Broke AF? What to do When Your Finances are a Hot Mess

Tired of feeling broke? Being buried in debt? Living paycheck to paycheck?

I get it.

A few years ago, my husband and I had $117,000 in student loan debt and my monthly student loan payments were nearly 50% of my net income.

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I felt frustrated, hopeless, and stuck.

Then I read Dave Ramsey’s book The Total Money Makeover and it changed my life.

I realized that I didn’t have to keep living in debt just because that was “what everyone does”. I didn’t want to be “normal” anymore.

Fast forward a few years.  My husband and I have paid off $127,000 of debt and we’re now 100% debt-free!  This journey hasn’t been easy. As Dave Ramsey says, we’re “living like no one else now so later we can live like no one else.”

Are you ready to take control of your financial disaster?

Here are eight steps to take when your finances are a complete mess.

Create a Budget

You can’t take control of your spending if you have no idea where your money is going.  The first step toward getting your financial house in order is to create a budget.

Many people feel that budgets are restricting, but actually, the opposite is true.  Budgets give you freedom! They give you permission to spend and they give you the ability to tell your money where to go instead of wondering where it went.

If you need help creating a budget, check out our budget bundle which will give you all of the tools you need to get started!  The budget bundle includes six printable worksheets:

1. Monthly Budget Worksheet
2. Cash Envelope Tracker
3. Debt Snowball Worksheet
4. Net Worth Tracker
5. Insurance Tracker
6. Saving Goals Tracker

Each worksheet comes with instructions to guide you through the budgeting process.  As a bonus, you’ll also gain access to our online budget calculator! Download the bundle today to get started!

Monitor Your Credit

Another crucial step toward getting your finances in order is monitoring your credit.  Your credit score is important because it determines things like whether or not you’ll be approved for a mortgage, how high your interest rate will be, etc.

With a great credit score, you can snag a low interest rate on a mortgage (or other loan).  That could save you thousands of dollars over time!

Many people are worried about monitoring their credit score because they don’t want to damage their score by checking it too often.  This is a myth. Many free credit monitoring tools, such as NerdWallet’s tool, use a “soft pull”. This means that checking your score won’t damage your credit!

Once you know what your score is, you can work on improving it (if needed).  I highly recommend Nerd Wallet’s tool because it breaks down your score by different areas (on-time payments, age of accounts, credit usage, total open accounts, hard inquiries, and derogatory marks).

It then gives you a rating (excellent, good, poor) for each of these categories.  This helps you to see how your score is calculated which will give you insight into how to improve your score.  

For example, if you have a “poor” score for “total open accounts” because you only have one account open, it might help to sign up for a credit card.

Related: Do You Really NEED Credit?

Save a $1,000 Emergency Fund

Dave Ramsey’s financial plan includes “seven baby steps” and baby step #1 is saving a $1,000 emergency fund.  The purpose of this fund is to prevent you from accumulating more debt while you work on paying off your existing debt.

(Baby step #2 is paying off all non-mortgage debt. If you don’t have any debt, congratulations! You can move right to baby step #3 – saving three to six months of expenses).

Related: The 7 Baby Steps Explained

Your $1,000 emergency fund is to be used for emergencies only – things like car repairs, necessary home repairs, or unexpected medical bills.  Things that you can plan for in advance (like Christmas or birthdays) don’t count as emergencies.

Saving $1,000 might seem impossible if you’re already struggling to make ends meet.  Take it one step at a time and start small if needed.

If you want to save $1,000 over a year, you only need to save $19.23 per week.  What can you cut from your budget to make room for $19.23 each week?

If you’re already on a bare bones budget and there’s nothing left to cut, try to find ways to make extra money. You could get a second job, work overtime, start a money making blog, or find another side hustle.

Create a Debt Attack Plan

Once you’ve saved $1,000, you can start paying off debt!  The first step to creating a debt attack plan is to list off every debt you have one by one (and the associated interest rate).  

For example, if you have 10 student loans, you’d list each loan separately.

Once you have your list, you can decide which loan to pay off first.  Dave Ramsey recommends paying off the smallest loan first (regardless of interest rate) because the “quick wins” will keep you feeling motivated to continue (this is called the debt snowball approach).  

Other personal finance experts recommend the debt avalanche method instead (this means paying off the highest interest rate loan first).  This might be less motivating, but it makes more sense mathematically.

Pick whichever option works best for you.  To calculate exactly how long it’ll take to pay off your debt, use an amortization calculator.  There are plenty of free ones you can find online.

Find Practical Ways to Save

A budget only works if you stick to it.  If you’re going over budget in certain categories (groceries, for example) every month, you probably need to find some practical ways to cut your spending in that area.

If groceries are your biggest budget buster, you could try shopping at a cheaper store (like Walmart), buying fewer prepackaged items, using your freezer to store leftovers, and so on.

Earn More (if Necessary)

If you’re sticking to a bare bones budget and you still can’t meet your goals, you’re dealing with an income problem. Try to find ways to make more money.  

You could work overtime, ask for a raise, find a better job, get a second (or third) job, side hustle, start a money making blog, rent out a room of your home, or sell items online.

Join a #DebtFree Community

Debt has become so normalized in our culture that many people believe it’s impossible to live without it.  Getting out of debt can be really tough when everyone you know thinks you’re nuts.

If they’re constantly pressuring you to spend money or making fun of your financial plan, you might feel discouraged.

The solution?  

Find your debt-free tribe.  

Whether it’s joining a group on social media, reading personal finance blogs, or spending time with your more frugal friends, it’s important to surround yourselves with people who support your goals and will encourage you along your journey.

Don’t expect ALL of your family members and friends to understand your path (they don’t need to), but make sure to spend time with some people who do “get” it. You are not alone in this journey!

Also, remember this quote from Dave Ramsey: “If broke people are making fun of your financial plan, you’re on the right track.”

Get Your Spouse on Board

Turning your finances around isn’t going to work if your partner isn’t on board.  If you’re married to a spender, getting them to be more frugal can be tough. My husband is a spender, and in this post, I shared how we’re managing his spending.

Here are some ideas for how to get your spouse on board:

Focus on the end goal. What can you do if you’re not in debt? Travel more? Retire sooner? What does your partner value? Show him/her what you could do if you get your finances in order.

Read a book or take a class.  Have your spouse read Dave Ramsey’s book The Total Money Makeover or take his class Financial Peace University. This might be the inspiration he or she needs.

Work together.  Have regular budget meetings and work together as a team to fix any issues.

Appreciate.  Be appreciative of your partner and compliment him or her on what he or she does well. For example, if he decides to change a costly habit or avoid an overpriced purchase, acknowledge this and be encouraging.

From Broke AF to Debt-Free Success

A few years ago, my husband and I were buried in debt and we felt like we’d be stuck in debt forever. Fast forward four years…we’re 100% debt-free.

Our story is not unique.  There are thousands of stories like ours out there.

You CAN turn your financial situation around.

It won’t be easy.

It will take hard work, persistence, and patience.

But it will definitely be worth it!

Are you ready to take control of your money instead of letting it control you?