Have you ever felt like you were stuck in a cycle of having more money going out than coming in? Have you not been able to save consistently because of tight cash flow? Are you constantly saying to yourself, “I’m tired of being broke”?
You are not alone. 70 percent of millennials are living paycheck to paycheck and only bring home enough money to cover their expenses. That said, you can change your situation. But you'll need to plan, create better habits, and be consistent!
Why you might be tired of being broke
Living paycheck to paycheck can be stressful and make you feel like you are only working to pay bills. You may not be able to save as much as you would like or have the ability to enjoy your money without worrying. The constant anxiousness about what you can or cannot afford is exhausting and weighs on you mentally and emotionally.
Where you are currently may even be a result of something beyond your control...life happens. However, it may also be from bad financial habits or past decisions. The good news is that your current financial situation isn’t set in stone. If you are tired of being broke and want to improve your finances, you can do so with some time and effort. Here's how to get started!
7 Steps to improve your finances if you’re tired of being broke
These seven steps to improving your finances work best if done intentionally and consistently. Over time, as you start to see results, don’t stop prematurely! Use that momentum as motivation to keep going, keep being persistent, and keep making progress.
Before long you will go from saying "I'm tired of being broke" to "I have all the money I need!"
1. Take control of your finances
The first step to changing your finances for the better is realizing that you are in control. No matter how you got into this situation, taking the reins and recognizing that you hold the power will lead to positive change. There may have been times where you felt or believed that money controlled you, but that’s not the case.
You have control over how much money you spend and how much money you make. You can also learn anything that you may not understand about personal finance and take action towards improvement.
2. Adjust your mindset
You have probably heard many people say that to make and maintain positive change, you need to think positively. It is really easy to see the negative when you’re broke. Shifting your mindset from negative to positive will motivate and encourage you if and/or when things get tough.
It will not always be easy, but a positive money mindset will go a long way. Additionally, actively working on adjusting your mindset will change your behaviors and help you make better decisions. You behave differently when you have your eyes set on a positive outcome.
If you find it difficult to cultivate a positive mindset, try writing down all of your negative or limiting thoughts and beliefs. Think about how these thoughts may have shaped your financial habits. After you have completed the list of negative thoughts that you have about money, see if you can counter each one with a positive thought.
The easiest way to do this is with positive affirmations. For instance, rather than thinking "I'm tired of being broke" think, "I have an abundance of money!" Shifting your mindset helps switch you into action mode. It also takes away some of the anxious thoughts about money and serves as motivation when you begin planning and budgeting.
3. Create a budget
Now that you are beginning to work through and master some of the mental roadblocks, it’s time to crunch some numbers and move into the more tangible actions. If you don’t have a budget that you can reference, set aside some time to create one! This is one of the most beneficial things you can do in planning and digging your way out of being broke.
Start by making a list of all of the money that you have coming in and all of your expenses. To help you assess your current expenses and spending habits, look through past bank and credit card statements to see where your money has been going. This will help you to see the areas where you may be able to cut back.
Choose the right budgeting method
Once you know your current position and your spending habits, create a physical or digital copy of a budget for your next paycheck. You can make this easier by choosing the best budgeting method that you can stick with. For instance, some find the 50/30/20 budgeting method helps them save more money.
This method has you allocate your income into percentages across your expenses, spending money, and savings. So, 50% goes to your needs such as housing, food, etc., 30% goes to your wants, and 20% goes towards your savings!
You can simplify this method even further by using the 80/20 rule. This rule is simple to follow because you use 80% towards needs and wants and save the other 20%. Other budgeting methods include the 70-20-10 rule, 60-30-10 rule and the 30-30-30-10 rule.
There are many different budgeting methods and tools to choose from. So don't feel stuck if one doesn't work. You can try different methods to see what helps you save more money so you won't be tired of being broke anymore!
4. Be more frugal to stop being broke
Now that you’ve identified categories where you can cut back, reduce the allocations for those areas. Reducing your largest expenses (housing and transportation) instead of nickel and diming the small things will make the biggest impact when trying to get your expenses lower than your income.
If you can do so, consider decreasing your housing expenses by downsizing or moving to a less expensive home or apartment. You may think about reducing your transportation expenses by getting a less expensive car or, if you have a car that requires a lot of repairs and maintenance, getting a car that you can put less money into. Also, be more frugal in the other areas where you spend the most money.
Use coupons and cashback apps
Use coupons to save on groceries and other household necessities. Apps like Ibotta and Fetch Rewards will give you rewards or cashback for purchasing certain items or scanning your receipts. Start couponing to save money if you're tired of being broke!
Meal prep and cook at home more often
The convenience of takeout will eat up (no pun intended) a lot of your budget. To be more frugal and avoid going over budget, prepare more of your meals at home. You can even save money by planning your meals around your grocery store's weekly ad.
Try a no-spend challenge
Take a break from shopping for items that aren’t necessities. A no-spend challenge is a fun way to test your discipline and become more aware of your spending habits. It will also help you be more intentional about your spending and decide how you can get the most bang for your buck.
Overall, make a plan for your money. Take control and tell your money where you want it to go.
5. Save for emergencies
Having an emergency fund is essential if you are tired of being broke. Once you have your budget in place and have reduced your expenses, you can start saving and setting aside money for emergencies. Unexpected things will pop up, and having emergency savings will help you not go deeper into debt.
Being proactive and saving money “just in case” will reduce some of the stress when these situations arise. Use the money that you are saving from reducing your expenses and spending to start your emergency fund.
6. Increase your income
Cutting your expenses is a quick way to start seeing progress, but realistically you will only be able to reduce your expenses by so much. You’ll eventually get to a point where you aren’t able to continue reducing. While it is going to take some time and effort, at some point you’ll need to increase your income.
If you can increase your income while simultaneously reducing your expenses, then you’ll work your way out of being broke even quicker! To increase your income and bring home more money, you can:
Negotiate a raise at your current job
Research salary data and find out how your salary compares to other salaries for similar positions in your area. Sites like Salary.com and Glassdoor.com allow you to compare salaries based on your skills and title. Make a list of your accomplishments, and be prepared to have the negotiation conversation when the time is right.
Find a new job that pays more than your current job
If you aren't able to negotiate a raise, find a job that pays more than you're making currently. Moving on to a new job is often the best way to get a larger increase in pay. Plus, you can find a job you love while you are at it, so it's a win-win!
Monetize a hobby
Do you have a hobby that you enjoy and work on when you have downtime? Figure out how you can sell the things that you create, and make some extra money in your free time. Check out these 40 top money-making hobbies for ideas!
Become a freelancer or start a business
Start a service-based business or become a freelancer using the skills that you already have. You likely already have some skill(s) that are in demand, and you can leverage your skills and knowledge to start a freelancing side hustle or begin building a business of your own.
7. Create a debt repayment plan
You have created a budget, started an emergency fund and increased your income. Now that you have a bit of wiggle room in your cash flow, you can get more aggressive with paying down your debt. Getting out of debt is the best way to change your financial situation if you are tired of being broke!
So start by writing down all of your debts and the payments for each. From there, you can decide on a repayment method that works best for you. Two of the most common methods are:
The snowball method is a great way to tackle your debt. You start by paying off your debts, starting with the one with the lowest balance. You’ll pay extra towards your smallest debt and just pay the minimum payment for your other debts.
When you pay off that balance, you move onto the debt with the next lowest balance. Using the debt snowball method and watching your smaller debts disappear will build momentum and keep you motivated.
The avalanche method will help you save more money because you pay off debts starting with the highest interest rate. You’ll pay extra towards your debt with the highest interest rate and pay the minimum towards the others.
Of course, this may take longer to pay off the first debt because the debt with the highest interest rate will not necessarily be the debt with the lowest balance. But it can save you some money in interest in the long run.
Whichever method you choose is up to you and what you place more value on! The snowball method is good if you need quick satisfaction with small wins. The avalanche method is better if you want to save more money in high interest and can stay focused even though it seems like it's taking longer to pay off debt.
You can change your life if you're tired of being broke!
Being broke can be mentally and emotionally exhausting. Breaking the paycheck to paycheck cycle and getting to a point where you’re living within your means will come with sacrifice and some bumps in the road as well.
However, being able to save and enjoy your money is definitely worth the work. With some time, effort, a shift in mindset, and practicing better habits, being broke will become a thing of the past.
Are you ready to transform your money mindset and take control of your finances? Enroll in our completely free "Build a solid foundation" bundle! Stay motivated to change your financial situation by tuning into the Clever Girls Know podcast and YouTube channel!