How to Avoid Being Broke

Improve your money management skills to avoid being broke.

You can earn a good income by getting an education in a demand field, and finding a job that pays you well for your knowledge and skills. But even with a good job, you may find yourself coming up short every month if you don't know how to manage your paycheck. You can turn the situation around by writing a budget and tracking your spending carefully. You won't go from broke to flush with cash overnight, but practice will give you the money management skills you need to turn your financial situation around.

Instructions

1. Avoid credit card spending to stay within budget. Reserve your credit cards for emergencies instead of using them to buy things you want, but can't pay for in cash. Plan to pay off credit cards as soon as possible. Credit card payments can cost you hundreds of dollars or more per month if you carry balances instead of paying them in full each month.

2. Open a separate bank account for your personal savings. Decide on an amount that you can afford to set aside each month and deposit it to savings. Start with small amounts, and increase the percentage you put into savings gradually. Set holiday budgets and plan for purchases as an incentive to keep saving.

3. Cut back on your transportation expenses. Join a car pool or ride public transportation to work. Buy a used, fuel efficient, late model car from a reputable dealer if you need a car to get around on days when you are not at work. Combine errands and take care of many of them as you can on a single trip, instead of using up gas to go on multiple trips.

4. Eat most of your main meals at home. Pack lunches for work and school. Keep meals interesting by planning ahead, and shopping for the ingredients you need to make the dishes you want. If you don't know how to cook, you can learn to make simple meals by watching cooking shows for beginners on television or on the Internet, and by reading food blogs.

5. Keep your housing payments affordable. If you struggle to pay your mortgage or rent each month even when you stick to your budget, it's probably time to consider modifying your living arrangements. For example, if you have a basement that can be used as an apartment, renting it out can bring in extra income to help with your bills. Rent out your entire house, and move to a cheaper apartment, or move in with a family member, while you pay down debt. Research other communities with a lower cost of living if you feel it's time for a move to an area with a lower cost of living. Consider factors such as employment opportunities in your field, and school quality before you make a big move.

References

• CNN Money; Money 101 Lesson 2; Planning a Budget
• "Entrepreneur" magazine; Put Your Finances In Order; Lorayne C. Fiorillo; October 2000
• CNN Money; Money Magazine: Ask the Expert; Tired of Living Paycheck to Paycheck; Walter Updegrave; August 2010
• Good Housekeeping; Menu Planning: How 15 Minutes Can Save You Hours Each Week! Read more: Family Dinner Menu Planning - How To Plan Weekly Menus; Lorie Marrero; May 2011

Resources

• Kiplinger: A Budget For Today and Tomorrow