember, if it was easy – everyone would do it. For every person who invested in Amazon and Facebook at the right time, there are 9 others who lost tons of money elsewhere. Studies show that 1 in 10 are actually profitable playing individual stocks.

Where to start investing:

The best time to start saving for retirement is as soon as possible.

1.) You can start with Individual Retirement Accounts (commonly referred to as IRAs) which are used to collect retirement funds that have tax-advantages. Just about any broker or bank can help you start saving for retirement today without being a “Financial Expert.”

2.) A simple approach to start investing would be with something like Acorns that invests your spare change after each purchase you make. Acorns take care of the leg work for you by rounding up all your purchases to the nearest dollar, then investing it for you.

You can add additional monthly contributions if you would like, but you don’t have too. Acorns allows you to withdraw at any time and only costs $1 a month up to $5,000 invested.

3.) Another approach to investing would be to use a robo investor like M1 to help you invest using their guides or your own individual investment mix.  Currently, M1 is one of the fast-rising robo advisors and they love pie graphs.

4.) Lastly, if you are unsure about individual stocks, check out Vanguard and invest in ETF’s. ETFs are investment funds traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally almost always ends up making you money. They also take the guesswork out for you.

Simply open a brokerage account with Vanguard and buy a few ETF’s, then as you learn more you can start to diversify and/or buy more starting at just $10 a day to get to half a million!


8. Get your 401K match.

Maxing out your 401K is an ideal money move to make early in life, but let’s be honest – it isn’t an easy process to contribute $1,500 per month to your 401K when you make $50,000 or less per year.

Contributing 50% or more of your take-home is quite a bit of money, especially if you’re busy paying off your debt and saving for an emergency fund (#10).

BUT…If your employer matches your contributions take them up on it. Who doesn’t like free money?

A 401K contribution that is matched takes precedence over paying off student loans and even saving. Why? Because it is free money.

Or as the folks over at Motley Fool put it, you benefit from compound growth:

“Let's say that you contribute $5,000 per year to an investment account for 30 years ($150,000 altogether) and that your investments earn the stock market's historical average rate of return. After 30 years, your account would be worth nearly $750,000.”

Not only is matching FREE money, but $750,000 doesn’t sound too shabby down the road, especially after you only invested $150,000 over 30 years.

How to take advantage of employer-matched 401K:

For example, let’s say you make $50,000 per year and your employer will match 50% of what you contribute up to 6%. That means if you contribute 6% or $3,000 per year, they will add another $1,500, putting you close to that $5,000 mark!

By now you get the point… take the free money.


9. Save only after you pay off debt.

The days of saving money for the sake of saving are no more. Having worked with individuals on their personal budgets and advising on how to better leverage their money, the most common pitfall I see is saving just to save.

Your money should be earning for you or paying down debt… not just sitting in a savings account earning .025%.

Saving to save is a scarcity mindset and is different than an emergency fund (below). Every dollar should work for you at all times. Remember, you work hard for your money so make sure you put your money to work by following #6 and #7 above or some combination of the two!


10. Build a FAT emergency fund

While saving just to save is not the best use of your money, creating an emergency fund isn’t a bad idea.

Inevitably something will come up in life. Having the ability to pull from an emergency stash when life hits is something you should start creating even if you only make $50,000. If I were to prioritize money I would personally go:

  1. Pay off high-interest debt ASAP
  2. Create a 3-month emergency fund
  3. Pay off other debt while slowly growing an emergency fund
  4. Invest once debt-free and a 6-month emergency fund is set.

For an amazing how to start an emergency fund article, just click here and follow it step by step.


11. Think of passive income ideas

If you find yourself making $50,000 or less it could be for a plethora of reasons. Maybe you’re at an entry-level position just out of college or your current line of work simply doesn’t pay well.

Either way, no matter what you make, looking into passive income ideas isn’t a bad thing to do – whether you’re 22 or 52.

My wife is currently reading a book that discusses how to ditch excuses that justify our current positioning. So even if you make $50,000 (or less) it isn’t a bad idea to look into how to create a passive income stream, it just might take a little creativity without ton’s of capital.

  1. Start a blog (for less than $36 a year)
  2. Start a direct sales business (low start-up costs)
  3. Buy really cheap real estate in the midwest
  4. Just be creative, any side hustle can become a passive income opportunity one day!

12. Read Personal Finance Books & Blogs Regularly

Whether you just got out of college or you’re looking just to make some better money moves for your future, reading personal finance books regularly is a must. 

In fact, reading, in general, is vital to your overall success. 

When you read personal finance books, you learn new financial concepts that are time-tested and often proven. Financial books can help you understand how taxes work, strategies for investing and tips for staying disciplined financially. 

Some personal finance books to checkout for beginners:

  1. Rich Dad, Poor Dad
  2. Automatic Millionaire
  3. Wealthy Gardner 
  4. Financial Freedom

Part two – read personal finance blogs.

A blog can offer more customized/tailored financial advice for your specific needs. Where books and large media companies tend to produce more generalized content, reading blog articles is a way to really level up your finances.

Most blogs are independently run and have practical financial advice and tips! Here is a list of the top 40 Personal Finance Blogs to checkout. 


13. Check your overall financial health regularly. 

Each year you should get a checkup with your physician. Well, the same can be said for your finances, but instead of annually, you should be checking your overall financial health monthly. 

This shouldn’t be an exhausting task, simply complete some of the following:

  1. Check your credit card and bank statements weekly, look for weird charges and high spending categories
  2. Look at your budget at least monthly and make necessary adjustments
  3. Monitor your debt to income ratio 
  4. Monitor your credit score
  5. Don’t look at your investments every day, let them grow – they will overtime!

Download this budget template here for free – Google Sheet Budget.


Final Smart Money Move:

Look at finances with a long term point of view, you don’t have to make a certain amount of money to practice long term thinking.

Simply designing a plan to reach some financial goals you have set for yourself doesn’t require money, just something to write with and some paper.

Those who set goals or practice financial goal setting are shown to take more action in their lives in order to accomplish their goals. So whether you make $50,000 or $10,000 per year, a smart money move you can make right now is to set some goals!


Question: What other money moves would you take or include?

smart money moves