Having enough money is the only way you can stop being poor. So, you have to figure out how you can manage your financial condition and save as much money as you can from your income. You have to find some other ways to increase your income along with your primary income. If you have debt, then you should try to follow a strict budget to save money and pay down debt. Finally, stop comparing yourself to others and set goals to move forward financially.
- Poverty is the state of not having enough personal income or money to afford basic needs
- There are many reasons you can be poor and some common reasons are being stuck in a debt trap, poor financial decisions, bad investments, and many more
- If you can’t keep track of your spending then it will be very difficult for you to achieve financial freedom
- If you are facing financial problems then you should immediately start budgeting and try to follow it every month
- If your income is not sufficient enough then you should try to find more earning sources to change your financial condition
Reasons Why You Are Poor
There are many reasons you can be poor. Many people don’t know how to manage their own finances and end up broke month after month. Moreover, there are other key factors available that are also responsible for you being poor. Let’s check them out!
Stuck In A Debt Trap
This is a very common reason for being poor. If you get stuck in a debt trap then it becomes very hard to come out of that trap and regain financial freedom. Kristin Wong of Brokepedia said:
“When you’re poor, it’s easy to get stuck in a debt trap because you’re desperate, whether it’s a payday loan, debt settlement scam, or even just using a credit card for an emergency, it’s easy to make rash decisions when you’re stressed, and these decisions usually keep people broke.”
Having A Disadvantaged Background
Sometimes fate plays a vital role in being poor. Many people are simply born with more advantages in life than others. These advantages are known as “privilege.” If you are deprived of these privileges then maybe you are one of these people who were born with less privilege than most and this is why you are being poor.
Poor Financial Decisions
If you made a series of wrong financial decisions then you might end up being poor. So, if you are a wealthy people then you have to ensure you are making the right financial decisions and avoid a sorry hand in life. Therefore, you should acknowledge where you come from and how the financial condition can affect your life.
You Don’t Pay Yourself First
This is also a valid reason for being poor. This is what personal finance expert Barbara Friedberg said about paying yourself first –
“The No. 1 reason people end up poor is that they don’t ‘pay themselves first”
Paying yourself first means you should put an amount of money from each paycheck into a savings account before divvying the rest out to cover expenses. So, you must have monthly savings to improve your financial condition.
Don’t Know Where Your Money Is Going
If you are not able to keep track of your spending then it will be very difficult for you to achieve financial freedom. Donna Freedman, a personal finance expert, and writer said –
“If you don’t know where your money is currently going, you can’t turn it in the direction you’d prefer it would do the most good — When you know you have enough money to deal with all of your needs and some of your wants — plus those pesky emergencies — you can sleep very well at night”
Therefore, you should maintain a list of your spending like saving up an emergency fund, rent or mortgage payments, retirement savings, etc.
8 Steps To Stop Being Poor And Broke
1. Start Budgeting
People with low income think that they don’t have enough money to budget, but that’s completely wrong. Budgeting means planning how you will spend your money or manage your income. Planning your money doesn’t depend on your income. So, regardless of your income, you must have a budget and you should try to follow it every month to stop being poor. If you have a proper budget then you will understand where you are going to spend your money before it comes. So budgeting allows you to plan for expenses in advance and help you save money from your limited income. Another advantage of budgeting is, you can also track your spending trends and help you reduce unnecessary expenses.
2. Find More Earning Sources
If you realize that your income is not sufficient enough to lead a normal life then you have to find other sources of income to support your mine income. You can take a second job or a part-time job or start a business in your spare time to increase your income. Or, you can also consider a long-term career change to have an increased salary. So, explore your options and consider another earning source depending on your situation to earn more money.
3. Make Saving A Priority
Savings is one of the best ways to get financial freedom. There are two easy ways you can save money. You can easily separate an amount from your income and put that amount into a savings account and use the account only for emergencies. You can also call it an emergency fund. You can start this type of fund from as low as $20/month. You should try to build an emergency fund that can cover between three and six months’ living expenses. Next, you should try to save money from your current expenses. If you can keep track of your spending; then you will be able to easily identify unnecessary expenditures. Try to avoid these expenses to save money. Moreover, when you are going out shopping; try to look for coupons and deals to save money from your daily expense.
4. Stop Using Credit Cards
A credit card is your main enemy of being poor. So, if you want to change your financial status then you have to stop creating debt. The first step of stopping the debt is to stop using a credit card. If you have credit cards then try to stop carrying them with you or don’t use them while making a payment. If you left your credit card in your house then you won’t be able to use the card while shopping. This way you will be able to avoid debt as well as unnecessary spending and save lots of money.
5. Get Out Of Debt
You won’t be able to save money or make real wealth if you have debt and paying more in interest than you are earning in interest. If you want to change your situation then you have to take proper steps to get out of debt. If you already have debt then you should make a plan to get out of it. You can set a budget and save extra money to pay off your debts each month. This way, you can easily pay off your all debts. Once you are debt-free, you can use the extra money to build your financial security.
6. Focus On What You Can Control
If you are going through poverty then you might feel everything overwhelming but don’t let poverty control you. Take control of your financial situation and how you feel about money. Rather than looking at others living a luxurious life, find out little things that you can control. For example, you can’t control your illness but you can easily control what you spend your money on outside of the necessities. So, if you want to get out of poverty then you should focus on the controllable things in your life and get out of poverty.
7. Establish A Plan
To stop being poor, you must have an executable plan. You have to find out ways to overcome your poverty. Therefore, first, you have to analyze your financial condition and where you stand now. You have to be honest with yourself while analyzing your bank accounts and compare them to your liabilities and see where you mass up. Once you determine your financial condition, you can plan better moving forward. If you don’t have a budget then create one immediately and try to follow it every month. Try to track your cash inflow and outflow to find out the required adjustments.
8. Invest And Save As Much As You Can
Without proper investment and savings, there is no way you can change or improve your financial conditions. Therefore, follow a strict budget and save as much as you can and then invest the money for better returns. Try to save or invest at least 20% of your income for savings, investment, or debt pay-off. This will help you break the cycle of poverty. Try to save or invest your first $1,000 and once you reach the target you will be able to save more.
Finally, you can’t break the cycle of poverty and stop being poor overnight. You will need dedication, patience, and a lot of grace to gradually change your financial condition. Learning how to get out of poverty will help you accelerate the process and support you overcome your financial barriers. Start taking control of your finances and dwell on them.
Last Updated on November 2, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.