Barely making ends meet and struggling to provide for just the necessities can be exhausting. When you are in that situation, it may seem difficult to find a way out, especially when you are living from paycheck to paycheck with nothing extra left to try to fix the situation.
Follow these five steps to take control of your financial situation.
You may think that you don't have enough money to budget when you are counting every penny, but you're wrong. Budgeting is planning how and when you are going to spend every penny. In short, it means that you know where you are going to spend your money before it comes.
Budgeting allows you to plan for expenses in advance and to start to put money aside for the bigger expenses that may come just once a year. When you are budgeting, you can also track your spending trends. That can let you choose areas where you may be able to reduce if you need to cut back or save for a long-term financial goal, like an emergency fund.
A successful budget will also give you the information you need to help you manage your money more wisely. It can also help you identify your problem areas; you can change strategies and find ways to save on those specific expenses.
Follow these five tips if you are tired of being poor and want to turn your financial situation around.
Find Ways to Earn More
If you are not making enough at your current job to cover your necessities and save money, then you need to find a way to increase your earnings. That may mean taking on a second job to help you catch up on your overdue bills.
It may also mean looking at a long-term career change that will allow you to make more money. Going back to school for additional training is a good option. If going back to school does not appeal to you, look at jobs in your field or a similar field that offer higher pay.
Some trade jobs offer competitive wages and have better job security than traditional jobs that college graduates take.
Explore your options and consider changing your employment situation to earn more money.
Make Saving a Priority
Start saving money now. There are two ways you need to focus on saving. First, put money into a savings account that you will not use except for emergencies. That is called an "emergency fund." You may start by putting aside but $20/week. That is as simple as eating at home one night a week or skipping the movies.
Over time, you should increase your contributions, until you have an emergency fund that will cover between three and six months' living expenses. That is your safety net. Here's why you need one: It is easier to make financial decisions when you know you have money in the bank to cover emergencies.
Second, focus on finding ways to save money on the things you already do. Look for coupons and deals for your area. Do not pay full price for something and check at a few different stores before you buy something. Save money by eating in or joining a club store to get better deals on food and other household items.
Smartphones make it easy to price shop once you find something to make sure you are getting the best price on it.
Stop Using Credit Cards
If you want to stop being poor, you need to stop creating debt. The first step is to stop using your credit cards. The easiest way to do that is to stop carrying them with you. If they are at home, you cannot use them when you go shopping.
An emergency fund can help you stop using them because you will have money to cover the unexpected expenses rather than falling back on your credit cards.
Get Out of Debt
You cannot begin to build real wealth when you are paying more in interest than you are earning in interest. If you want to change your situation, you need to take the steps that will help you get out of debt.
First, make a plan to get out of debt. Once you have your budget set up, you can begin looking for extra money to pay off your debts each month. As you pay off one debt, take that money and apply it to the next debt on your list. Once you are debt-free, you will have more money available to start building financial security.
Frequently Asked Questions (FAQs)
How do I know whether I'm poor?
If you want to know how your financial situation stacks up against your peers, you can use poverty guidelines as a benchmark. The most commonly used poverty guidelines are set by the U.S. Department of Health and Human Services (DHS), except for Alaska and Hawaii, which each have separate federal poverty guidelines.
How many poor people are there in the world?
According to the most recent World Bank data, roughly 9.3% of the global population lives under the international poverty line of $1.90 per day. However, these figures haven't been updated to reflect the impact of the COVID-19 pandemic. The pandemic is expected to significantly increase the number of people facing financial insecurity.