It is never fun to live paycheck to paycheck and struggle between knowing if you have enough money to pay for both food and rent. What’s even more frustrating is when you tell people that you’re struggling financially and they give you generic advice like “just save money” or “stop eating out” because that’s not helpful at all.
Here are five real and meaningful ways for how you can save money when you are broke to help you learn how to become a better saver.
1. Track Your Money
The only way you’re ever going to control your money and start saving is to know where it is coming from and where it is going. For some people, once they finally pause and take inventory of their budget, they start to notice patterns and trends that can be changed to save money. But before you can make any changes, you need to know how much you are making and spending every week and every month.
2. Minimize and Maximize Your Budget
Once you understand the flow of your budget, it’s time to alter it. This is where unsolicited advice is the worst because what works for one person might not work for you. Sure, someone else was able to cut out every single subscription service they had, cut the cord so they no longer have cable or internet, eat nothing but lentils, and wear only second-hand clothing, but that quality of life isn’t for everyone.
A better option is to investigate your spending habits, see which sacrifices you are willing to make, and also look into small ways to decrease your budget at the same time.
Start With the Big Things
Rent, debt, bills, and food are usually the biggest parts of any budget. Reducing those big costs by even 1% is going to be more impactful to your savings than focusing on smaller costs. Rather than focusing on getting rid of small spending habits that won’t make large waves on your budget, start by figuring out where you can make even the smallest reduction in the biggest pieces of your budget.
This can mean making big choices like moving to a place where rent isn’t as high or talking to debt collectors to see if there are any reductions or deals available. But even a small change in these big-ticket items will lead to meaningful shifts in your budget.
Explore How You Can Earn More
Cutting costs is only one part of saving money. You also need to consider what you can do to earn more. It doesn’t have to be a second or third job, but every small hustle you have to earn a bit more money will help you save.
For example, one of the most common pieces of advice you will see online is to cut all of your streaming subscription services. Rather than thinking you have to cut the $9 Netflix subscription fee, consider what it would take to earn $9 a month. Something as simple as mowing a neighbor’s lawn or babysitting for one night can easily cover your Netflix subscription and help you save a little bit more.
3. Get Out of Debt
Debt ruins any savings you have. Before you start focusing on any amount of serious savings, focus all of your efforts on paying off all of your debt. The sooner you get out of debt, the sooner you’ll be able to really start saving.
You’ll hear many people talk about the compounding interest of savings and how you can grow your wealth dramatically through regular contributions to an investment vehicle like a Roth IRA, 401k, or the stock market. But the opposite also works for debt and the massive interest rates that come with them. Consistently buying things with credit and going further into debt only leads to having to pay off that debt for years to come, and spending much more than the original cost due to interest fees.
One method of paying off debt is to use the debt snowball. First, stop making any more purchases on credit. If you can’t afford it without debt, it’s not time to buy it.
Next, you figure out how much you spend on all your debts and rank them from the least amount to the highest amount.
For the third step, you make minimum payments on all of your debt, except for the smallest amount. The smallest amount gets the minimum amount plus anything extra from your monthly budget. Once that smallest amount gets paid off, take everything you were spending to pay off that debt and move it to the next smallest debt.
As a simple example, let’s say you had only three debts with minimum monthly payments of $20, $50, and $100 but had an extra $5 in your monthly budget. You would start by paying all of the minimum payments but add that extra $5 a month to the smallest debt, making payments of $25 instead of just $20.
Do that until the smallest debt is entirely paid off. Once that debt’s gone, take that $25 a month you were using to pay the smallest debt and transfer it to the second debt. This means you’d make payments of $75 instead of $50. Again, do this until the second debt is paid off in full, and then continue the snowball and take the $75 a month and add it to the final payment of $100, for monthly payments of $175.
Once you’ve paid off the final payment for the last debt, that means you can finally save $175 a month without affecting the budget you’ve always had.
4. Stop Comparing Yourself to Others
Budgeting and managing your money isn’t just about the cash that is spent; it’s also about your mentality.
Keeping up with your neighbors is pointless and unhealthy. If you feel like you have to make a purchase or go into debt because that’s what is expected from you, you need to seriously rethink that purchase.
Living within your means and getting out of debt is always a better option than putting yourself in a bad financial situation.
5. Be Patient
It’s important to learn how to be patient when saving money. The best way to save money is to consistently add to your savings and to let your savings sit undisturbed.
It takes years of consistent effort to build up your savings, but it only takes one impulsive purchase to ruin it all.
Be patient, and let your wealth grow at its own speed. As long as your savings are growing, you’re headed in the right direction.
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