6 Lessons I Learned From Being Broke


There was a period in my life when I was barely making ends meet. I wasn’t on the verge of bankruptcy, but I lived paycheck to paycheck in expensive Washington, D.C., on an entry-level reporter’s salary, which wasn’t much.

I remember having to eat lunch at home before meeting friends at a restaurant because I couldn’t afford a meal out. Fortunately, I could at least always pay my bills.

Those years of living lean actually helped me make better money decisions and take control of my finances. I certainly live a more comfortable lifestyle now that I earn more. But the lessons I learned when I was struggling financially have helped me avoid getting in that situation again.

April is National Financial Literacy Month, so here are six things I learned while I was broke and how those lessons made me more financially savvy. Hopefully, you’ll be encouraged by what I did right and avoid what I did wrong.

1. Don’t Live Beyond Your Means

When I was just starting out on my own, I didn’t buy new clothes every month or dine out every week. But, looking back, I realize that I was living beyond my means in an apartment that was way too expensive for my small salary.

Make Your Money Work for You

I was paying about $800 a month for a one-bedroom apartment in Washington, D.C. That might not seem like a lot now, considering the median rent in the nation’s capital is currently nearly $3,000. But I was there almost 20 years ago, and that rent consumed almost half of my monthly paycheck.

Read: 7 Tips to Get the Most Out of Your Paycheck

I didn’t stop to think about how hard it would be to cover my rent and still have enough left over for other expenses on such a small paycheck. Living beyond your means is an easy trap to fall into when you don’t have much money. You might end up in this situation if you turn to credit to buy what you really can’t afford. If you continue to live this way, though, it doesn’t matter how much money you have; you’ll always be broke if you live beyond your means.

I’ve since vowed never to let housing consume such a large percentage of my budget. My husband and I now have a monthly mortgage payment that’s less than 20 percent of our combined monthly take-home pay.

Make Your Money Work for You

2. Know Where Your Money Is Going

If you want to break the cycle of living paycheck to paycheck, you need to know where your money is going. When I was nearly broke, I tracked every penny because I had to. If I spent more than $50 at the grocery store, for example, I knew I was in trouble.

Because I’ve become smarter about managing my money, I don’t have to monitor every penny every day anymore. Now, I have all my monthly bills and expenses that must be covered listed in a spreadsheet. My husband and I have two bank accounts: one for bills with more than enough cash to cover our expenses, and one for spending, to which the debit card is linked. Moreover, we frequently audit our expenses to see what can be cut.

3. Have a Safety Net

I know it’s tough to set aside money for emergencies or cover the cost of insurance on your own when you hardly have enough to pay the bills. I learned the hard way why it pays to be prepared for the unexpected.

Make Your Money Work for You

My first paying job was an internship that didn’t offer benefits. Being young and healthy, I assumed that I could get by without health insurance. That was a mistake. I found out that I had two impacted wisdom teeth that had to be surgically removed. Even though I had the procedure done at an inexpensive clinic that was a training ground for dental students, I didn’t have the money to pay the $500 bill, which was about one-third of my monthly paycheck. I had to get help from my parents.

Insurance might seem like an unnecessary expense, but trust me, it isn’t. Medical emergencies can be a lot more costly than monthly insurance premiums. And an emergency fund might seem like something you can afford to build when you’re not living paycheck to paycheck, but that’s when you need it the most. So consider making small sacrifices in spending now to build your safety net so you don’t have to make major sacrifices when emergencies happen.

Related: 20 Things You Should Know About Saving Money in Your 20s

Make Your Money Work for You

4. Find Ways to Improve Your Situation

I realized quickly there was only so far I could stretch my small paycheck. Rather than complain about how little I had, I did something to improve my situation. I got a second job.

I had to sacrifice nearly all of my free time, and the job wasn’t related to my field, but it was worth it because I was able make ends meet and build a financial cushion. By earning about $8 to $10 per hour working evenings and weekends, I added an extra $150 to $200 a week to my budget. I also got a great discount at the retail store I was working at, which I used that year to buy Christmas gifts.

It certainly was better to take on extra work when I was younger so I didn’t end up deeply in debt, which would’ve kept me living paycheck to paycheck for years to come. I kept my eye out for higher-paying full-time jobs and managed to boost my annual salary by several thousand dollars every time I made a switch. If I had been complacent, I would’ve been stuck at the same low-paying job still living paycheck to paycheck.

5. Realize That You Can Still Have Fun on a Budget

I learned when I didn’t have a lot of money that there are plenty of ways to have fun and enjoy life without spending much — or anything. My husband, who was my boyfriend then, and I would bike along all of the wonderful local trails, take advantage of the city’s many free museums and events, or just hang out with friends — those friends didn’t have much money, either, so there was no pressure to spend.

Our splurging at the time was limited to $1 beer and $1 nachos during happy hour at a bar. I loved that deal and wish I could find a place where I live now where I could spend just $2 on beer and nachos.

Read: 50 Ways to Live the Big Life on a Small Budget

Certainly, having money goes a long way toward alleviating financial stress — but only if you manage it wisely. Money doesn’t guarantee happiness. So when you’re struggling to make ends meet, push yourself to find ways to improve your situation but don’t assume that you can’t have fun and be happy until the day comes when you have more money. Just make sure you find free or low-cost sources of entertainment so you don’t stay broke forever.

6. Don’t Get Discouraged

I never let myself think that I’d always be living paycheck to paycheck. I knew my situation was temporary because I was taking steps to advance my career, improve my finances and improve the way I budgeted.

I also didn’t let the fact that I didn’t have much money get me down. I was grateful to have a job in my chosen field. I was grateful to have friends I could spend my time with and family who supported me. And now I’m very grateful that having barely enough to get by taught me important financial lessons at a young age so I don’t truly end up broke later in life.

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About the Author

Cameron Huddleston

Cameron Huddleston is an award-winning journalist with more than 18 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, USA Today and many more print and online publications. She also is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. U.S. News & World Report named her one of the top personal finance experts to follow on Twitter, and AOL Daily Finance named her one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, CNN, MSNBC and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., KGO in San Francisco and other personal finance radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more. She has an MA in economic journalism from American University and BA in journalism and Russian studies from Washington & Lee University.

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