What to do if you are broke

Today we are going to talk about what you should do if you are broke.

I’m not going to be tell you to start a shopify store or go buy bitcoin or give you one definitive solution, because there is no such thing as a definitive solution for what you should do to make more money and not be broke. Understand that there is no one-size-fits-all approach to improving your financial situation. If someone is telling you how to get rich, why would they be telling you if they could just do it themselves.

I know many people prey on the vulnerability of people who are in a poor financial situation and I just want you guys to keep that in mind.

If you’re in a bad financial situation, maybe you’re seeing ads for business opportunities. Do your research and due diligence. Understand that most of the time they are gimmicks or they don’t work as portrayed

If you’re broke you are in one of these situations:

You probably have zero dollars of positive cash flow each month.
That means that your income is equal to your expenses.

Believe it or not, that’s not the worst situation you can be in

If your expenses are exceeding your income, then you’re going into debt and my guess is if you’re reading this you are either living paycheck to paycheck or you have very little savings and you want to figure out how to make more money or save more money with the end goal of improving your financial situation.

DEFENSIVE APPROACH

This is simple:

If your income is equal to your expenses and you want to generate a positive cash flow, whether it be to have more money in your savings account or a rainy day fund or have money to invest or start a business, the first thing you can do is cut down on your expenses. I call that the defensive approach, because at that point its like pinching a penny out of a dime. You can save money, clip coupons, buy food that’s on sale. But you can only go so far with this approach.

When I was 15 years old, my parents had just gotten divorced and my mom didn’t have a lot of money. I had to help her with this defensive approach because we didn’t have much. We didn’t have enough to buy all the groceries we wanted, so I helped her clip coupons. We bought groceries that were on sale because we were following the defensive approach. Now that worked for us at the time. We were able to have enough money to pay rent, utilities and bills. You can only go so far with that as far as savings go.

I compare this approach to shrinking down and hunkering down, its like there is a problem but you are avoiding it. The main problem is you don’t have enough income. So I want you to focus on that. The very first thing you should do before you work on your income is to cut down on those discretionary expenses, maybe stop buying name brand groceries, clip coupons like I did with my mother, and do what you gotta do. That’s the first thing you guys should do.

OFFENSIVE APPROACH;

Run towards the problem instead of shrinking down. Increase your income!

That could be continuing education, starting a business, starting a side hustle, or getting a part time job on top of your normal job. The best thing you can do is run towards the problem and fix it.

I imagine the main problem for most people is the income. It will be different for everyone. Some people have the ability to work more hours, some people are more ambitious. Some people will get a part time job and maybe work during the holidays, whatever it is for you just figure out how to make more money.

BEST APPROACH = DEFENSIVE & OFFENSIVE APPROACH

Increase your income while decreasing your expenses, which will increase your positive cash flow. The best way to do that is to attack the problem from both sides. Two problems = not enough money and too many expenses.

Maybe you will read this and hope I tell you the next million dollar idea or how to go out there and make money for very little effort and if I did that I would be very dishonest.

Broke = when your income is equal to your expenses.
In Debt = when your expenses exceed your income.

The very first thing you need to do is figure out these numbers.

So many people have no idea what their expenses are, so the money is just flowing out of their account because they have no idea where its going.

  • Identify what your expenses are
  • Figure out what your positive or negative cash flow is.
  • How can you improve this

Figure out how to make more money, save more money, and then take the positive cash flow and invest into stocks and index funds and as a result your money is going to grow into more money. The end goal should be to figure out how to get out of making money in an active way, but that gets into passive income, which is a topic I will save for another post.

This is a good place to start if you are broke.