Money is one of the biggest stressors for Americans; there are hundreds of surveys out there that reflect this. I would hazard a guess that it isn’t the rich people worrying about how they’re going to make their next billion, but instead the poor people worrying about how they’re going to pay rent this month.
You won’t find a magic word or a cheat code that’s going to get you and your family out of poverty in this series. There’s no get-rich-quick scheme here. Instead, I’ll offer some suggestions on how to tackle your financial obligations and make decisions in a way that’s going to put you on track to exit poverty, or at the very least, increase your net worth. You’ll often hear people say that “poverty is a mindset.” I find that phrase offensive. A lot of people are living in poverty due to circumstances completely outside of their control. A single mother of three with no degree doesn’t have a lot of options for a sustainable income. Putting the blame on their mindset is patronizing and demeaning. With that being said, your attitude and approach to your finances can absolutely make a difference in your financial situation, and although your mindset is secondary to your income level, it’s still a factor.
As a disclaimer, this is not at all financial advice. These are just some lessons that I have learned in my life, often the hard way, that I’m hoping will help you on your financial journey. I absolutely advise you to visit with a financial advisor to get a plan for yourself that’s tailored to your needs and your financial situation.
Making a budget is a crucial first step in achieving your financial goals. Whether you’re making four figures or eight, everyone needs a budget. There are a ton of free apps for your phone that will automate most of the process for you. However, I recommend keeping an old-school budget using pen and paper. For me, writing things down helps make them more concrete. It’s one thing to scroll through an app and see all the money you’ve spent on fast food, but it’s another thing to write down in your ledger that you just dropped $10 on burritos. The best thing about a personal budget is that it’s personal; you can make it however you want to. The only person that budget is going to benefit is you, so feel free to do it in any way you like. As long as your tracking your income and your expenses, you’re doing it correctly.
If you’ve never made a budget before, don’t worry about planning your expenses for the first month or two, just track your spending. Write down or log every dollar that you spent, the day you spent it, and what you spent it on. At the end of the month, you will have a decent idea of where your money is going. Be sure to log all the income you receive, too.
Once you’ve tracked your expenses and income for a month, you can start to plan out the next month, then the next, and see where you’ve got some wiggle room.
You will always be poor, or at least not as wealthy as you could be, if you don’t have at least a basic budget.
There are tons of benefits to having a budget. For me, the biggest benefit is knowing exactly how much money I have to “waste.” When I say waste, I mean spend on things that aren’t either essential to living or income growing. It’s healthy sometimes to waste money. Treat yourself. It’s good for you psychologically. Sure, you probably don’t need that Blizzard from Dairy Queen, but you can’t put a price on your mental health. The key is being able to balance out frivolous spending with your income, and that’s exactly what a budget can help you do.
Another important benefit of a budget is for planning purposes. With a budget, you’ll be able to predict your regular expenses, like your rent and groceries, further into the future. This will help prevent you from getting into unexpected financial binds.
Next, we will talk about saving. There are a bunch of different methods for saving money, and I’ll run you through some of my favorites when the time comes.