It’s no great statement to say that being broke sucks! The feeling of having no money and how this affects your mindset, your relationships and your general happiness. Whilst we aren’t saying all you need to be happy is money, far from it, what we are saying is that having money (or at least not having to go without nearly everything) does help life become more enjoyable and does give you options.
For those who are currently broke, there are ways out of this, it will usually take a bit of time though. So how can you get out of this? How quick can you engineer a much needed financial turnaround and what steps can you take to make sure you never return to broke town?
Below we go through some ways and ideas on how to stop being broke.
Realizing you have to make a change
It’s one thing to say you have to make a change, it’s another to genuinely want to make a change. Getting to this stage usually takes a particular event or traumatic episode to push you to the edge of change.
Financial issues usually don’t happen suddenly, rather it’s the culmination of bad habits, oblivious behavior and the occasional rash or desperate move. In the Ernest Hemingway book The Sun Also Rises, a character asked “How did you go bankrupt?” Two ways. Gradually, then suddenly.”
Some of the bad habits that can trigger the wanting to make a change for your financial situation include:
Bills piling up
We touched on being oblivious above as a trait of those in financial desperation, preferring to keep their head in the sand rather than admit or tackle their financial problems head on.
This could be with your bills piling up rather than contacting each debtor to let them know you are having money problems or calling them with a repayment date.
It could be getting a plethora of debt collector calls and leaving these to go to voicemail rather than speaking to your debtors and putting a repayment plan in place.
Relationship stress over finances
We’ve touched on financial stress being a big factor in relationship breakdowns yet many choose to take this path rather than do something about their finances and fight for their relationship. Or you could be
Tired of being broke?
Before a significant change is to be made in life usually you experience some seismic event such as the one of the examples above, a traumatic financial experience such as your card being declined when trying to pay for groceries at the supermarket or just the culmination of all of the above and you are just tired of being broke.
Closing a chapter
Once you’ve realized any of the above and you are invested in making a change then you are closing a chapter of your life, the negative and poor financial one and will be writing a new positive financial chapter, one where you are attentive to your finances, where you pay your bills on time, live within your means and your budget and look to earn more money and build your savings and investments.
So who do we do this?
Take Responsibility
Whilst you can blame others for your current financial position, the truth is in nearly all cases the buck stops with you. No one forced you to buy the designer clothes you didn’t need, no one forced you to go out drinking every week blowing hundreds of dollars every week, no one forced you to gamble your paycheck on horses or sports. Accept where you are financially, take responsibility and make a vow to yourself to change.
The longer you blame others and divert blame away from yourself, the longer it will take you longer to right your financial ship. The quicker you accept that it’s on you the quicker you can move forward and plan for financial prosperity.
As part of your change look at things like:
Transforming your relationship with money
For a lot of people who are broke or who have a difficult relationship with money these issues began when they were younger. This could have been due to arguments between parents or family members over money or the lack of it and these arguments or views around money helped form a warped view around money and arguments that it can cause.
Another reason for this could be a lack of education around finances and budgeting in a person’s formative years. Whilst we get taught (hopefully) to read, write and other essential skills growing up, many of us aren’t taught how to use and treat money, how to budget or how to invest, particularly if you come from a low socio-economic background or suburb.
Having a fragmented understanding of finances and debt, it is very easy to be seduced by the savvy advertising around loans and credit cards and before you know it you are hooked on debt and in financial trouble.
Addressing your relationship with debt and money should be one of the first things you target when looking to improve your financial situation and to get you out of being broke.
Financial abundance
When you are broke it’s hard to have a positive mindset (particularly around money) and it’s hard to have a mindset of financial abundance. It’s easier to live in a world of despair particularly if this is all you really know about finances. It’s hard to see where the path forward is going to come from, particularly when you are getting constant overdue payment reminders or phone calls from debt collectors.
Sadly many people in this state don’t have the understanding or tools to make significant financial changes or have the education or skills to improve their income situation which (if maintaining a reasonable level of lifestyle expenses) will drastically improve your financial situation.
If you can find a way to see financial abundance (along with setting goals and putting together a suitable plan) this will go a long way to repairing your financial situation.
Creating a self growth plan
Clearly putting together a self growth plan should involve setting financial goals, improving your mindset and education and putting together a solid plan.
We’ll go into more detail below regarding creating financial goals and mapping out your personal financial plan however when setting goals (whether these are long term financial goals or you are setting monthly finance goals) these have to mean something important to you and have to be part of your personal lifestyle plan. You can’t be living or planning to live someone else’s life, it has to be for you.
Setting challenging yet achievable goals (both short and long term) will put you back on track not only financially but across all aspects in life such as your relationships where eventually you get to the point where you are:
Living Your Best Life
Ask yourself what is your best life? Where are you living? What is your occupation? Who are you spending your time with? What are you doing with your time? Figure out what living your best life means to you and start putting a plan together to get as close as you can to living your best life.
So how do we get to living your best life? To live the lifestyle you should be living?
Find out where you are at and where you want to go financially
To get to your planned destination, you need to know what your start point is. In the case of someone who is broke or in serious financial strife, you need to find out your starting point so we can begin to build some solid foundations.
When building a house you’d never build a slab on unstable ground, the same should be with your finances. On unstable ground, as soon as you started building walls and pillars and put the roof on, the whole structure would collapse and you would be back to square one. So start with a solid foundation (along with solid habits) that will allow you to build something that will last a long time.
What this means is you need to know exactly where you stand financially. How much money you owe, what your monthly repayments are, what the interest rate is and to who you owe the money to. Find out how much money you earn, how much tax you are paying (and eventually should be paying) and finally how much money you are spending and where you are spending this.
You want to know what your net financial position is and also whether you are currently (or can) be in a surplus or a deficit.
As part of building a solid foundation you’ll also want to review your spending, where does your money go, what financial habits are uncovered that will put your future financial prosperity in jeopardy if they aren’t dealt with now? The quicker this is outlined, the quicker you can move forward.
There are people reading this who are scared shitless about doing this exercise. These are the ones who have preferred to keep their head in the sand while letting bills pile up and their financial situation deteriorates.
Make today the last day you neglect your finances and make today the day you start your plan to become financially strong. Figure out exactly where you stand financially by completing a full financial audit regarding all of your finances.
Build stronger financial habits and set goals
Now that you have a detailed description of where you are currently financially, where do you want to go? This is your chance to dare to dream, to think big. Remember when setting your long term financial goals, do your best to do this from an abundant mindset, from your future financially successful mindset.
If you are currently broke and if you are setting future financial goals from this broke mindset it’s likely these will be very small minded reflecting your current situation. If you take action, set goals and a plan and stick to this you will likely not be broke for too long at all so take this on board and set big challenging financial goals.
Review some of your previous spending or habits and see if these give any hints as to your checkered financial journey so far? How much money were you wasting on goods or services that you didn’t need and only purchased or used to keep up with others? Review these expenses so you can put together a lean budget to live on while you are repairing your finances.
The worse your financial situation, the leaner your new budget will need to be, however remember you won’t be broke forever so take your medicine while you are saving money and repaying debt.
If your financial situation is more dire, reach out to your creditors to get some relief while you rebuild your financial situation. They may be able to reduce or defer the interest due, they may be able to reduce monthly repayments or even defer these repayments for a short period of time to help you rebuild.
Also don’t be afraid to review your larger long term expenses or repayments to see if there are better, cheaper alternatives on the market. An example of this could be a cheaper home or car loan, cheaper energy, phone or internet provider. Reach out to your current providers to see if they have better options available and if not put these expenses to market for potentially better options.
For those wanting more detail regarding putting together a budget check out previous articles on this topic.
Sticking to your new budget and financial goals helps build strong financial habits. By maintaining these habits you will get that much closer to achieving these goals and living your best life both financially and personally.
Earn more income and spend less money
Whilst we recommend that you go through your expenses with a fine tooth comb and set up a suitable budget (if you need a hand to track your expenses, popular apps include Mint, YNAB and PocketGuard. Your financial provider may also have an app or program that can help you track your budget and expenses), the major improvement in your financial situation will come about from increasing the income you earn.
This could be through your job, this could be selling unwanted items to make some money or this could be through taking up a second job or building a side hustle.
The easiest way is to approach your current employer about getting a pay rise. We’ve written about asking for a payrise previously however the main tip is to put together an argument as to why you deserve your pay rise and provided your company is in reasonable financial health, that you have been performing at a high level (and haven’t had a recent pay rise) it’s likely you will be successful.
If you aren’t successful and feel you are unappreciated at your current job then look elsewhere for a higher paying job or apply for a job promotion either in house or at another employer. If a job rise isn’t possible then look to getting your employer to pay for courses or additional education that will lead to a pay rise at your current job or with a competitor.
Alternatively look for a second job or look to start a side hustle. If you have a skill or talent, find something around this. If you don’t have this don’t worry there are plenty of 2nd jobs that you can take up that don’t rely on special skills or education requirements. Examples could be unskilled manual labor in your neighborhood through delivering food or packages or becoming a virtual assistant.