Many people were raised to believe that working hard would lead to a payoff at work. Unfortunately, that isn’t always the case. As a result, you can put in mountains of effort and not see your income rise accordingly. Plus, if you’re working hard but struggling to manage your money effectively, you might continue having trouble making ends me. Luckily, in either case, you can improve your financial situation. Here are ten things to do when you work hard but are still broke.
1. Create a Two Budgets
Spending time writing a budget is classic financial wellness advice, and with good reason. It gives you a plan for your money, making it easier to allocate your income effectively. The problem is that many budgets are incidentally optimistic and unrealistic. If you have a budget and it isn’t working, yours might fall in that category.
Instead of writing a budget, create two. Make one based on where you’d like your money to go. Then, create another one that aligns with how you’re actually spending. Go through your financial records for the past three months and categorize every purchase honestly as you right up the second budget. After that, compare the two budgets and see how they differ.
This exercise makes it easier to see whether your ideal spending plan is potentially realistic. If the two budgets are far apart, then see if you can create a third budget that represents a happy medium. At a minimum, it will bring you closer to your goal while being easier to follow than the first.
2. Stop Using Credit Cards
If you’re using credit cards, stop. Interest rates on credit cards are classically high, so you’re sending a substantial amount of money to your lender every single month. While it’s difficult to stop turning to debt to make purchases, it’s worth the effort. Your balances will shrink, reducing the amount of interest you’re paying. Plus, it may improve your credit score, which makes better interest rates easier to capture in the future.
Not using credit cards when you’re used to turning to them isn’t always easy. Often, it’s an exercise in self-discipline. However, you can reduce temptation dramatically by putting your credit card in a spot other than your wallet. That prevents you from randomly using it while you’re out and about. Additionally, if it’s in part of your home that isn’t readily accessible, the act of having to go get it gives you a few moments to think about whether the purchase is actually that important, and that can make a difference.
3. Use the 72-Hour Rule
The 72-hour rule is a barrier against unnecessary spending. The concept works as follows. Whenever you’re thinking about buying a non-essential, wait 72 hours before buying the item. If you’re still as interested in the purchase after those three days pass, then you can consider going forward.
The trick is that you likely won’t feel the same about the item after 72 hours. As a result, it’s easier to say “no” to that purchase. Essentially, by waiting, you’re avoiding spur-of-the-moment spending that wasn’t motivated by the right reasons, and that can work wonders for your budget.
4. Carry a Goal Reminder
Another step that can help prevent extraneous spending is to carry a financial goal reminder in your wallet and have one near or on the device you use for online shopping. For example, you can put a sticky note on your debit and credit cards and have an image relating to your goal on your smartphone or computer lock screen.
By having the reminder nearby, you always see it before you spend. As a result, you get a chance to consider whether what you’re about to buy helps you achieve that goal or moves you further away from it. If it’s the latter, you may find that the note gives you the motivation not to make the purchase.
5. Create an Emergency Fund
Emergency funds are stashes of cash that help you navigate unexpected expenses, like surprise medical bills, car repairs, or periods of unemployment. With an emergency fund, you can avoid turning to debt when something happens that you didn’t see coming.
When you first start saving, aim for $1,000 or the amount you need to cover your vehicle and property insurance deductibles (whichever is higher). Next, work to get one month of living expenses set aside and then move toward three months of living expenses. That gives you a solid cushion.
After that, you may want to refocus on debt repayment before expanding. If your debt is under control, then try to work your way up to six months or one year of living expenses.
6. Say “No” to Vices
Vices like drinking, smoking, and gambling cost a significant amount of money, particularly if you participate in them regularly. By quitting, you’re not only potentially improving your health; you’re also freeing up room in your budget for other goals.
Quitting tobacco is an excellent place to start, as tobacco products are typically expensive and can increase your odds of developing potentially expensive health conditions. Drinking is also quite costly in most cases, especially if you consume in excess and end up with medical troubles related to the habit.
Gambling usually involves losing far more money than you ever get back. Plus, losses can wreak havoc on your mental health, so it’s best to avoid the activity and redirect that money toward a financial goal.
7. Advocate for Yourself at Work
When you’re giving your job your all, you might assume it will automatically lead to raises or promotions. In reality, that doesn’t happen more often than not. At times, the main reason is that, while your manager may know you’re doing well in the position, they don’t always see the cumulative value of all of your efforts. If you don’t help them see that, you might not advance as quickly.
Instead of leaving things in your boss’s hands, advocate for yourself at work. Gather up evidence that you’re going above and beyond, and reflect on your performance to ensure there haven’t been any recent issues. Then, schedule a meeting with your managers, present the information, share more examples of how you excel and express your interest in securing a raise or promotion.
In some cases, that meeting will lead to a pay bump. If it doesn’t, ask your boss what you need to do to make one happen. Create a formal plan with them that moves you toward that raise or promotion. Work that plan carefully, ensuring you’re exceeding expectations. Then, meet with your manager again to discuss the results and advocate for that raise.
8. Find a New Job
In some cases, all of the effort and self-advocacy in the world won’t lead to a raise or promotion. If your employer isn’t willing or able to help you grow and advance professionally, consider launching a job search. By doing so, you can potentially find a position with a different company that pays you what you’re worth, allowing you to increase your income.
Ideally, you want to find a new job before leaving your current one. That way, you can transition between the two positions, ensuring you don’t have a period without income. Additionally, it lets you avoid a gap in your resume, which works in your favor.
9. Acquire a New Skill
In some cases, your income stagnates because you don’t have the right skill set to keep moving forward. If you’re in that situation, focus on acquiring the capabilities you need to increase your income-earning potential.
There are many free or low-cost ways to enhance your skill set. You can find self-directed courses online that are either free to everyone or come with a small fee. Connecting with a mentor could give you access to someone who can show you the ropes. You can also seek out cross-training opportunities at your current job if learning programs are available there. If you qualify for a Pell Grant or find scholarships, you can potentially go to college outside of work hours without having to pay out of pocket or use student loans.
Explore your options to see what’s available. Then, pursue one that lets you acquire new skills that can move your career forward.
10. Resist Lifestyle Inflation
It isn’t uncommon to start spending more when your income increases. It’s normal to feel like you can afford it because your paycheck is larger, causing you to inflate your lifestyle accordingly. The problem is that lifestyle inflation can keep you broke.
Instead, when you get a raise at work or eliminate a debt, don’t treat that money as cash you can spend on splurges. It’s better to maintain your current lifestyle and focus those funds on financial goals. For example, make sure that there’s enough money in your emergency fund. Pay down another high-interest debt. You could also start investing if your emergency fund is solid.
By refocusing your additional income on financial goals, you keep making progress forward. In time, you’ll tackle enough of your financial goals that you’ll have room to breathe. Then, you can reevaluate your budget and make changes without ending up broke again.
Do you have any other tips that can help people who work hard but are still broke? Have you tried any of the options above and want to discuss your experience to assist others? Do you think some of the strategies above aren’t viable, and if so, want to tell everyone why? Share your thoughts in the comments below.
Read More:
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