When you’re trying to pay down debt and build savings at the same time, you might wonder if one should take priority over the other. We ask a CFP if it is better for your financial future to pay down debt or save first.
How to Stop Being Broke
Are you struggling to pay the bills or can’t afford the things you want? Being broke is not fun, and it comes with a lot of stress. There’s no sugar-coating it. So what can you do to stop being broke? In this post, we’ll outline a few steps you can take to make more money and find a path to financial freedom.
Take Responsibility for Being Broke
Being broke is a choice. And while for some it might be easier than others, at the end of the day, you make decisions every day that impact your future. For example, if you decide to watch television for an hour today, that’s one hour you could be spending dedicated to improving your future but you chose not to.
That’s just one example that can quickly add up. It could be watching television, going out with friends, or spending time on social media. All of these distractions can keep you from achieving your financial goals.
When you’re tired of being broke, you need to figure out what these distractions are. It might help to write them down in a journal. Figure out how much time you spend on these distractions each day and then total them at the end of the week. This will give you an idea of how much time you could be spending on your future.
You do not need to stop these activities altogether. Maybe you try spending half the amount of time on each one or reallocating your time towards things you deem more important, like family or friends instead of television. The goal is to cut a few hours of your time on these distractions and dedicate it to improving your future.
Create a Plan for Your Finances and Future
The second thing you should do when you decide to stop being broke is to create a plan for your finances and your future. For your finances, you should create a budget in order to keep your cash flow positive each month. You should document all of your income and all of your monthly expenses so that each dollar is allocated towards your expenses or savings. If you have leftover money after subtracting your expenses from your income, this should go toward your savings or anything else to increase your income.
For your future, you should plan a way to increase your income. It might be by going back to school, dedicating more time to your current job in hopes of getting a promotion or starting a business. No matter your scenario, there is always a way to make more money. You can learn these skills to boost your income.
Consider a Working More
If you’re working an hourly job and have the option to increase your hours, consider doing so to give your income a slight boost. Even if it’s just a few hours each week, this can add up and give your budget a positive cash flow.
Pick Up a Side Gig
If you don’t have the option to work more hours or you have a salaried position, you could consider working a side gig. Driving for Uber, doing photography, or dog walking are all examples of side gigs you could do to increase your income.
Consider Starting a Business
If you have a passion and are looking to make some extra money along the way, starting a business might be the perfect option for you. Some businesses take less to start than others, so you’ll need to either start a business with low start-up costs or find an investor to help you get started.
There are many businesses you can start that have relatively low start-up costs. Some of the best options to consider are:
Spend Less Money
The ultimate reason why you are broke is because you make less than you spend. In order to balance this out, you have two options. Make more money or decrease your spending. Usually, the second option is easier and can happen quickly. Below are a few ideas to help you spend less money.
Stop Eating Out
Eating out can cost you thousands of dollars per year. When you compare eating out to the cost of groceries, you’ll see that you can often cook the same meal for significantly less than if you buy it at a restaurant.
Most people will eat out because of poor planning. To combat this, plan your meals ahead of time so that you have the ingredients and the time to make the meals you want to eat. Making meals at home is much cheaper than eating out, consider some of these cheap money-saving meal ideas to get started!
Cut Your Transportation Expenses
Between fuel, maintenance costs, insurance, and the cost of your vehicle, your transportation costs can squeeze your wallet. There are a few options to consider to cut your transportation costs.
Use Public Transportation
Do you have public transportation in your area? If so, consider taking a ride on the bus to trim your transportation expenses leaving with more money at the end of the month.
Get a Job Closer to Your Home
If the commute to your job is over 30 minutes, it might be time to starting looking for a new job. By finding a job closer to your home you can save time AND money.
Get a Fuel Efficient Car
Save on transportation expenses by purchasing a fuel-efficient vehicle. If you currently drive a larger vehicle like a truck or SUV, consider a smaller car or an electric vehicle to lower your fuel costs.
Find Cheaper Car Insurance
If you have a good driving record and still feel like you’re paying an arm and a leg for car insurance, start looking around. There is no cost to getting quotes from alternative insurance companies so try to find one that offers similar protection for a lower cost. We’ve found that Geico tends to have the lowest rate for standard protection.
Trim Your Mortgage or Rent Expenses
Your housing expenses will oftentimes be the largest portion of your budget. By trimming these expenses, you can have a drastic impact on your cash flow and it can be relatively easy to do.
If you are currently renting a space, browse around to see if you can find another less costly space.
If you own a home, consider refinancing your mortgage or moving into a new home that is less costly.
Ditch the Broke Mentality
Part of being broke comes with the mentality of being broke. You need to suppress this mentality and instead encourage yourself to get out of it using some of the advice above. If you’ve ever heard of the phrase “think it to existence” this is the same idea. By thinking you can get out of being broke, your chances of doing so will drastically increase.
There are a few things you can do to help you get out of this mentality:
- Visualize your success
- Try meditating
- Get support from others
Being broke can be demoralizing, stressful, and depressing. But don’t lose hope! There are many things you can do to boost your income and stop being broke and it all starts with your cash flow. If you spend more than you make, you’ll continue to be broke, so you need to find a way to reverse this. Whether it’s picking up a side gig or trimming some of your monthly expenses, there are multiple options to regain a positive monthly cash flow. In addition, you’ll need to get out of the “broke mentality” and into a positive and encouraging mental state.
The chances are unless you were born into a family with too much money, you’ve been broke at one point or another and it’s up to you to stop being broke.
What are your tips to stop being broke? Comment below!
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The post How to Stop Being Broke appeared first on Don’t Work Another Day | Personal Finance & Investing Blog.
I racked up a miserable amount of credit card debt in college.
Don’t get me wrong – I’m thankful I had access to credit cards so I never had to say no to fun or friends during college due to my financial situation. And, I have many great irreplaceable memories show for it. But, when I saw how much of my paycheck after college was going into the black hole of interest payments, I realized it was time to get serious about down my debt.
After some planning, I was able to take 5 small steps to pay off my credit card debt 3.5x faster without compromising on my lifestyle.
Here was the situation: I had a $8,249 of credit card debt with an interest rate of 25.49%. And, I was making monthly payments of $240. At that rate, it was going to take me over 5 years to pay off my credit card debt.
Step 1: Transferred balance to a lower interest card
This may sound counterintuitive, but often the best first step to paying off credit card debt is to get another credit card. When trying to pay off credit card debt, interest is your biggest enemy. According to Money.com, Americans paid a staggering $113 billion dollars in credit card debt last year. Because many new credit cards offer 0% interest on balance transfers, they can be an excellent way instantly eliminate this interest cost. There is a catch though.
I had to incur a 2.5% balance transfer fee to set up the new credit card. However, as described below, I was able to offset this cost entirely in the first month of having my new credit card.
Step 2: Set a budget that is higher than your minimum payment.
My new credit card had an interest rate of 0% for the first 18 months. And so, I committed to paying off the balance in that timeframe. This meant I had to commit to a payment that was higher than what I was paying at the time.
First things first, I needed to know how much I would have to pay every month in order to pay off my debt in 18 months.
I created and used a credit card payment tool to understand how much I had to pay each month in order to pay the debt off in the time I planned.
In my case, I needed to find a way to pay down an additional $220 a month.
Step 3: Became more proactive when planning activities
Instead of going along with the plans of friends, I started being more proactive in planning activities. Small adjustments allowed me to continue having fun while not breaking the bank.
– Night at the bar = Night at the bar with happy hour specials
– Coffee at Starbucks with friends = coffee at my place with friends
– Dinner at an expensive restaurant with friends = dinner at a fun (but cheap) restaurant with friends
– Out of town trip with expensive hotel = Staycation day with full day low cost activities like hiking at a state park
A little proactive planning on my part not only helped me easily save an average of $4.00 per day, but my relationships with friends improved. I went from being someone who tagged along on plans and spent more money than I had, to being someone who was always planning fun activities for our friends and saving money at the same time. Added bonus – I was helping my friends save money as well. Savings of $4.00 per day = $120 of savings per month. Over halfway there!
Step 4: Opened a new savings account and sent my payment budget there directly.
Keeping funds separate was critical to helping me make set aside the money needed to make my payments. By creating a separate account and routing part of my paycheck directly to that account, I was able to “pay my savings first”.
In a typical month, I would use all of the money I had in my checking account. Once I routed some of my checks directly to the new account, money I needed for savings never hit my checking account. It became much easier to set aside the amount I needed for my payments. Then naturally, I found myself opting even more for activities that were within my monthly budget based on how much was left in my checking account.
Added bonus: Many savings accounts come with signup bonuses that can climb as high as $500.
In my case, I was able to find a savings account that had a $150 new account sign up bonus. This signup bonus covered two thirds of my balance transfer fee, so my net cost to go from a 25.49% interest rate to a 0.00% interest rate was $100. Between the money I made from creating a new savings account and the interest savings, I more than offset the cost of the balance transfer fee in the first month alone.
Additional savings = $100 per month.
Step 5: Stopped using credit cards to pay for things
The last thing I did was commit to no longer using credit cards to pay for things. This was the hardest step. I wanted to make sure I didn’t fall into the trap of charging up my credit cards again.
To do this, I canceled all but one of my credit cards. And, I put the remaining one in a drawer. I kept it there, to be used only in the case of emergencies. Thankfully, I never needed to use it. However, I did find that I had to say no to a few things because I didn’t have the money at the time.
The most important thing for me here was a shift in mindset. I stopped buying things that I felt I “deserved” and instead only bought things that I had already “earned”. For me, this has been a lasting mindset that has helped me to value the things I purchase.
You can do this!
Wrangling your credit can seem hopeless. But with a bit of planning, a few small adjustments, and a new mindset, you can get your debt under control and paid off in much less time.
With these small steps, I was able to save $6,700 in interest charges over 18 months, without compromising my lifestyle!
If you’re looking for a first step to getting your credit card debt under control, check out this credit card planning tool we created. It will help you think through the small steps you can take to getting things back under control.
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It’s been about six months since I started working part-time, and because I’ve found myself reflecting on the experience over the last couple of weeks, I figured I’d share those thoughts here on the blog.
My Current Part-Time Job
What I Like About My Part-Time Job
In sum: as far as adjuncting goes, this is probably as good as it gets.
What Bothers Me About My Part-Time Job
3. People in my field don’t take me seriously. They just don’t. Former colleagues basically act as if I’ve left the discipline altogether. If you aren’t a REAL professor or a REAL researcher, you are a washed-up, second-rate hack (fellow adjuncts, I know you know what I mean). Elitism runs rampant in higher education, and there’s no greater evidence of this than the way in which adjuncts are treated by people who have the same level of education and experience that they do. Being kicked out of the club makes me very sad, and I try not to think about it.
For the past four years I lived in East Africa. There is a lot to love about East Africa — the vibrantly colored fabrics, the graffiti on…
When news of the coronavirus broke in China, my girlfriend and I were in the middle of a religious fast for the new year. The fast consisted of commitment to no social media: Instagram, Facebook, Twitter, etc. and no streaming: YouTube, Netflix, Disney Plus, Hulu etc. Unfortunately, precautions to survive the coronavirus include another list … Continue reading “Fasting, Viruses, & Cabin Fever: Escaping the Coronavirus”
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