In my early 20s, I acquired a different perspective on financial well-being from being broke. I learned three things:
- There is an enormous difference between looking like you have money and actually having money.
- The real-life consequences of unplanned purchases and the importance of living within my means.
- I became willing to do anything to make sure I was never broke again.
Here are my 7 rules for never being broke:
#1 Learn to Say ‘No’
Shortly after realizing that I couldn’t afford my tuned up lifestyle, I learned the truth about being broke. Living so close to my means meant that I was always just one step away from being left completely desolate i.e., one day off work or one prolonged illness could get me there. For a while, I struggled to say ‘No’ to those nights out, shoes, and other inconsequential things. But once I got over the stigma of saying ‘No’, life became a lot easier for me. I cut back on everything unnecessary to my existence.
I know that a ‘Yes’ life will open a lot of new opportunities, adventures, but it also comes with increased chances of bad decisions. Bad decisions always have consequences. So strike a balance and have a real conversation with yourself before you lose yourself to worldly things. Don’t live to please people – know thyself.
#2 Increase Income, Decrease Spending
Live below your means and progressively increase your income. In retrospect, I now realize that spending three-quarters of my earnings on clothes, shoes, transport and eating out is absolutely ridiculous. What was I thinking? Unfortunately, I wasn’t. Amazingly, I never crunched the numbers to see the real cost of my life would be. Now that I’ve been broke, I realize the importance of living below my means and striving to systematically increase my income and decrease spending. Learning to truly live below my means and have those side hustles.
Doing these things will give you more freedom to save and prepare for the future. The bigger the gap between income and spending, the better. As ultimately, we seek to invest the difference. Putting your money to work will earn you more and more over time – if properly done. This doesn’t mean putting your money in a low-interest earning account. It means we invest in things that will earn us more than we had before i.e., an investment account, starting a business or even an education to get a better job.
#3 Learn to Appreciate What You Have
I realized long ago that I was never going to get ahead without appreciating what I had. In fact, I never really started making progress until I learned the hard way that there are no quick fixes. Quick fixes, always materialize to nothing. Things unravel real quick as you squander what you have because you don’t appreciate it. Life has no quick fixes, just amazing lessons, and for those willing to learn, grow and never look back.
Without gratitude, you will never learn to recognize what you have, appreciate it and enjoy it – truly. Learning to be content with what you currently have been given unlocks marvelous lessons that will guide you when you do have plenty. Ultimately, this is why you’ll always hear me saying “You can’t keep asking for an increase while doing things that cause you to decrease.”
#4 Do the Math & Plan Ahead
Realize now that only you can solve your own financial problems. As I look back, I realize that I would have probably been much better if I had learned to invest and slowed down a bit. I don’t regret anything though, because a better decision then would have led me to another path. For instance, I wouldn’t have taken the time to major in finance. I always thought that finance was this wild beast that couldn’t be tamed.
Now that I work in finance, helping others, I see many people struggling with it too. Many people believe that personal finance math is beyond their abilities. I mean many of us here can solve the Pythagorean theorem but can’t draw designs on their own personal finance. The math here is more basic like 1+1 is 2 because ultimately things must add up – where plus and negative signs have real-life meaning. So, do the math and plan ahead for all the money that you intend to spend and save. It is always advisable to look at your numbers often as they will reveal how well you are applying your financial knowledge to building wealth.
#5 Have Goals
Having no goals in life is like setting sailing without a compass. If you want something, the first step is knowing what your final destination is. Looking back, I had a vague idea of where I wanted my life to be. And because I never sat down to write what exactly I wanted, my destination was neither here nor there. When you are aware of your goals, nothing will stop you from going and getting them. So the best advice I can give you here is that whenever you are facing the situation where you are broke, regularly review and keep in mind your goals and they will nudge you on to achieve.
#6 Avoid Debt
I am glad I never took on debt earlier on because our economy penalizes for late payment and default. Debt can really cripple your life and really destroy your chances of improving your life. Don’t mess with this beast unless you truly understand it well. If you don’t have to, don’t get into it.
Most importantly, do not ignore debt if you have it. Sweeping your problems under the proverbial rug only sends increasingly threatening letters to your mailbox from your creditors. Ignoring stuff like this is the worst way to go about it. Treat debt with the seriousness it deserves.
#7 Time Is Money
This is a very common saying, but many of us do not really realize how important it is until later on in life. If I had saved all the money I was so liberally spending on things I really didn’t need, my balance sheet would look a lot different now. Over the years, with compound interest, I would have had the chance to retire 10 years earlier living the life that I want. Now, I am busy giving and throwing away all the clothes and shoes I accumulated in my early 20s. They are out of fashion and no longer to my taste. Purging has made more conscious of the missed opportunities I wasted. Having a better understanding of myself now, I could easily have started a business with that money. The time to save is always now – a little here, a little there goes a long way.
So here’s my conclusion…
Being broke is draining and demoralizing but don’t let it keep you down. Fortunately, as with all things, it’s a matter of time. You just need to be patient to get the life you want and make a meaningful effort to get you there. Make the right choice today – to never be broke again!
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