Being young and broke can be a stressful situation. This is the phase of your life when you need to be very active and have enough to fund your youthful activities. It is a phase in your life when you need to enjoy all the happiness that comes with being an adult. But if you are broke, you’ll miss all the fun.
Being broke is not unusual for young people. However, there many things that you can do to avoid getting to this state or getting out of it. If you are broke, this guide is for you. We have rounded up some of the best ways to avoid becoming broke.
1. Audit Your Spending
If you are getting broke, it is an indication that you are spending income very fast. Maybe you have too many expensive spending than you can afford and that’s why your money gets exhausted before the next pay. Therefore, what you need is an audit for your spending. Sit down and look at how you’ve been spending your money daily. You can start by recording how you spend money every day or keep all receipts. Then you will be able to identify the unnecessary spending and cut them off your budget. That’s one strategy of avoiding getting broke.
2. Don’t Spend More Than You Earn
The rule of the thumb when it comes to managing money is to avoid spending more than you earn. This is the most straightforward strategy for avoiding getting broke. You must always have an expenditure that fits within your monthly. So, you need to set limits in your spending. Otherwise, you will need to take out loans to supplement the deficit. Therefore, you must operate on a stringent budget to avoid getting broke.
3. Have a Financial Plan
The main contributor to being broke is the lack of a financial plan. Unfortunately, most young people do not know how to spend money diligently. If you find yourself getting broke often, then you need to consider developing a financial plan. This is a plan that helps to allocate your many to useful spending to ensure a cash flow throughout the month. It is something that you can create by yourself, but we recommend that you seek the services of a local financial planner.
4. Start Saving
Saving a portion of your money is another strategy that can help you avoid getting broke. There are always those bad days of the month when most people don’t have money. Therefore, you have a portion of your money saved to cover these days. Therefore, whenever the rainy days come, you will have something to keep afloat until the payday. However, this money should not be kept in the house because of the temptation of using. Try a separate bank account for your savings.
5. Avoid Splurging
One of the biggest mistakes that young people make is buying everything that pleases their eyes. Most of them can’t tell between needing and wanting. That’s a very irresponsible way of spending money. You must avoid splurge temptations. Avoid buying what you want but what you need. You may not need that expensive smartphone even if it is the latest in the market. You can still use that car for another two years instead of going for the expensive new models. That’s how you fight the urge to splurge.
6. Stay Away From Danger Zone
What is taking most of your money? Or rather, what are you almost addicted to? These are what we refer to as the danger zones. If you love new shoes or you love buying new clothes, then you need to avoid places such as shops and malls that stocks these items. If you have been spending most of your money on drinks, then you should avoid bars and friends that you drink with. This is one of the strategies that will help reduce unnecessary spending. It also means more money in the pocket.
7. Get Rid of Credit Card
One of the biggest mistakes young people make is using multiple credit cards. It is one of the traps that have left most of them in a financial crisis they could have avoided. With a credit card, you just swipe at every purchase, and before you know it, you are overspending. You also get yourself into serious debts. That’s how most individuals become broke. So, throw away that credit card and start using cash. With cash transactions, you will be able to monitor your spending. You will also avoid paying off expensive loans.
8. Invest Smartly
If the money that you are earning is too little that it cannot meet expenses, then consider some form of investment. There are many types of investment opportunities here in Australia that you can put your money in and start getting regular income. For example, you can set up a business and start getting revenues. Similarly, you can buy bonds, annuities, EFTs, or invest in a mutual fund. All these are investment opportunities that can earn you passive income to supplement your salary.
9. Avoid Piling Up Debts
It is very easy to get in debt, especially when you are spending more than you earn. However, the problem starts when they start piling up. So, most of your money goes to servicing debts. So, you have no money in the pocket and become broke. Avoid piling up debts by monitoring the debt-to-income ratio. If the ratio is above thirty percent, then you should get worried. Additionally, clear your student’s loan as fast as you can.
10. Have a Side Hustle
If you find out that your monthly income is not meeting your needs, then you need to consider looking for another source of money. Having a side hustle is one of the best ways to supplement your monthly budget. You can get a part-time job from another company or start your own business. There are so many online jobs that you can also take up, such as ghostwriting.
Being young and broke is a common thing for young people, but you can avoid it by being smart. The most important thing is to establish what is getting you broke. If you are overspending, strike out all the unnecessary expenses. You should also avoid piling up debts. Additionally, if the money is just not enough, have a side hustle to supplement your monthly income. However, have problems managing your money, consult a local financial planner.