Beating Broke

Personal Finance from the Broke Perspective

How to Survive Being Broke

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Many of us have been broke.  It’s not a fun place to be.  You may feel depressed and desperate, but recognizing that you won’t always be in this position is imperative.  There are steps you can take to live a more comfortable life financially.  Until then, here’s a primer on how to survive being broke.

How to Survive Being Broke

How to Survive Being Broke

If you’re broke, you must take care of your immediate needs first.

Short Term Action to Take

Maintain a Positive Attitude

Many people who are broke become depressed.  They don’t see any way out of their situation and can’t imagine a future where they’ll be in a better position.

To successfully beat being broke, you need a positive attitude.  Research stories of people who were broke and went on to become successful and much more comfortable financially such as Erin Brockovich (played by Julia Roberts in the movie Erin Brockovich) or Chris Gardner (played by Will Smith in the movie, The Pursuit of Happyness).

Remember that life can change quickly.  You may be broke now, but you likely won’t be in the same position in five years or even two years.

Live on Beans & Rice

How to Survive Being Broke
Photo by Paul Hanaoka on Unsplash

The next step is to trim your expenses as much as possible.  Since food is often the largest monthly expense behind rent, that’s the best place to start.  You may love to eat salmon and steak, but now is not the time to do so.  Now is the time to eat the proverbial beans and rice.  For instance, when my mom and dad were first married and broke, my mom would buy one pork chop, pound it flat, and then split it between the two of them.  Once they had two kids, she would buy two pork chops and pound them flat to make four servings.  Now is the time to stretch your food as much as possible and buy the least expensive food you can.

Choose Your Friends Carefully

What financial position are your friends in?  You’ll want to find friends who are mindful of their money and not spendthrifts.  When my husband and I were first married, we were broke.

Some of my coworkers invited us to go with them out to eat.  The other two couples were both financially comfortable, and they chose a Mexican restaurant.  To my dismay, there were no prices on the menu.  We ended up spending too much that night, even though we tried to make frugal choices.  It was just an expensive restaurant.  We couldn’t go out with my coworkers again because we couldn’t afford their lifestyle.

If you try to maintain friends who are in a better financial position than you, you may never become financially comfortable.

Entertain at Home

How to Survive Being Broke
Photo by Johanna Dahlberg on Unsplash

Just because you’re broke, you don’t have to give up your social life.  Instead, change the way that you socialize.  Instead of going to a bar or restaurant and spending a lot of money, invite friends to your home.  Have a potluck at your house or have a game night.  Once a month my parents used to have their friends over in the summer for a volleyball night.  Be creative.  You’ll find there are plenty of ways to socialize without spending a lot of money.

Find a Hobby That Pays

Sometimes when people are broke, they have a lot of time, but not much money.  If that’s your circumstance, find a hobby that pays.  For instance, my uncle started a small side business for athletes at his former high school.  He would comb through micro fiche to find all of the articles for a particular year about the high school football team.  He’d print these out and bind them all together and sell them to the athletes.  He made some money on the side, and the former athletes had a scrap book of all the old newspaper clippings from their glory days.

Other ideas might include gardening, crafting and selling the product on Etsy, doing genealogy research for someone, building web sites for others, etc.  You’re only limited by your imagination in what you can do.

Long Term

When you’re broke, you may immediately think just of the short-term, but you must also think of the long-term.  How will you get out of this situation so you’re not broke your entire life?

There are several important steps you should take.

Earn a Degree

Photo by Juan Ramos on Unsplash

If a degree would help you secure a better job, than look into taking college classes.  When you’re already broke, you may feel like you have you have no time or money to do so.  However, if you don’t take steps to improve your situation, you’ll remain broke for much of your life.

I had a friend, Becca, who was raising her niece and nephew.  Money was tight, but she prioritized her education.  She took one or two classes a semester, putting in much of her study time early in the morning or at night when the kids were asleep.  It took her many years to get her degree, but she did.  Now, she lives a comfortable, middle class life and has a professional job.

Learn about Finance

If you don’t already have a solid background on personal finance, now is the time to learn.  This doesn’t have to cost any money.  You can borrow books from the library, take free finance classes online, and read blogs.  Learn all you can about managing money.  I’m not just talking about ways to save money, but ways to build your emergency fund and invest so you don’t end up broke again once you get out of your current situation.

Final Thoughts

How to survive being broke is a challenge for many people.  However, the first step is a mental one.  Realize that you’re currently broke, but you won’t be broke for the rest of your life.  You can make both short-term and long-term changes to improve your life and vastly improve your financial situation.  Many, many other people have done so.  Learn about those people and take concrete action to improve your current situation.

4 More Ways to Save on Medical Bills

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Previously, we talked about four ways to save on medical bills.  Most of those techniques involved ways to delay or forego medical expenditures.  However, sometimes medical care is necessary, and in the case of a major injury or mental health crisis, the amount you spend on medical care can be large and sudden.  When faced with large medical bills, you may feel discouraged and overwhelmed, but there are still 4 more ways to save on medical bills.

4 More Ways to Save on Medical Bills

Offer to Pay Cash for a Discount

If your large medical expense is not the result of an emergency that requires immediate attention, you may be able to offer to pay cash for the procedure in exchange for a discount.

When a woman is planning to have a baby at a certain hospital or birthing center, she can often negotiate for this type of discount, for instance.  By paying cash, she saves the hospital the trouble of going back and forth with insurance.  Therefore, the hospital may gladly give a discount.

Negotiate with the Provider

Another option is to negotiate with the provider.  Julie’s insurance didn’t cover psychologist appointments, so when her son needed therapy, she negotiated with the provider.  While the rate to see a more experienced psychologist was $125 per hour, she was offered the chance to have her son see an intern for $50 per hour.  The intern was supervised by one of the experienced psychologists.  This helped Julie feel comfortable going this route.

Create a Payment Plan with the Provider

4 More Ways to Save on Medical Bills
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If you are facing medical bills in the thousands or tens of thousands of dollars, make sure to not only negotiate with the provider, but also to ask to go on a payment plan.  When my children had orthodontic work done, I paid a down payment and then took advantage of the orthodontist’s payment plan.  I paid the same amount for 18 months, and the orthodontist charged me no interest.

Hospitals and other medical providers may offer you a similar type of payment plan.  Many will provide these payment plans free of interest, while others do charge some interest.  Make sure to get your payment plan in writing.  If your financial situation changes, contact the medical provider so the arrangement can remain in good faith.

Seek Assistance

If you or a loved one is facing long-term medical expenses, research, research, research.  You may find organizations that can help you pay for the services you need.

One of our children was diagnosed with high functioning autism a year ago.  We have literally paid thousands of dollars out of pocket for services.  However, even after spending that much money and seriously straining our budget, there were services like occupational and speech therapy that we could not afford.  A friend told us about an organization that helps families like ours.  We went through a lengthy application process and were approved.  Now our child is receiving speech and occupational therapy at no charge to us.

Similarly, a family friend’s husband had a catastrophic stroke from which he’ll never recover.  She found an organization that will help her pay for her husband’s long-term care.  This is something she desperately needed because her husband will be institutionalized for the rest of his life.

High medical bills can be overwhelming.  However, there are 4 more ways to save on medical bills that you can use to get the help you need and to reduce the amount that you need to pay.

Have you faced high medical bills?  If so, what strategies did you use to remain financially solvent while paying your medical bill obligations?

Why We’ve Decided Not to Throw Extra Money at Our Debt Now

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Going into debt is a bit like gaining weight.  It’s much easier to go into debt than to get out.  But, when you’ve finally decided you want to break the debt cycle and live debt free, it takes a lot of time and effort, much more effort than it took to go into debt.  Likewise, when you decide you want to be fit and healthy, you have to work much harder than you did to gain weight.  With either situation, when you decide you want to make a healthier change, you want it to happen.right.now!  That’s why so many people who want to be debt free decide to save only a $1,000 emergency fund and put the rest of their money on debt.  We’ve tried that before, but there are several reasons why we’ve decided not to throw extra money at our debt now.

Get Off the Debt Repayment Roller Coaster

Why We've Decided Not to Throw Our Extra Money at Debt Now
Photo by Matt Bowden on Unsplash

With COVID-19, we’re living in unstable times.  But honestly, even before the virus, a $1,000 emergency fund was never enough.  My husband and I have been in debt most of our lives.

When we were first married, we had student loan debt, car loan debt, and credit card debt from our time in college.  We followed financial gurus who said have a $1,000 emergency fund and put the rest of the money on debt.

Some months, we had phenomenal success and paid down a significant amount of our debt.  But other months, because we were living so close to the edge with only a $1,000 emergency fund, we’d have the unexpected happen such as a $2,500 car repair.  Our emergency fund would be wiped out, plus we’d go back into debt to finish paying for the unexpected.

Going back into debt a few thousand dollars when we were trying to pay down debt was depressing.  Plus, we’d have to pause our debt repayment and start back over to rebuild the emergency fund.

We paid off the credit cards eventually, but a few years ago, we went back into credit card debt when three things happened one summer—our HVAC system died, our house had mold and had to be remediated, and our child had a medical issue that wasn’t completely covered by insurance.

Since then, we’ve been working to build a more substantial emergency fund AND pay down debt.  No more debt repayment roller coaster for me.  This time I vowed when we paid down our debt, it would stay gone.  But for that to happen, we needed a bigger emergency fund.

The Economy Is Too Uncertain

Now that COVID-19 has hit, we’re not paying any extra on our debt.  We’re funneling all of our extra money to our emergency fund with the goal of hitting a 6-month emergency fund.

Why?

No one knows for sure what the economic impact of this virus will be.  I want to make sure my family has enough cushion to survive.  That means creating an ample emergency fund.

Prepare for Potential Job Loss

Why We've Decided Not to Throw Our Extra Money at Debt Now
Photo by Alexander Mils on Unsplash

We’ve been lucky that my husband hasn’t lost his job.  He’s in the higher education field, which is being hit especially hard by this pandemic.  He has to furlough for 39 days this upcoming year, which means we will essentially be losing two months of pay in the next 12 months.  However, we’re grateful that he still has a job.

But what will happen next year?

There is a very real possibility his job could be in jeopardy next year, depending on how badly this year goes.  We want to be prepared.  Sure, it would be nice if we could get our debt load down, but right now, we’re just focusing on piling cash in the bank.  We want an ample security net.

Much of the country is in the same predicament.  If you work for or own a small business, how long can the business hold out?  We’re already seeing some small businesses closing permanently, which means all of those employees will be looking for jobs.

I don’t want to advocate irresponsibility, but if you’ve lost your job and aren’t able to get a new one, you can always negotiate with your creditors or worst-case scenario, not pay your bills.  However, if you don’t have money in the bank, you’re left without resources.  Having a savings account in this situation always comes first.

Only Pay Down Debt After a 6 Month Emergency Fund Is Established

If you pause paying down your debt and only pay your minimum payments due, you can always change your plan later and pay more on your debts in a few months.  That’s one of the major reasons why we’ve decided not to throw extra money at our debt now.

We’re going to save, and save, and save.  If we, as a country, as a world, ride out this virus and it is no longer a threat, things can change.  Let’s say my husband and I do save a six-month emergency fund.  If, in another year or two, his job is stable, and the world is back to normal, we can change gears.  Maybe we take three months’ worth of our emergency fund and throw it on our debt to pay it off.  We can do that.

Final Thoughts

Though you may want to be debt free or carry a lower debt load, there are several good reasons to pause that goal.  The main reason why we’ve decided not to throw extra money at our debt now is because having money in the bank is priceless, especially in the age of a pandemic.

We can later decide to take some of that large emergency fund and put the money on our debt.  However, if we pay down our debt and stay with a $1,000 emergency fund, we’re extremely vulnerable financially to what may happen in the upcoming months.  We intend to protect ourselves as well as we can from economic instability by saving as much as we can.  There will be time later to aggressively pay down debt.  We don’t believe now is that time.