7 Ways To Create Financial Breathing Room in Your Budget, According to George Kamel

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Even if you have a budget, it may seem like you are constantly treading water trying to make ends meet.

“If you feel broke and you feel like you’re barely keeping your head above water, you’re not alone,” said George Kamel, a Ramsey Solutions financial expert, in a recent YouTube video. “I know it might seem like everyone around you has more money, but 78% of Americans feel like they live paycheck to paycheck.”

If you’re struggling to break free from the paycheck to paycheck cycle, Kamel suggested a few ways to create some breathing room in your budget.

Change Your Mindset

Many people who struggle with money have a victim mentality that keeps them struggling. While Kamel acknowledges that there may be legitimate financial hardships that brought you to where you are, it’s always possible to make a change.

“Remember, it may not be all your fault, but it is your responsibility,” he said. “Once I owned up to that, it’s when I finally started to turn things around. … Sometimes all you need is someone telling you it’s possible and showing you the way.”

Stop Taking On More Debt

The only way you’ll be able to eliminate the debt you currently have is to stop accumulating more of it.

“You’ve got to stop the bleeding,” Kamel said. “Living with debt of any kind is one of the biggest things keeping you broke, because those payments will eat up your hard-earned income faster than Guy Fieri can scarf down a chicken tendy. … So, no more car loans, no more Afterpay, no more opening up store credit cards.”

Having debt means you’re constantly paying for choices you made in the past.

“You can’t build for the future while paying for the past,” Kamel said. “It’s impossible.”

Build a Starter Emergency Fund

It’s important to stay current with all of your bills and make at least the minimum payment on everything you owe, but then put any leftover money toward building a starter emergency fund of $1,000.

“Here’s why this is important: If you’re living on the edge of broke, chances are you’re only one layoff or an emergency or busted A-track away from a full blown crisis,” Kamel said. “So you need a financial safety net, even if it’s a small one.”

Saving $1,000 might be challenging with your current lifestyle, so to do this, you may need cut back on your spending or sell things around the house that you no longer need.

“One thousand dollars is just a little buffer between you and life to help you sleep better at night, knowing you could pay cash for those ankle-biter emergencies that can and will derail your progress eventually,” Kamel said.

Use the Debt Snowball Method To Pay Off Your Debt

There are several debt payoff methods, but Kamel recommends the debt snowball method, which involves paying off your debts in order from the smallest balance to the largest balance.

“Attack the smallest debt first and make minimum payments on the rest of your debts,” he said. “Because you’re throwing everything you can on that smallest debt, that little pipsqueak gets paid off super fast. Then, once the smallest debt is gone, take the payment that’s freed up and apply it to the next smallest debt.”

Although it might be better mathematically to pay off the debt with the largest interest rate first, Kamel said what’s more important is to build momentum.

“The point is to give you some quick wins to keep you motivated about the process and actually make it across the finish line, instead of getting so caught up in your math and interest rates that you give up,” he said.

Cut Back on Spending

You’ll be able to pay off your debt quicker if you cut back on spending. You can use the money you save toward your debt repayment.

“You can save some serious money on food and groceries by meal planning, packing your lunch and buying store brand products,” Kamel said. “You could also cancel subscriptions or memberships that you’re not using.

“You could switch insurance for a cheaper rate, or even DIY some home projects watching some YouTube videos,” he continued. “And here’s a big one: Stop eating out. It might be more convenient, but staying broke is a lot less convenient.”

Make More Money

The other way to pay down debt faster and create more breathing room in your budget is to earn more money. One easy way to do this is to work as a ride-share or delivery driver as a side hustle.

“We live in the convenience age, and people will pay good money for you to do things like drive them to a Morgan Wallen concert or bring them a big, cheesy Crunch Wrap Supreme,” Kamel said. “If you’ve got a driver’s license and a reliable car, you can deliver people, food, groceries and packages in exchange for money.”

Working for companies like Uber and Instacart gives you the freedom and flexibility to work when and however often you want.

“On top of your full-time job, you can make anywhere from $15 to $30 an hour, depending on your location and peak hours,” Kamel said.

You might also consider freelancing, consulting or tutoring.

“Most of you have skills like graphic design, writing and editing, coding, marketing and SEO, photography, virtual assisting, bookkeeping, and you can make some pretty good money to throw into your debt snowball by using those skills to help others,” Kamel said.

Grow Your Emergency Fund

Once your debt is paid off, focus on building an emergency fund of three to six months worth of living expenses. This will give you the financial breathing room you want.

“That emergency fund is insurance,” Kamel said. “It’s playing defense, and it helps you avoid ever going back into debt again. … This emergency fund is a game changer. Make it a priority. Just think of what it would feel like to have $10,000, $15,000, even $20,000 set aside for emergencies and no debt payments in your life. That emergency fund will turn a crisis into an inconvenience.”

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