Improve your finances when you are broke Improve your finances when you are broke

Become an expert: Tips and tools to improve your finances when you are broke

If you are constantly struggling with money, you need to know you are not alone. Have you ever wondered why, though? 

Are you broke because your job doesn’t pay enough? Is it because you’re living beyond your means? According to the World Bank, a large number of people can barely survive through the month, so it is worth taking the time to determine why you are broke —and what to do to about it.

Here are 5 of the most common reasons why people are usually broke:

1-    Reduced income

You might not be getting paid accordingly, but chances are that you are also living beyond your means. It is important to adjust your lifestyle so it matches your income, even if it means moving to a smaller apartment, disposing one car or taking up a second job.

2-    Medical bills

A Harvard Study shows that 62% of people filing for bankruptcy are facing huge medical bills. And it was not only an issue for those without medical insurance, part of that percentage had insurance but their bills exceeded their limits. A great way of minimizing medical bills is by choosing the right coverage for you and comparing different providers.

3-    Student loans

A lot of people don’t take repaying student loans seriously enough. Defaulting a student loan can create bigger problems along the way, because it will directly affect your credit score. The best way to avoid issues here is by repaying the loan as soon as you start earning money.

4-    Credit card debt

Credit card debt is probably the most expensive type of debt you could have. A great solution to this problem is consolidating your debt in order to save some money, considering the overall cost of repayment.

5-    Costly housing

Most people spend 30% of their income on housing alone. Experts suggest you should find affordable housing, meaning your payments (whether it’s rent or mortgage) do not exceed 20% of your paycheck. If you live in a very expensive city, consider getting a roommate and splitting the rent and the bills.

Top reasons why people fail at budgeting

Have you ever created a budget that you soon struggle to follow? Do you feel that budgeting is very restrictive? You are not alone. Here are some insight about budgeting that might help.

It is really frustrating to feel like you fail at budgeting. For starters, when we put a lot of thought to make the most out of our income and plan ahead so we can make payments, save and have some fun, we want that plan to work. However, sometimes it fails. 

There are three common mistakes that most people make when it comes to budgeting:

Creating a budget for a “normal” month

You probably know what your fixed expenses are and, maybe, you’ve been budgeting for those normal spending you know you have every month. But then, you have an unexpected expense and you get frustrated because you can’t follow your budget. Actually, if you look closer, you will find out that these “unexpected” expenses that keep appearing month after month are not that unexpected.

Identify your random non-monthly expenses, make a list and assign an amount to each one. Add up all the amounts for one year and divide the number by 12. Set aside that amount into a separate savings account every month. This way, you have your stash for whenever these unexpected expenses pop up.

Forgetting fun

Every good budget includes a fun factor. You can’t live your life without spending a little money on yourself, so don’t feel guilty for that. The best you can do is include in your budget three big categories: money for expenses, money for goals, and money for fun. 

This is also a good way of keeping yourself within your budget for longer, because let’s face it: if month after month you feel deprived, you are likely to drop any financial planning attempt and that is, ultimately, a bad idea.

Tracking every single penny

This can be exhausting and time-consuming. Instead of going down this road, a simple approach is dividing your expenses into two big groups: fixed and flex.

Fixed expenses are going to take up the same amount of money each month and usually, you can’t stop paying them: bills, rent, subscriptions, etc. Again, it doesn’t matter if they are mandatory or just because you want to pay for them, your Netflix subscription can be a fixed expense if you can’t do without it, and that’s ok.

Flex expenses, on the other hand, are those that require a bit of an active decision: where you buy your groceries, where you buy your clothes, etc. These things can have an impact on your budget, so plan accordingly and adjust as necessary.

How to optimize your budget during the economic slowdown

During this global pandemic, economy is shifting in a way that deeply affects everyone’s finances. Here are some tips that will help you optimize the way you spend your money.

In times like this, there are a lot of things that we can’t control. But there are some we can and we should keep an eye on. The way you spend your money is one of those things. Here are some tips for you to make the most out of your budget.

1-    Look for coupon codes

Online shopping is at its peak since the pandemic broke out. Some popular websites for online shopping will let you use coupon codes to save money while purchasing. Try RetailMeNot, SlickDeals and Hip2Save.

Browser extensions are a useful resource for you to save money while shopping online. Once you install one, it will automatically find and apply discount codes from different retailers. There are many options available, such as Cently, Honey and Wikybuy 

2-    Use shopping apps that offer rewards

There are a lot of apps that offer cash back or gift cards when you shop, such as ibotta, Drop and Shopkick

If you usually shop at a particular store, you can also download the store app, if available. This will allow you to keep an eye on their discounts and promos.

3-    Track your spending

See where your money is going and adjust as necessary. There are many apps that will allow you to keep an eye on your finances  Sometimes, it can be scary to do this, but if you know how you spend your money, you know how to make the most out of it.

4-    Save the difference

Save as much money as you can, it doesn’t matter how much it is. If you saved money on groceries, put the difference in a savings account. This way you make sure that you are actually saving money and not just spending it on different things.

When times are hard, you don’t need to panic. Try to adjust your spending habits and optimize your earnings!

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