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Creating and using a budget is one of the best ways to begin living a life of financial freedom. But many of you might be thinking, “Yeah ok, that’s great for you – you actually have money to budget. But what about those of us who are struggling just to pay our bills every month? What about those of us who barely make ends meet? How can we budget when we’re flat out broke?”
I hear you. And this post is just for you! If you have any sort of income, no matter how small, you can benefit from a budget! And more than that, a budget can help you improve your financial situation so much that you’ll wonder why you didn’t do it sooner. So take a breath, have an open mind, and read on!
Minimizing your expenses
The first step to living on a budget when you’re broke is to minimize your expenses as much as you can. I know this isn’t always fun, but if you want to get ahead in life, you have to live within your means. And that means not spending more money than you make. Remember, credit cards and loans lead to debt, which may help in the short term, but only leave you more broke in the long run.
Cut out anything unnecessary
You’d be surprised at the number of things you could probably cut from your spending right away. Cable or streaming services are a big one. You can also cut out any subscription services, eating out, and beauty products or services that aren’t necessary. You want to take your spending down to the bare bones to begin with and then add things in as you are able (only if you can pay for them with cash and not credit).
Make use of financial aid
I know that government aid has a bad rap and I totally get it. There are lots of people who use and abuse the system. But when you boil it down, it was established to help people who are struggling. And if that’s you, there’s no shame in accepting help when you need it. However, I am of the firm belief that this type of help should be temporary and is only intended to help you while you work on digging out of a hole. Your goal should always be to use the aid only until you are able to sustain yourself – you should be actively working to get to that point.
Accept help from friends and family
Along the same lines, don’t be too proud to accept help when it’s offered to you by friends or family. You can almost certainly find someone in your circle who can babysit while you work. If you’re looking for clothes or toys, someone probably has some in storage they’d be more than happy to pass along to you. And, in some situations, it may even be ok to specifically ask someone you’re close to for monetary help – though I would use this privilege sparingly and be certain to pay them back as soon as possible.
If you’re really struggling to get by, you might even have a close family member or friend who is willing to share their home with you for a short period of time. If you are ever in this situation, you need to make sure you are making every effort to not only get on your feet again so you can find your own home, but also offering something to those you are staying with for their generosity. Even just a small amount of rent and making sure you (and your children if you have them) are helping with household chores may be enough. It is probably worth writing up a simple contract from the start outlining a timeline and expectations on both sides for your own protection and the protection of your generous family or friends.
Maximize your income
Another option you should consider if you’re really struggling to make ends meet is finding more income. You could do this in a variety of ways. You could start a side-hustle, find a second job, or work for a raise at your current job. Or maybe you could do all three!
There are tons of things you can do from home these days since so much is done online. As much as many people say they hate them, MLM’s (think LipSense, Plexus, Pampered Chef, Avon, etc.) can make a decent income if you work really hard. Keep in mind, though, that many of these companies do require an upfront fee to pay for products and if you don’t make enough sales you could actually end up losing money.
You can also work from home doing transcription, proofreading, freelancing, or become a virtual assistant, for starters. Many companies are now also offering remote positions that only require an internet connection and some basic skills. Search the internet for lots of opportunities!!
Set your priorities
Choosing your top priorities and putting all of your focus on just one thing at a time will help you reach your money goals faster. When you spread yourself too thin by trying to do too many things at once, you never make any progress. Instead, pick your one thing and follow through on accomplishing that task before moving on to the next.
The two most common financial priorities are to become debt-free and to build up your savings. Usually, you’ll want to pay off any debt you have as quickly as possible without worrying about having a massive savings account. But you do want to keep a little in savings in order to keep from adding to your debt while you’re trying to pay it off.
A lot of experts recommend having a $1,000 emergency fund to start with. But if you have a lot of assets, you may want to increase that amount a little. For instance, in my family we have a mortgage, two cars, and two kids – so we’ve decided to bump that amount up a bit since one major problem in our home could easily cost more than $1,000. We want to be prepared as we pay off debt. Some people may be able to get by with less if you don’t have many things to pay for. I recommend keeping at least a minimum of $500 in savings at all times even while paying off your debt.
How to set up your budget when you’re broke
Ok, now we get to the good stuff. Now that you’ve minimized your expenses, maximized your income, and set your priorities, you’ll want to put it all in your budget. First, be sure to include your 4 essentials (food, shelter, clothes, transportation). This will include groceries (eating out is a luxury you only get if you can afford it), rent or mortgage, basic utilities (cable doesn’t count as basic), basic clothing, and basic transportation costs. You should aim to keep this amount to no more than 50% of your income.
Once you’ve got your bare essentials in your budget, put as much as is possible towards your priorities to reach your goals as quickly as possible. For some of you, this may mean the entire remainder of your paycheck will go towards your priorities. Don’t let that discourage you. Digging out of a hole requires some sacrifice, but if you’re willing to work hard and not give up, you will be rewarded with freedom from financial burdens in the end. You should aim to budget at least 10-20% of your income towards your priorities. But the more you budget here, the quicker you’ll reach your goals!
Finally, if there’s anything left, you can put this towards whatever you want! You’ve earned the right to enjoy your life a little. The quicker you reach your goals by sticking to your priorities, the more you’ll be able to budget to this category! You should aim to keep this amount under 30% of your income – although, I’d recommend dropping this amount down to as little as 10% while you’re working on paying off debt or building your savings.
While digging yourself out of a hole is not an easy task and definitely not fun, it can be done. But you have to decide that changing your situation is the thing that’s most important to you. If your heart’s not in it, you won’t make it. But if you buckle down, dig your heels in, and refuse to give up, you will be able to better your life. The first step is just deciding to make it your priority. You can do this! I’m so excited to see what’s in store for you as you embark on this journey to financial freedom!
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