How to improve your living situation when you have no money.

Last week, a reader emailed asking, “how do I improve my living situation when I don’t have much money?”

Both her and her husband drive “beaters” that collectively ran them $1,200 in cash, they have no credit cards but owe both of their families money for various things, and they live in a home that they rent and work full-time.

Her husband is in construction and she works in retail. They are wanting to start a family but want to improve their lifestyle by purchasing a home before they bring home babies.

In order to understand the situation a little better, I started asking if she would mind sharing some of their personal details about their finances.

After some discussion about income and expenses, I asked her if she truly felt that she had every expense listed. The more and more we chatted, the more obvious it became that outside of the bills, neither her or her husband knew where their money was going.

And both of their incomes were pretty irregular. Her husband’s income was wildly unpredictable and her income depended upon how many hours she worked that week.

So in an attempt to help this reader and her future family reach the goals they wanted to achieve, I proposed this:

1. For the next 30 days, track every single penny spent – by hand on a sheet(s) of paper. List out the date, what the transaction was for (groceries, snacks at the gas station, clothes, etc.) and how much the transaction was for.
2. Once you’ve completed the above, determine where the biggest “budget leak” is – where are you spending the most money and ask yourself if you can eliminate or reduce this expense.
3. If you’ve determined that you can reduce or eliminate expenses from your spending, I want you to now take that money you were spending and start building up your starter emergency fund.
4. Once you’ve reached your starter emergency fund goal, I want you to work on paying back the smallest of your family loans and then “work down” the list of family loans to the biggest loan until they are all paid off.
5. Once all the family loans are paid off, which if you’re aggressive you’ll be able to do in about 13 – 16 months, I want you to build up your 6 month emergency fund.
6. Once the 6 month emergency fund is fully funded, I want you to start setting aside money in a separate savings account. This account will be for a down payment on a house.

***Please note, that I recommended going straight for the 6 month emergency fund instead of the 3 month first because of the irregularity of their income. My husband works in construction and I know that in one fell swoop the market can crash and then construction work can be hard to find so I wanted them to have a beefier buffer before moving on.

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Outside of these specific tasks, I mentioned that since she works retail and she mentioned that the holiday season always means a higher paycheck for her, I suggested that her and her husband go ahead and plan now, to take that additional income and put it in their emergency fund.

Here’s the thing though, this all looks easy on paper but in reality, it’s actually quite hard. No one in their right mind wants to track their spending for 30 days and most folks last a week at best. Heck, I’ve failed at this assignment numerous times.

It’s definitely not easy. This is why I always suggest defining your life’s goals because the more clear you are on where you want to end up in the life, the easier it becomes to take on these really tough challenges.

And so, I want you to make it a point this upcoming week and weekend, to tackle a BIG challenge that you’ve been putting off.

It doesn’t have to be money related – just make sure it’s something that has been sitting on that “to-do list” so long that you’ve almost forgotten that it’s important.

If you need a list of resources to help get you motivated to tackle your big challenge, here are some of my personal favorites:

The 12 Week Year (book)

How to set goals using the SMART method (video)

Intentionally Organized (free email series – seriously, this one is life-changing good!)

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