Being broke is not fun.
If you are broke you already know that, and to make matters worse, it’s really hard to stop being broke.
Here are a few tips on how I stopped being broke years ago and tips on how to not be broke.
Step 1. Be realistic about your situation and decide to change.
Nothing will ever change unless YOU decide to change it. The first step in deciding to change is to take a good look at your situation and be realistic about it. If you are living paycheck to paycheck then you have to take the steps necessary to change.
The first step is your decision to take action and determine how to not be broke.
Step 2. Assess your situation.
Do you have zero savings? Is your rent / mortgage too high? Is your car ok or on the verge of a breakdown? How many people do you have to support? Do you spend too much money? Do you only make miniumum wage? Do you have a lot of debt?
Every journey starts out at the beginning and you need to know ‘where you are’ when you start out.
Here are the questions we all have to ask ourselves:
a.) How much do I make each month?
b.) How much debt do I have?
c.) How much do I spend each month and on what?
d.) What are my living, internet, utilities, car and phone costs each month?
Subtract b + c + d from a. Be honest. It’ll probably leave you with nothing or next to nothing.
Step 3. Decide what you can change with your monthly expenses
Here is where you start making real decisions. There is no one solution to everybody’s situtation since everybody’s situation is different. But, in general here is what you can do:
Decide if you can lower your monthly fixed expenses (rent, electricity, water, gas, phone, internet/cable, etc…).
I’d start with the phone expense and internet expense.
No matter what phone carrier you are with (ATT, Verizon, T-Mobile, Sprint, etc…) call them up and ask if they have a cheaper plan. Tell them you will switch to one of the other carriers if they can’t help you get a lower monthly bill.
As far as internet/cable goes… if you have cable, cancel it. These days with streaming you don’t need it. You will be happier not watching all the garbage on tv these days… seriously. Once you’ve cancelled cable, see if you can call your internet provider and see if they have a lower monthly plan. If you have competing providers tell them you’re considering switching unless they can lower your plan.
Call them up and ask if they have any plans or specials you can join that would lower your monthly bill. They might not, but these days almost all power companies do. My power company has a cheaper rate if I don’t use much power between 3:00 pm and 6:00 pm. It’s lowered my bill about $5 -$10 per month.
Once you get onto a cheaper rate structure, figure out how you can lower your electricity costs based on your actions. In other words, don’t use as much electricity.
Plug all your devices, modems, tv, sound systems into a power strip and turn off the power strip before you go to bed. All those devices consume energy even if you aren’t using them.
Turn off your computer every night.
Don’t bake every day. If you must bake, then bake twice a week and store the food in the fridge.
Don’t leave the hot water running while you do the dishes.
The high power consumer items in your house are A/C, Water Heater, Electric Stove and Irons. Knowing this, change your habits and reduce the amount of power you consume.
If you have to pay the water bill, chances are the water company charges a miniumum amount regardless if you actually use it or not. If you never exceed it, then there’s really not much you can do about it since the rate structure is controlled by your municipality.
But if you do exceed it … (one of your teenagers likes to take 3 hour showers…) then put an end to whatever it is that is exceeding the amount.
Don’t make excuses. Remember, you are trying to improve your money situation.
Rent / Mortgage
It’s probably easier to lower your monthly living cost if you have a mortgage since you can refinance your loan (providing the rates are cheaper).
But if you rent, especially if you rent from a private owner and not a corporation that owns a complex, try this…
Call up the ower and tell them how much you like living there, but ask if there is anything you can do in exchange for lowering the monthly rent. Can you cut the grass? Take care of the pool? Do the regular maintenance on the house (if you are a handy man type)? Maybe you could ask them if you could build them a website and maintain it, or do social media promotions about other properties they might have.
I admit, it helps to know your landlord and be on a first name basis with them. But you never know. I would not tell them that you intend to move out unless they lower the rent. That won’t get you anywhere. You need to let them know how much you appreciate them. You attract flies with honey, not vinegar.
If you are single or in a position to get a roommate, you could try that. But don’t just accept anybody. Make sure you know them, trust them and they don’t drive you crazy.
Step 4 – Your income
There are a few things you can do. Start with the easiest one for you.
This might just be the one thing that requires the biggest change. Take a good look at your job and ask yourself: “Am I going anywhere with this job”.
Is it a good long term prospect? If not, then look around and see if other similar jobs are paying more.
Fix up your resume and start looking. Go to Indeed.com or any of the other online job portals and keep trying. EXPECT TO GET REJECTED MANY TIMES. It’s all part of the game. Don’t take no for an answer, though, and keep trying. You will eventually find something better.
If you take a look at your life and you realize that you need to get out of the cycle of dead end jobs, then consider a trade school. You might have to endure 6 months to 2 years of training, but so what? After that you’ll have found work that you really like and will be getting double, triple or even way more that you’re making now.
There are all sorts of trade jobs:
- AC repair
- Nursing Technicians
- Lab Technicians
- Auto mechanics
- Tower technicians
- Network specialists
Find one that is interesting to you and go for it!
Will it be hard to make a big change and study for a while? Yes. But not impossible.
If you do not want to make a job change, can you supplement your current income?
The answer is ‘Yes’.
You can do a side hustle like Uber or Lyft and maybe make an extra $30 – $40 a day.
You can do pet sitting with a site like Rover.
You can start your own blog in a niche that you like or are familiar with and get to the point where you can monetize it. (If you start now, you’ll be that much farther ahead this time next year).
Step 5 – Tackle your debt.
Hopefully you don’t have debt. It is the single worst thing you can do to yourself, economically speaking. If you have it, its very hard to get out from under.
But there are a few things you can do.
Pay off the lowest credit card (or whatever kind of debt it is) debt you have. If you have three credit card balances, one for $10,000, one for $12,000 and one for $3,000, concentrate your efforts in paying off the $3000 card first. Why?
Because it will be the easiest to pay off and the soonest to pay off. Once you pay it off, then concentrate on the $10,000 card. This time you will have not only the money you’ve been paying it with, but also the money you can now send to it that you used to use to pay to the $3000 card.
Lets say you used to pay $200 to all three cards each month. What you should do is whatever extra money you might have from a side hustle or that you can spare from other savings, is send $200 to the cards with the higher balances, but send $300 to the card with the lowest balance. That way you will eliminate the $3000 card much more quickly and then use the $300 + $200 to pay off the lower of the two high debt cards.
Will you be suffering this whole time? Yes… but you will be anyway.
Finally, when you pay off the second card, use all the money remaining to pay off the final card.
There are also promotions that banks have where you can transfer open balances to them and they’ll give you the new card interest free for a year. If you can do that you can pay off the card much faster since all your payment will go to the principal.
If you have student debt you can try using credible.com to refinance your loan and get lower monthly payments. The hardship with student loans is you are usually starting out and have a ton of other expenses going on just to get started, like buying furniture, new clothes for work, a car… basically you are developing an infrastructure to get you off the ground. It’s hard, but it can be done. If you can get lower rates then you should definitely refinance. It will save you a bundle as you pay it off.
Step 6 – Miscellaneous Spending
Maybe this should have been the first thing I talked about.
This is the one thing that is most in your control. When you are young you tend to think that your having a good time is the most important thing. The problem is that having a good time costs a lot of money.
When you live at mom and dad’s house, you have the disposable money to spend. But when you move out and need to pay for everything yourself, you soon realize you need to control your spending.
What I would do is to allow myself a ‘cheat’ day (within reason).
So choose one day a week that you will go out and have fun like you are used to, but put on limits. If you used to spend $100 each time you went out, then decide to spend only $50.
Go to a slighly less fancy restaurant or bar.
Don’t use Uber… get a ride from a friend.
Don’t drink. (this will save you the most anyway).
I know, I know, you’re thinking the dude writing this is a total killjoy.
The truth is I’m trying to help you. Save your liver and your money by not drinking. At the bar with your friends ask for a sparkling water. Who cares if your friends laugh? Chances are if they see you asking for that, they will too.
Don’t buy as many new clothes. When you absolutely have to buy clothes, buy staple clothes.
What do I mean by staple clothes?
Staples are the kind of clothes you have to have in your closet, like black pants or a black dress.
You already know what they are:
White dress shirt
Black dress pants
Khaki casual work pants
White dress shirt
This is not meant to be fashion advice. It’s meant to be money advice. Buy GOOD quality staple clothes that are black, white or neutral colors… that can combine with everything else.
All the other stuff you can buy can buy at Target or Wal-Mart.
Also, I know this will disgust some of you, but buy stuff at Goodwill, from Craigslist or garage sales.
If you move into a new apartment or house don’t rush out and buy a lot of furniture… First check out craigslist in your area and Goodwill. Then if you can’t find what you need there, check out IKEA. Always check out the cheap alternatives first.
Many times people are moving and just want to get rid of otherwise really good things.
Speaking of other kinds of spending… be disciplined and tell yourself you do not need the latest and greatest.
If you are an Apple fan, I totally understand the ability to talk yourself into getting the latest iPhone. I’ve had this problem, but I fought it and didn’t get the iPhone X or Xs. Guess what?
I saved myself a $1200 expense that I don’t have to pay back.
How do you do resist the spending on something you think you can’t live without?
Tell yourself that you will get it once you pay off a credit card, or get a new job, or you get a promotion… any goal that is worthwhile. Then you are postponing… not depriving. But if you do this, guess what you’ll find?
When you finally achieve your goal and now you’ll allow yourself the new ‘toy’, you’ll find that you don’t want it as badly as you thought you did.
Bottom Line: Control your spending… a lot!