I don’t know about you, but one of the worst feelings in the world is thinking “I’m broke and need money”. For some of us this may be an everyday feeling you have, trust me, I have been there, and most people at one point in their life have been there as well.
The big question that I would pose to someone with that feeling is, what are you going to do about it? Are you the type of person that is going to be complacent with this feeling, or are you going to do something about it to try and fix the problem?
Don’t get me wrong, there is no simple fix to just creating money. What did your parents use to tell you about money growing on trees? But if you want to put the time into it, there is always a solution to any financial problem that you may face.
There are three different topics I want to touch on today that can solve the “I’m broke and need money” mentality. These solutions may not work for everyone but are still a great first step for any type of financial struggle you may have.
- Evaluate your Expenses
- Evaluate your Income
- What not to do
Evaluate your Expenses:
This may sound like a simple solution, just figuring out what you are spending each month. You would be shocked at the number of Americans that don’t do this every single month. If you don’t know what you are spending, how are you supposed to know how much money you are able to save, or you are losing each month?
Where should you start first? Easy, with your mortgage or rent payment. This will likely be the biggest expense for everyone going through the process. A whole other article could be about should you buy or rent a house, but honestly that is neither here nor there at this moment. Always buy if you can, but obviously, not everyone is in the situation.
One of the biggest rules you should try to follow that you will typically see in personal finance articles is the 25 percent rule. That means you should never have a rent or mortgage payment that exceeds 25 percent of your household income for the month.
There are a few ways to justify this, and at the end of the day, it’s your call. Do you use your gross pay before taxes for this target, or should you use your net pay after all the deductions?
To be the most cautious use your net pay, but I myself at times have been closer to the gross pay side of things. So, what do you do if you are over the 25 percent threshold? It’s obviously not as easy as moving to a new home or apartment in one day to solve all your issues, but if you are significantly over 25 percent, you need to consider all your different options.
Optimizing Living Expenses
If you own a house maybe you look at moving to an apartment for 30 to 60 days until you get your finances figured out, or maybe you just look at downsizing in general. You may not have the view you want or live in your favorite neighborhood, but if it takes the I’m broke and need money thoughts away from your brain, isn’t it worth it?
The other buckets of reducing your costs are smaller, but there are still things you can look at. Your gas bill, the electric bill, water bill, cell phone, cable and Wi-Fi, even your trash services. I’m not saying you’ll find a way to save thousands on these things, but you can certainly cut a couple of hundred dollars a month if you put in some effort.
With your electric and gas bill. Look to see if you can go to a budget plan. That will typically keep your payment from fluctuating as much throughout seasonality and you’ll have a better baseline to follow in your budget. Additionally, you can also keep the heat a few degrees lower, the air conditioner a few degrees higher, and always make sure you are shutting off lights. Not running an oven and using a grill when it’s hot is a small item as well that would amaze you with energy savings.
Another weird tip I have to help control a water bill, make sure your loads of laundry are full. I know it’s important to separate whites, colors, and delicates, but make sure you are doing a full load each time. A washing machine and dryer are way more efficient on costs with a full load compared to a partial.
Spending on “Wants” vs Needs
Now, on to another area where you can legitimately save big dollars but may not want to. Your cellphone, cable, and internet bills. If you truly feel broke and need more money, I would argue all of these are wants and not needs. You likely do need a cell phone, but you don’t need an iPhone 13 with the max storage and all the bells and whistles to go with it.
You also likely don’t need the 200MB internet package, or the movie channels with your cable. I get it, all things that make life easier, but life usually includes making tough decisions. One thing my family did in the last year was shop cell phone carriers. We don’t have the newest phones in the world, but they work just fine and we saved nearly $75 a month.
We also shopped cable providers and lowered our internet speed at one point. Both of those things saved us an additional $35 a month. We truly didn’t give up anything major and saved over $100 a month that could go towards groceries or savings. Real money that can make you stop thinking, I’m broke and need more money quickly.
There are obviously a ton of other things to consider with your variable monthly expenses as well. These are items you fully control. Trying to use coupons at the grocery store, focusing on cheaper foods while shopping, and trying to limit how many times you eat out per month. I get everyone needs food, but you don’t always need a $40 steak either.
Again, this may not be an area you are willing to budge, but you’ll never lose the I’m broke and need more money mentality if you aren’t willing to make at least a few sacrifices.
About six months ago my wife made the decision to stay home with both of our kids full-time. One focus she has had ever since is saving as much as she can at the grocery. She constantly watches coupons, shops the store brands, and is willing to go to multiple stores to save money if possible. We also try to only order food in or eat out once a week.
While our grocery bill has increased, it didn’t go up nearly as much as our spending at restaurants decreased. If you do this correctly, depending on the size of your family, you can save some pretty serious cash quickly.
Now that we have covered how to try and manage expenses, let’s move on to managing your income, and seeing if there is anything you can do to generate additional income.
Evaluate your Income:
This is a tricky one, it’s not easy to just create additional income on a monthly basis. If it was that simple, everyone would do it. However, there are still a few questions you must ask, and scenarios you must consider trying.
The first evaluation should be your current job. Are you thinking about a change? Do you feel underpaid? Are you a highly desired employee? If the answer to any of these questions is yes, you should at least consider your options. Whether that is asking for a raise or floating your resume to a few other companies to just see what other options exist.
In current market conditions, good employees have a lot of leverage and can often demand more. Now that doesn’t mean if you are making $20/hour you can go demand $50, but a reasonable five to ten percent raise is certainly not out of the question.
I know 20 years ago the big thing was finding your first job and staying with that company for 35 years and retiring. While there is nothing wrong with that, it’s also just not the norm anymore. Younger folks are constantly looking for new challenges and work/life/balance is typically much more a priority compared to prior generations.
The biggest piece of information I can recommend is if you feel broke and need more money, find a secondary income. This doesn’t mean you need to find a second full-time job, but anything that can provide a small amount of secondary income each month.
That could include mowing the neighbor’s yard for them, picking up a weekend shift delivering pizzas, doing a small repair job for a friend. The opportunities are honestly endless, but it really comes down to how much you want to work at something.
If you really want to fix the I’m broke mentality, you will have to be creative and certainly put in some additional effort. I mentioned my wife cutting coupons earlier; she also enjoys decorating cookies. We bring in almost another $200/month from her selling her goods to friends and neighbors.
The best thing to look for is what I call the “side hustle”. These gigs are usually a better option than a true second employer. Both are great options, but a side hustle allows you to be your own boss and have more flexible work hours. The biggest challenge with a secondary income is managing work/life/balance.
Not only do you need time to recharge your batteries, most of us also have significant others or even kids that all require our attention.
As mentioned before, I know this is a tough one, but at times in the summer I have found myself making an extra $500 to $600 per month of additional income. That is money I typically try to put directly into my savings account.
What not to do:
Now that we have covered two different solutions to shake the I’m broke feelings; we must also cover things that you should not do. Obviously, everyone’s situation is different, but these should be avoided at all costs.
The biggest one that will be most tempting is selling your house for a profit and moving into a rental property. If you have a house that you have been paying on for a few years and put a nice chunk of money down on it, that is certainly an easy way to generate quick cash.
I’m not saying there will never be a scenario where this isn’t a plausible option, but if you are just getting by check to check, I would certainly try some of the other options above before this strategy.
The second option that I have seen people do constantly that makes me sick is pulling from a 401K retirement account or a 529 college savings account.
Again, I’m not saying there will never be a situation in someone’s life that won’t require them to dig into their retirement or college savings, but man, it would have to be extremely serious before even considering that option.
Not only are you paying taxes on a lot of that money before contributing, but you’d also be paying a huge penalty on taking it out early. In certain accounts, you would be paying well over a 20 percent penalty to withdraw funds.
Not only that, what are you going to do when you retire? No one wants to work until the day they die (well most that is). If you ever come to a situation where you just can’t get out of a hole and it’s going to make you homeless, dig into the retirement accounts.
If you are living check to check and really want to get a different car, don’t even think about it. But in any situation where you can’t shake it, please walk through all the steps above first. Evaluate what expenses you can cut and if there is any way to add additional income.
The last thing I will also never suggest, taking out a credit card to create quick cash flow. If you are strategic, credit cards at times can be extremely valuable if you find 12-months zero percent interest. However, you must be extremely careful with this strategy.
Taking out a credit card to create extra cash flow is like taking out a loan at 20 to 25 percent interest. You’re taking out a bad debt to pay off another bad dept, which is like a dog chasing its own tail; a game you will never win.
Personal finance 101, never get a credit card unless you fully intend to pay the full balance each month. Credit, layaway, cash advance operations, and high-interest loans have made learning to grow up and be financially responsible so much harder.
At the end of the day, if you are willing to work, there is likely a solution for you to get out of any type of financial hardship. It may mean giving up something that is important to you and making some other difficult sacrifices, but there are certainly several options to stop constantly feeling like you are broke and need money.
Best piece of advice I’ve ever been given, money doesn’t buy happiness. Remember, if you start making an extra $1,000 per month, most people are just going to spend it. It doesn’t matter if you are 18 or 60 years old, it’s never too late to start saving money and living within your means.