I’ve been broke before in my life, and I mean stony. I’m talking the kind of broke that even when my 800 dollar paycheck hit, my bank account was still in the negative.
I’ve been so broke, in debt, and bad in credit that I couldn’t even get a checking account opened.
So how did I survive and get out of that situation?
Slowly and consistently. One. Step. At. A. Time.
Figure Out Exactly How Broke You Are
And by exactly, I mean exactly; right down to the last penny, you can rummage out of your couch cushion.
Grab a notepad and a pen, open your bank account, and start doing some math. First, write down how much is in your bank account. It doesn’t matter if it is 1.00 or -100 dollars. Do you have another bank account or savings? Write that down.
Write down the bills you owe for the month how much change you have scattered around in the car, the house, anywhere, and everywhere. Look in your wallet or your purse.
Write down your debt, whatever else you owe, and whatever the balance on your credit cards.
This can be the worst part of the process because you are staring the reality of your situation in the face, but there is no way around this.
How much actual money do you have to spend?
How much debt do you have?
How much do you owe this month on bills or groceries?
Write down the numbers.
Let’s crunch the numbers, and I will base this off how much money I was making and owed at a particular time in my own life.
50 dollars to spend
9,890 dollars in debt
2,350 dollars owed each month in bills
Making 1600 dollars a month.
Yeah, these were some real numbers.
You have to do this to figure out exactly how broke you are.
Make An Immediate Short-Term Budget
I say short-term budget because when you’re this broke, you have to take immediate action. But, still, you’re not planning to be in this situation forever.
You have to be very realistic here and break down where you can make some sacrifices and how much money you need to get through each month.
You have heard “pay yourself first” well, some of us can’t afford to pay for a ramen noodle, let alone pay ourselves, so what do we do?
Pay your most necessary bills first. Rent, food, electricity, and whatever necessities you need to make it through the month. Everyone’s situation is different, so use your best discretion, but be honest.
You can probably cut your food budget down by a third or even half. It sucks, but this is a necessary short-term budget plan.
You honestly may have to live on some peanut butter and bread, rice, and beans, or even boil some chicken to throw in there.
Learn how to cook on a budget. You can still eat real food even when you’re broke.
As Theodore Roosevelt said, “do what you can, with what you have, where you are.”
Get a Second Source of Income, or Change Your Job
Generating more income is the best and fastest way out of a bad financial situation.
Getting a second part-time job will be the fastest way to generate extra income for yourself, unless you are already established in some way with a skill set that you have, then develop that further.
Changing your job may seem like an unusual thing to think about when you’re broke. Still, if you aren’t generating enough income, you have to evaluate every aspect of your life. Part of that evaluation may be taking an honest look at the job you have now.
Do you remember that last conversation you had when you said, “I’m so happy that I struggle to pay my bills and put food on the table.” No, you don’t, because that never happened.
So why would you stay at a job that doesn’t pay you enough money to get ahead with your life?
There is no sensible reason for this.
You probably have many skills that you can utilize and generate more income for yourself.
People are paid based on the value that they bring to the table, and you bring a lot more value than you realize. So even if you think you don’t possess any skills, you probably have a lot more than you realize.
If you’re in the type of job where a raise can be life-changing for you, then ask for a raise, but if your job gives out 35 cent raises per year, then you need to change your job.
Once you are generating enough income, pay yourself whatever extra you can, no matter what the amount is.
Learn Personal Finance
This is crucial. Educating yourself about finance is one of the best things you can do for yourself.
Finances aren’t as complicated as you may think, and it’s not like you have to aim to be an expert on Wall Street in a week.
We are simply talking about learning about personal finances.
One of the best books to learn finances and get yourself in a good financial position is Financial Freedom by Grant Sabatier.
It is a very practical book, and it lays out an achievable plan for how one can achieve their financial goal.
But learning about personal finance isn’t simply just reading books or articles; it is a process that involves practice, application, and discipline.
Learning about your personal finances will be different than learning about my personal finances.
Everyone has a different situation, so make sure that you apply what you learn in ways that make practical sense for your situation as you learn.
Make a Realistic Plan
Benjamin Franklin was a brilliant man, and he put it very simply: “if you fail to plan, you plan to fail.” This applies to any situation in life.
A plan can be easy, but one thing people tend to do is come up with an unrealistic plan to achieve a specific goal.
I have a friend who starts every explanation the same way. He says, “it’s very simple,” and he will continue with his explanation.
So, I will start the same way. It’s very simple; you need a realistic plan that fits your situation that will work for you in a very practical way.
Let’s assume you are paid bi-weekly.
Add up all your bills for the month and divide this number by 2.
Let’s say you bring in 2,000 dollars per month post taxes; you need to break this down in the time frame you are paid.
So, Let’s say your bills equal 1850 per month. You will have to deduct 925 dollars from your paycheck every pay period. Then, if there is any remaining balance, you can use that towards debt or savings.
This way, you know that 925 dollars of your income cannot go to anything else except the necessary expenses that you need to survive each month.
The same method applies to any pay period; whether it be weekly, you would divide by 4 or monthly and subtract your monthly expenses every pay period.
That is a realistic plan.
Come up with a realistic plan that you know you will follow through with and be honest with yourself.
Don’t pressure yourself or stress yourself with a plan.
This should be slow and steady.
Now What?
Remember that you won’t solve your financial problems overnight or even in a week.
Come up with your plan, follow through with it, and you will be in a much better place sooner than you realize.
Remember, you can be broke and stressed out for another year, or you can take the year and plan out your goals, and by the end, you will be able to breathe.
It is summed up in the same ways that we have covered, find out exactly how broke you are, create a budget, generate more income, and learn more about finance.
Be aware of your situation, be realistic, and be honest with yourself.
Persistence is a powerful force, and it always reaches the target.
