Unfortunately, almost 80% of US workers live paycheck to paycheck.1 If you’re tired of being broke all the time, you can change how you spend money, improve your credit score, learn how to save money, and increase your income!
Improving your personal finance comes down to drive and determination. It is possible, no matter how daunting it may seem. There are ways to make more money, ways to pay all your bills and still have enough money left over for more than just basic living expenses. You just need to create the proper habits and behaviors to achieve financial freedom.
1. Turn Bad Habits Into Good Ones
Habit formation is the biggest key to changing your life. If you can take control of your habits and change them for the better, you’ll be well on your way. And several bad financial habits drain our bank accounts.
Overspending
Spending money that you shouldn’t is a common way to ruin a budget and leave you with the funds you need. It may be tempting to buy the best of the best, but you’ll save more money by paying better attention to where each dollar is going.
Let’s take grocery shopping, for example. Several grocery stores offer low-price options. And most products you need are available in generic versions that don’t carry a name brand or high price tag. It may seem tedious to pay attention to every penny, but those pennies add up. If you choose the cheaper version of every grocery item you need, you may actually save a large chunk of change. And there are budgeting strategies that make it possible to create a grocery list for 300 dollars a month.
This same principle applies to pretty much everything you need: clothes, office and school supplies, electronics, and more. Shop at local thrift stores or the Salvation Army. Post on social media to see if any friends or family have what you need and are willing to offer it for free. Many apps allow you to buy and sell items in your local community.
To be financially independent, you need to learn how to stop overspending and save more money. For example, you could try the 6 month saving challenge.
Wants vs. Needs
Understanding the difference between wants and needs is a large part of becoming financially stable. Knowing exactly what you need and don’t need can save you money in the long run. Obviously, you need groceries, a roof over your head, and clothes to wear. But do you really need five different streaming services because the shows you watch are all on different ones? Unfortunately, you do not.
It may be tough to part with certain luxuries, but doing so can set you up for financial success in the future.
Impulse Buying
When it comes to being broke and striving for financial stability, sometimes you may be required to deny your impulses.
Learning how to stop yourself before making an impulse purchase is very important. Find ways to distract yourself, change your focus to something else, remind yourself that it’s not practical. If you tend to make large purchases on the fly, there are a few ways to become more mindful.
When you’re thinking about making a big purchase, try to stop yourself by opening your bank account app on your phone first. If you can interrupt the impulse and remind yourself of what’s essential, it may help you to avoid the purchase. Maybe try taking a few moments to focus on your breathing and ground yourself. This may help to clear your mind so you can think more realistically.
2. Tired of Being Broke? Improve Your Credit Score!
Boosting your credit score is a big part of mastering personal finance. A higher FICO score will lead to better loans, credit cards, interest rates, and more. And if you can avoid costly loans and interest rates, you’ll save more money.
There are a handful of proven ways to increase your credit score over time:
Become Debt Free
Lowering your outstanding debt is one of the most significant ways to improve your credit. Even if you only have a little money left over each month, it’s wise to put it toward your existing debt.
Paying Your Student Loans
Student loan debt is a big part of many people’s lives. You may be paying them off for years. And if you don’t make your payments on time, it can lower your credit score. Many lenders will be willing to work with you to make sure your payments are manageable. Do your best to pay more than the minimum payments each month, and they’ll be paid off before you know it.
Paying Off Your Credit Card Debt
Credit card debt can pile up very quickly if you’re not careful. The best way to manage a credit card is to only use it if you have the funds to pay it off immediately. This way, you’ll avoid interest charges, late payment fees, and more. And you’ll get whatever rewards come with using the card.
It’s extremely important to pay off your credit cards quickly. And if you’re worried that you can’t, then don’t even use it, to begin with.
Make Payments on Time
Paying all of your bills on time will also help to improve your credit score. When you miss payments, there’s a chance that could show up on your credit report. If the company you’re paying reports on-time payments to the credit bureaus, then late payments can sink your credit score.
Create a schedule, a budget, and a clear plan to pay all your bills on time. Set up auto-pay for any accounts you have that offer it.
Avoid New Forms of Credit/Loans
Taking out new installment loans, payday loans, or even credit cards can potentially lower your credit score. If you’re doing this too often, it will tell banks and lenders that you’re not financially stable. This will lead to a lower credit score.
The rule of thumb is to avoid opening new loans or credit accounts unless it is absolutely necessary. If you can avoid a new loan or credit card, you should. Find creative ways around this. Instead of using unsecured loans to purchase a car, save up for a while and buy a used one. Instead of opening a new credit card, consider a part-time job to increase your income.
3. Learn How To Save Money
Saving money is another crucial part of a healthy financial life. It may help you handle financial emergencies or even avoid having to borrow money when times are tough.
The best way to save money fast is to start small. Open a savings account and add a little bit to it each month. Over time, you may be able to start adding more money. Eventually, you’ll have enough money to take care of a challenging financial situation when it pops up.
It may seem difficult to save if you’re struggling financially. This is where budgeting and planning will help. Create a full budget every month, and find out if you have any extra money you can put away. If you don’t have extra money each month, focus on our next tip, increasing your income.
Common Budgeting Methods To Start an Emergency Fund
| Strategy | Description | Pros | Cons |
| 50/30/20 Rule | Allocate 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment. | Easy to follow; Balances essentials, leisure, and financial goals. | May not work well for low-income earners or those with high debt. |
| Envelope System | Cash is divided into envelopes for each spending category. When an envelope is empty, no more spending in that category for the month. | Helps curb spending; Tangible system. | Carrying cash can be risky; Not suitable for digital or emergency expenses. |
| Zero-Based Budget | Every dollar of income is allocated to a specific expense or savings category, so income minus expenses equals zero. | Ensures every dollar is purposeful; Great for goal-oriented savers. | Can be time-consuming; Requires frequent monitoring and adjustments. |
| Pay Yourself First | Automatically route a portion of your income to savings or investment accounts before covering other expenses. | Prioritizes saving; Helps build wealth over time. | Can be challenging if expenses are high or income fluctuates. |
| Debt Avalanche | Focus on paying off the debt with the highest interest rate first, while making minimum payments on others. Once the highest-interest debt is paid off, proceed to the next highest-interest debt. | Saves money on interest in the long run; Can be faster than other methods. | May take time to see initial progress; Can be discouraging if highest-interest debt has a large balance. |
| Debt Snowball | Focus on paying off the smallest debt first, while making minimum payments on others. Once the smallest debt is paid off, proceed to the next smallest debt. | Quick wins motivate continued effort; Simplifies debt repayment process. | Might end up paying more interest over time. |
| Balanced Money | Similar to the 50/30/20 rule but with a focus on balancing spending (needs and wants) and savings based on your financial goals. Often tailored to individual preferences and financial situations. | Flexible; Can be adjusted to fit personal goals and situations. | Requires regular review and adjustment; Not as structured as other methods. |
4. Increase Your Income if You’re Tired of Being Broke
Being broke is challenging, but getting to a good financial place is possible with hard work and dedication. And it may be even more difficult if you’re living on one income. How you increase your income may depend on how much time you have and how much money you need.
Here are a few options on how to increase your income and avoid using quick cash loans:
Finding a New Job
If your current job isn’t cutting it, you might want to start looking for a new one. If your income is not enough money to cover all of your expenses, then that’s a good indication that it’s time to job hunt.
Start by talking to family and friends, post on social media, ask around to see if you know anyone that has a connection to a job opening. It’s not uncommon for people to find jobs through family, friends, and peers. Many websites allow you to search thousands of job openings based on your specific skill set.
Getting a Part-Time Job on the Side
If you aren’t interested in leaving your current job for a new full-time job, you may be able to supplement your income. One good way to do this is to find a part-time job that you can perform in your free time.
You can find these jobs the same way you would find a full-time job. Online searches, friends and family, and driving around your community to talk to local businesses.
Side Hustles
A side hustle is basically a part-time job, with some minor differences. Many would consider a side hustle to either be a job that allows you to create your own schedule or possibly one that involves a hobby or passion.
Creating an Etsy shop to sell your art could be considered a side hustle. Even driving for a ride-share app or working for a food delivery app may be a side hustle. These can be great options for adding some extra cash, saving money, and getting your finances back in line.
FAQs About Being Broke
First, don’t panic. Review your monthly income and expenses. Start by cutting any non-essential costs, then prioritize your essential payments. Consider seeking advice from a financial counselor who can provide personalized guidance.
It might seem daunting to stop being broke, but even small contributions matter. Start by setting aside a tiny portion of your monthly income, even if it’s just a few dollars. Over time, these amounts will add up and form a safety net for you.
The debt snowball method involves making minimum payments on all debt, while putting extra money towards the smallest debt. Once the smallest debt is paid off, you roll the money you were paying on that debt into the next smallest balance. It can be a motivating way to see progress while you’re working on improving your financial situation.
Look for freelance opportunities or part-time work, sell items you no longer need, or consider a roommate to share living expenses. Every little bit can help increase your cash flow.
It’s important to maintain a balance. If you’re behind on essential debt payments, it’s okay to pause savings until you’re more stable. However, a small emergency fund is crucial, so try to contribute even a minimal amount when possible.
Budgeting is key. List your expenses, prioritize them, and consider ways to reduce costs. Contact creditors to negotiate terms if necessary. Automating payments can also ensure you don’t miss due dates, which can lead to additional fees.
Living within your means is essential. This might involve downsizing your living space, using public transportation, cooking at home more often, and avoiding unnecessary expenses. Also, educating yourself about personal finance can provide you with the tools to manage your money more effectively.
Being Broke: How CreditNinja Can Help
Becoming debt-free might be a long journey. But all the hard work and dedication will be worth it when you master the personal finance basics. You’ll have an emergency fund for unexpected expenses, credit card debt repayment, and more.
For additional information on saving, such as budgeting with irregular income, check out the CreditNinja blog! We offer free financial articles on almost every topic because we understand the importance of financial literacy.
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