Many of us have been in this place at one point or another (or frequently), and it can be scary — even terrifying. You can’t go out with your friends because you just can’t afford it. You can’t spend money on anything at all. You’re not even sure you can even make rent or buy groceries. So, what do you do?
First, take a deep breath and remind yourself you’re going to get through this. Perhaps you’ve been in this place before. Chances are, it worked out okay. Money isn’t everything, but you do need it to live your life. Remember: there are solutions to this crisis.
What do you do next? Here’s how to resolve the situation and get out of your financial hole.
How to know if you’re broke
If you’re broke, chances are, you know it. However, some people might see a crisis where there isn’t one, while others let it sneak up on them.
1. You live paycheck to paycheck.
According to a survey conducted by CareerBuilder, 78 percent of Americans are living paycheck to paycheck, meaning they have limited savings and immediately spend the money they earn. This crisis reared its head in January of 2019, when roughly 800,000 federal workers many of whom were living paycheck to paycheck with additional revenue — had no source of income during the government shutdown.
2. You obsess over who owes you money and the exact amount of damage.
You spotted your friend that one time, and she better pay up soon. If you weren’t in dire straits, it probably wouldn’t matter — you might even forget about it or figure it all evens out in the end. But when you’re broke, every penny counts. Your relationships are starting to suffer because of it, because friends feel like you’re nickel and diming them.
3. You’re in debt.
You have mountains of serious debt — credit card debt, student loan debt and personal debt. And it continues to grow. You worry about debt collectors calling; even if they haven’t started yet, it could be right around the corner.
4. Your bank account is overdrawn.
Now, in addition to being in the red, you have to pay overdraft fees you can’t afford. (A word to the wise: Stop using this account immediately. You’ll only do more damage to financial health and credit score.)
5. You can’t maintain your lifestyle.
Instead of getting drinks with friends or going out to eat, you stay in on weekends because you just can’t afford to spend money on the nonessentials (and maybe even the essentials). Meanwhile, your eating habits have taken a turn for the worse because ramen is cheaper than fruits and vegetables.
6. You have no savings.
Your paycheck goes straight to rent, and you haven’t even started a savings account. You think maybe sometime in the distant future you might be able to put some money away, but that day might never actually come.
7. You’re well-versed on all the discounts.
Fifty percent off means you’re saving money, right? No, it doesn’t. If you’re spending money, you’re not saving it, even if it seems like a really, really good deal.
8. You worry about money all the time.
No matter what you’re doing, you’re thinking about money. Perhaps the debt you’ve accrued is all-consuming, or maybe you’re just not sure if you can make rent next month. It’s always there in the back of your mind (or the front): “I’m broke.”
X reasons why you might be broke
So, why are you broke? Every person is unique and has different habits, of course, but here are some ideas to explain why money is tight — or nonexistent.
1. You don’t budget.
The fix: You really need to start budgeting so you know how much you can afford to spend comfortably. There are many tools at your disposal. Try out one of these money management apps to help you get started.
2. You don’t earn enough money.
The fix: TIme to speak up and ask for that well-deserved promotion! When you do broach this topic with your boss, you should discuss your qualifications and leave money out of the conversation — you’re not going to be promoted because you’re broke, and bringing up the issue won’t sit well with your boss. Or, if there’s no raise in sight, consider getting a side hustle.
3. You have trouble turning down invitations (because of FOMO).
The fix: Time to learn how to say “No.” Maybe you really want to go out to dinner with your friends, but until you start saving money, you’ll need to find a way to politely decline at least sometimes.
4. You only buy name-brand items.
The fix: Is there an actual difference in the quality between name-brand items and the rest? If not, consider buying the store-brand, which is generally significantly cheaper and of the same quality. For example, drugs must contain the same chemicals, so there’s no need to buy Advil when you can get the Rite Aid version for a much lower price.
5. You blame others for your money woes.
The fix: Just don’t. The blame game never goes well for anyone, and you could ruin relationships by not taking responsibility for your problems.
6. You buy things impulsively.
The fix: Make sure you really want something before you put down your credit card. Wait a certain amount of time (such as two weeks) before letting yourself buy something you don’t need. You probably won’t even want it anymore.
7. You’re disorganized.
The fix: If you can’t remember if you paid off your utilities or rent, create a spreadsheet to keep track and ensure that you don’t miss crucial payments.
8. You only pay the minimum on your credit card bills.
The fix: This is a bad habit that will put you into further debt. If you can’t pay off your credit cards in full, don’t use them until you can. The bottom line is that you shouldn’t be spending money you don’t have.
9. You’re lazy.
The fix: Do you drive to the gym because a 15-minute walk is too much? That gas is costing you. Consider walking instead — it’ll take on another 15 minutes to your workout! (Adapt this scenario to other aspects of your life, and the general principle stands.)
10. You don’t have an emergency fund.
The fix: Start cutting back. Set aside a small percentage of your paycheck every month until you have a money pot to help you get back on track if something goes wrong — and that includes being broke.
11. You hide from your problems.
The fix: If you don’t know where you stand money-wise because you’re too scared to look at your balances, it’s time to take a good hard look at yourself — and your finances. Bite the bullet and just look. Knowing is the first step toward solving your problems and you’ll be relieved to at least have the information.
12. You spend money you don’t have.
The fix: You’re expecting to get a bonus next money. You’re anticipating a huge tax return. But until you actually have the money in your hands, do. Not. Spend. It.
13. You buy what you need at a given time.
The fix: Buy in bulk. It’s generally cheaper to buy 12 rolls of toilet paper than one. Plus, you’ll save yourself a trip to the drug store and avoid spending gas money.
Where can I get money when I’m broke?
If you’re broke, how can you make money quickly? Here are a few ideas.
1. Sell your stuff.
Chances are, you don’t need or even want everything you own. Gather together clothes, books and knickknacks and bring them to a thrift store, have a yard sale, or sell them online through eBay, Amazon or another venue.
2. Get a side hustle.
Babysit or pet sit. Secure some freelance work. Mow a neighbor’s lawn. Work at your local Starbucks. There are many ways to pick up extra cash by doing a little extra work. Check out some of these ideas, too. It’s also a good idea to sign up for freelancer marketplaces such as Upwork, Fiverr and Freelancer.com to find work matching your skill set.
3. Rent out your room.
Being an Airbnb host comes with its stressors, but it’s a great way to make some money without having to put in a ton of time.
4. Maximize credit card benefits.
It’s not a good idea to have more credit cards than you can keep track of (that means probable debt and missed payments), but having a few that offer great benefits can save you money in the long run. For example, if you travel frequently, get a credit card through an airline to rack up miles and other benefits.
5. Take surveys online.
Taking surveys requires minimal effort. Make sure the sites you’re using are legitimate — some good options are Swagbucks and Opinionsquare.
Become a driver for Uber, Lyft, Via or similar platforms. You can do this part-time to earn some extra money, and some people even make it a full-time job. Rates vary, so make sure you do your homework and find out what payment is like in your city.
7. Return what you don’t need.
If something still has the tag on it and you know you’re not going to use it, return it. You clearly don’t need or want it.
8. Do random tasks.
Sites like Amazon MTurk (Mechanical Turk) let you complete random tasks from the comfort of your own home. Or, if you have certain skills, check out TaskRabbit and help people with moving, handiwork and more.
9. Create something.
Are you a crafter? You can make money selling your work on Etsy or at craft fairs. You can also sell artwork and even digital items (if you have graphic design skills) such as logos.
10. Teach others.
Do you have a unique skill? You can give private or group lessons on topics such as art, music and sports. This is a great way to do what you love while earning money.
11. Borrow money.
If you’re so broke that it seems impossible to pull yourself out of the hole, and you’ve tried the above ideas to no avail, it’s time to bite the bullet and ask for a loan. It’s difficult, embarrassing and sometimes painful to ask friends and family members to loan you money, but chances are, they’ll want to help if they can. Explain why you need the money and work out a plan for paying it back. (Of course, you absolutely need to pay it back.) Make sure you ask politely and express gratitude for whatever they can do to support you — as well as understand if they can’t.
How to avoid being broke in the future
Being broke is can be a terrifying place, so once you’re back on your feet, it’s important to take steps to ensure you never end up there again. To prevent it from happening repeatedly, you should:
• Set up a savings account and contribute a percentage of your paycheck to it every month.
• Create an emergency fund with at least $1,000 to help you out of difficult situations.
• Budget, budget, budget. (Here are some tools to help.)
• Keep track of everything you earn and everything you spend.
• Prioritize your spending, focusing on essentials. (Consider the 50/20/30 plan.)
• Ask for help from people who know how to manage money. (There are also plenty of great blogs, podcasts, books and more that offer expert advice on personal finance.)