How to never be broke again or poor. What if I told you that, by following these 5 simple steps I could assure you that you can change your life in a minute. Unfortunately as at 2017 78% of all American workers say they live paycheck to paycheck. It’s not just low-wage workers who have this problem.
Nearly, one out of every ten workers making over $100,000 a year. Say they live paycheck to paycheck and 59% of them are in debt living paycheck to paycheck.
It is like being stuck on a never-ending staircase, no matter how hard you try you can never get ahead. Every dollar you make goes into paying bills, leaving you with nothing left to show for all of your hard work. No wonder that 55% of all Americans are in credit card debt with 10% having more than $5,000 balance outstanding.
So if you continue in this financial struggle for years. How will you work towards your long-term financial goals like buying a house or saving for college?
The good news is that the following steps will help you break free from any financial turmoil you may be facing. So that you won’t go back to live paycheck to paycheck again.
Table of Contents
1. Track Your Spending
It just won’t happen; therefore the first step to take control of your finances is to figure out exactly where all your money is going. Believe it or not, most people make enough to cover their core expenses. The reason they struggle financially is because of their discretionary spending. They may not be even aware that such things are going against their finances.
Your first goal is to track down those hidden budget Buster’s and eliminate them. So for the next month, track every single penny you spend from your monthly rent payment to that dollar cup of coffee.
Jot down your expenses in a notebook or use personal finance software like mint to keep track of all of your spending. Make sure to consider your automatic payments and hidden costs to your monthly subscription and Netflix or bank transaction fees. These small fees are sneaky culprits that will drain your savings potential every single month, for those who want to manage their money old-school-style.
Write down your expenses in a notebook instead. Simply seeing all of your expenses written down in black and white can be a revelation. For instance, you might realize you’ve been blowing nearly $30 a month on ATM fees or $50 a month grabbing a snack at the convenience store. On your way home from work, seeing how these nickel and dime expenses are costing you could be enough to shock you into changing your habits freeing up passion.
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OK let me show you the next tip among this list of “how to never be broke again”.
It is my favorite way of managing my money so I strongly recommend you get used to it…
2. Make Budget To Avoid Being Broke
Once you know where all your money is going every month, you can then use that information to make a budget. When it comes to the format of your budget, some people will prefer to write their budget down on paper while others will lean towards tracking using software like Excel.
Either way works but the main thing is that you update your budget and stick to it. I told you that, these were 12 simple steps to show you, how to never be broke again. So let me share with you two of my favorite budgeting methods before we move to the next tip.
1. 20,30,50 method
This budget method works in the following way, every month, divide your income with 50% being designated towards living expenses like rent utilities and groceries. The next 30 percent goes towards entertainment costs like going out deed or seeing a movie. The final twenty percent is meant to go right into your savings account unfortunately not everyone wants to break down their expenses to this level which is why I want to share with you.
2. 80, 20 method
What I find to be the easiest budgeting method ever invented. If you’re unfamiliar with this method here’s how it works. 80% of your income goes towards your living expenses and the other 20% goes towards your savings every month. It’s that simple just make sure to include annual expenses like property tax payments and gym memberships into your budget in the appropriate months.
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The next hack on how to never be broke again is…
3. Cut Down Expenses
Now that you have set up a budget, it’s time to optimize your potential to make sure you are now intending on saving 20% of your income every month. What if you could save more to make room in your budget for more savings? You need to look for other things you can cut. There are two main types of expenses in your budget; fixed and flexible.
Fixed expenses are costs that are the same every single month, such as your rent or car payment.
Flexible expenses are those that vary from month to month such as gas and groceries.
To save as much as possible, you need to look at both these types of expenses. Flexible expenses are usually easier to cut since they don’t require major lifestyle changes. However, you can often find greater savings by cutting back on fixed expenses, since these are some of the biggest items in your budget.
For instance, finding an apartment that costs $300 less a month will help in the same Department much more than cutting out a few coffees a month. Once you’ve found some big savings opportunities in your day-to-day life to increase your savings. I established my own money-saving mindset, I would use a stranger test for every purchase. I was considering if you’re unfamiliar with this money-saving trick.
You should pair this excellent work with the shift in your savings mindset. From this point, whenever you consider buying something ask yourself, do I really need it? When I was
Let me explain how it works. Every time you think about buying something; Picture of strangers standing in front of you, in one hand they have the item you want to buy. On the other hand, they have monetary value in cash. Which would you rather have? In most cases, cash is probably more appealing. When taking this approach on a regular basis, you’ll start to see yourself continuously picking the money over the item which solidifies your position and not splurging and instead of keeping that money in hand.
Okay, let move on to the next tip on how to never be broke again.
4. Boost Your Income
For most people, cutting expenses is the easiest way to boost savings. However, if you’re already living on a shoestring budget, there’s probably not much you can cut. In this case, the best way to save more money is to make more money. There are two main ways to do this: earn more at your job or find ways to bring in income on the side.
Let’s start by looking at a few ways you can increase the income you earn through your job.
1. Our first glance to earn more Money
It may not be obvious how you can increase the income you get from your job. However, if you look carefully you’ll find that there are actually several ways to give your paychecks a little boost.
For instance, you can offer to work more overtime if you are allowed for it. You can demonstrate to your boss that you are doing a good job and pitch him or her on the fact that you deserve a raise.
In the same way, you can look into other opportunities within and outside your company for higher-paying roles. Maybe you don’t think any of these methods will help increase your incomes, then we have to move on to outside sources of income to boost your earnings.
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2. Our Second glance to earn more Money
One of the ways to supplement your nine-to-five income is by picking up a second job. While holding down two jobs at once is demanding if you can manage it even for a short time. It can give you the extra cost you need to pay down some debt or get your emergency fund started.
Another great option is to start your own side business. You already have to listen to your boss for eight hours a day so why not be your own boss, while also supplementing your income? This can come in the form of freelance work, a YouTube channel, or driving for Uber or lift.
However, if you can fathom working even one extra hour a week, then renting out a room in your house is another way to increase your income. Whether you do this by taking on a long-term tenant or renting out a room on Airbnb, leveraging your property to earn you some extra cash is a great way to kick start your savings efforts.
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5. Put Your Money To Work
This is a top way among this list of “how to never be broke again”. Once you’ve found ways to set aside more money in your budget for savings. You need to start putting that money to work for you.
If you simply leave it sitting in your savings account, it won’t earn much interest. The average savings account yields just 0.09% interests annually which means that, even if you have $50,000 in savings, you’ll earn a measly $45 interest.
So where should you put your money instead?
Common investment vehicles include equities and real estate which have historical average returns of 6% and 8.4% respectively. So with that same $50,000 we just talked about, you can instead be earning anywhere from 3,000 to $4,200 instead. But maybe picking stocks to invest in or being a landlord doesn’t appeal to you. Don’t worry there are other investment vehicles you can use to grow your wealth.
Some of the most commonly used investment vehicles include Roth IRAs and 401ks and if you’re unfamiliar with them let me briefly explain how they work.
With a Roth IRA, your contributions are taxed when they’re made. So you can withdraw the contributions and earnings tax-free once you’re age 50. This is important because whatever amount this account accrues to overtime, will be the exact amount you’ll have access to when you withdraw it and similar to a traditional IRA.
A Roth IRA has an annual contribution limit of $6000 a year or $700 for people of age 50 or older.
A 401K on the other hand is a retirement plan that is offered by employers which allow employees to realize tax advantages when used. You see normally when you were in money as an employee you have income taxes withheld on the money you earn. A 401k plan allows you to avoid paying income taxes in the current year on the amount of money that you put into the plan.
The amount you put in is called a salary deferral contribution as you’ve chosen to defer some of the celery urine today. Put it in the plan and save it, so you can spend it in your retirement years, then upon retiring you will draw out the amount of money you need to live from the plan which will hopefully be at a lower tax rate than you would have incurred when working, allowing you to save tax overall once.
You have one or both of these funds set up, you then need to ask yourself how involved you want to be in the investing process? If you want your involvement to start and end with a deposit into your account, then using a Robo advisor to manage your investment portfolio as a way, go is really good.
Alternatively, you can self-manage your fun by choosing the specific funds you want to invest. In either way the main thing is that, you start letting your money work for you.
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6. Focus on Building Passive Income
Warren Buffet once said “If you don’t find a way to make money whiles you sleep, you will work for the rest of your life until you die” This is true because there is a big difference between those who focus on building passive income and active income.
Whiles you can keep earning from passive income with no work. Active income will make you broke if you don’t work. It just means no work, no gain. So if you really don’t want to be broke again then consider building a passive income. I have seen almost 99 tips to never go broke again in many sources and I wonder why no one talks about passive income.
But it is the best alternative when it comes to building wealth. For you to understand what I mean here just look at this example.
Mr. P and Mr. A are very good friends who work in different channels. Whiles Mr. P focuses on passive income Mr. A is more interested in building active income. Currently, Mr. P has made a lot of investment which can provide for all her needs for the rest of his life in case he loses his current job or go on retirement.
Because Mr. A doesn’t know the value of Passive income he keeps living pay check to pay check without thinking about investment or savings.
These two friends grew old to an age where no company will employ them again because they were too week for any job. Whiles Mr. P comfortable lives on interest on his investment. Mr. A begs for money on the street before he can get something to eat.
So tell me, what made Mr. A broke? Active income right? Yes, that is what will happen to all those who focus only on active income without thinking about passive income.
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7. Avoid Impressing Others
This is a very bad attitude that most people are into right now. I actually don’t know what is wrong with them.
But tell me, does it really make sense to look like a rich man in the eyes of others while, in reality, you are poor?
It does not make any sense at all. Many peoples live their lives according to other people means which is a bad thing. You are who you are, you need to be by yourself and live according to your own means. I can truly tell you that, most of the people you see on the street with fancy cloth and vehicles most of them do not have even $100 in their bank account.
They just live on debt, and instead of them to focus on building wealth for themselves they just live on other people’s means. They go for loans or use their past 20 year’s earnings to purchase a car just to impress others. I actually don’t know how these peoples will survive if they get fired in their jobs.
Impressing others with your 20 years hard earning is really bullshit. Don’t be like these peoples ok; they actually don’t know what they are doing. They prefer to be seen as riches but they don’t know they are digging a poverty hole for themselves to fall in.
See, if you really want to be financially independent and never go broke again then you need to get rid of this habit if you are already into it. Because not only will you be poor in the future, others will disrespect you too.
I don’t know what to say about this again for others to get the lesson in it. So let move on to the next step I have been waiting for.
This is not just a guide on how to never be broke again. No, if you master it and stop impressing others you will be successful in no time.
- Related The Key To Success
8. Buy Assets
So what is an asset actually? To define it in a way that you will better understand it I have to consider explaining it together with liabilities. So let look at the definition of all the two.
Asset is anything that put money into your pocket.
Liability is anything that takes out money from your pocket.
Is that simple and I know you have just chosen what you want among these two (Assets and Liabilities). Most peoples buy items that do not have any value in their life. An example includes buying 20 TV and placing them in a single bedroom while you live alone. A lot of my friends have been doing this and what they get from it is just a compliment when someone visits them! Hey, wow you have so many TV’s this is great.
Yes, it looks great but remember you will only watch one at a time. So what will you get from the other 19? Waste of money.
Instead of buying liabilities consider buying more assets which will put money in your pocket month after month. There shouldn’t be any limit to the number of assets you can buy in your life. Remember the more assets you have the more money you make.
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Among all this guide on how to never be broke again.
Below is what i really want you to pay much attention to…
9. Be financially illiterate
Do you know the main reason why most people with low monthly earnings becomes successful than those with high monthly income?
They say knowledge is power because if you are with the right mindset of building wealth, no matter how much your current earning. You will apply your knowledge to double it. Financial education is a great knowledge that always pays the best interest. Most people think acquiring such education is much expensive. This is not true because you can actually learn it yourself without being thought by others.
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It is true most people learn about finance in schools but this is not the only option out there. In fact, I can tell you that I have learned much more about money myself than what I was thought in school. How did I do it? It simple, there are thousands of books out there about finance that you can buy and begin learning it. No need to enroll in school.
Final Thought on “How to Never Be Broke Again”
In short, if you really want to become rich or financially free and never to be broke again. Then apply the various I have listed above. Remember what I always say “Get the Action Habit”. Also, don’t forget to comment below on any idea you have in mind that I couldn’t add.