How To Save Money If You’re Broke
Want to know how to save money even if you feel like you don’t make enough, or are flat-out broke?
Here’s what to do:
Depending on your financial situation, setting up a workable Conscious Spending Plan may seem out of reach for you.
Some people have already cut their spending to the bone and still don’t have any extra money.
For me to suggest that they put away 10 percent for retirement is, frankly, insulting. How can they be expected to contribute 10 percent toward long-term savings when they don’t have enough to fill the car with gas?
Sometimes this is reality, and sometimes it’s perception.
Many of the people who’ve written me saying they live paycheck to paycheck actually have more wiggle room in their budgets than they think (cooking instead of eating out, for example, or not buying a new cell phone every year).
They just don’t want to change their spending.
However, it’s true that many people really cannot afford to cut more spending and really are living check to check.
If you simply can’t cut more out of your budget, this spending plan may be a useful theoretical guide, but you have more important concerns: making more money.
There’s a limit to how much you can cut, but no limit to how much you can earn. Once you increase your earnings, you can use the Conscious Spending Plan as your guide.
Until then, here are three strategies you can use to earn more.
Method #1: Negotiate a Raise (So You Can Save More Money)
If you already have a job, it’s a no-brainer to negotiate for a raise.
The Society for Human Resource Management (SHRM) notes that the average cost per hire is $4,425. If they’ve already spent nearly $5,000 recruiting you, and thousands more training you, would they really want to lose you?
Asking for a raise takes careful planning. I even wrote an article on how to negotiate your salary.
Don’t do what my friend Jamie did.
When he realized he was being drastically underpaid for his contributions, he seethed without taking any action for more than two months.
When he finally got up the courage to ask his boss for a raise, he said it in the most timid way: “Do you think I might possibly ask you about a raise?” If you’re a manager, the first thing you’d think is, “Oh God, not another thing in my day.” Jamie’s boss brushed him off, leaving Jamie frustrated and underpaid.
Remember that getting a raise is not about you. It’s about you demonstrating your value to your employer. You can’t tell them you need more money because your expenses are higher. Nobody cares.
You can, however, show how your work has been contributing to the company’s success and ask to be compensated fairly.
Here’s what you need to do:
Three to six months before your review: Become a top performer by collaboratively setting expectations with your boss, then exceeding those expectations in every way possible.
One to two months before your review: Prepare a “briefcase” of evidence to support the exact reasons why you should be given a raise.
Ready to take control of your finances (without tedious budgeting?) Get the first chapter of Ramit Sethi's NYT Bestselling Book below.
One to two weeks before your review: Extensively practice the conversation you’ll have with your boss, experimenting with the right tactics and scripts.
Three to six months before you ask for a raise, sit down with your boss and ask what it would take to be a top performer at your company. Get crystal clear about what you’d need to deliver. And ask how being a top performer would affect your compensation.
Set up the meeting:
How are you? Hope you had a great New Year’s! I’m really excited to kick things off this year, especially with our new X and Y projects coming up.
I really want to do an exceptional job, and I’d like to chat with you for a few minutes about how I can be a top performer. I have some ideas of my own, but I’d love to get your guidance as well. Would a 15-minute chat next week be okay? If so, how about I swing by your desk Monday morning at 10 a.m.?
Notice how gradual this process is. You’re not coming straight out and asking for a raise. You’re not even asking what it takes to be a top performer. You’re simply asking for the meeting.
In the meeting:
YOU: Hi Boss, thanks for taking the time to meet with me. As I mentioned, I’ve been doing a lot of thinking about the position and what I can do to really be a top performer this year, and I’d like to discuss that with you if that’s okay.
YOU: So the way I see it, my role in the position can be broken down into three main areas: A, B, and C. I think I’m doing pretty well with A, and I’m picking up B pretty rapidly. And I need a little help with C, as we’ve discussed before. Does that sound about right to you?
BOSS: Yes, that sounds right.
YOU: I’ve been thinking a lot about these three areas and how I can really take them to the next level. I have some initial thoughts of my own, and I’d be happy to talk about those, but I’d actually like to get your thoughts first. In your eyes, what would be the most meaningful things I can do in these three areas to really be considered a top performer?
BOSS: Hm . . . I’m not really sure. Maybe blah, blah, and blah.
YOU: Yeah, I agree—we’re on the same page here. So here’s what I was thinking: Specifically, I’d like to achieve goals A, B, and C, and I’d like to do all this in six months. That’s pretty aggressive, but I think it’s doable. Would
you agree that’s something that you’d like to see from me, and that it would also help peg me as a top performer?
BOSS: Yes, it would. That sounds perfect.
YOU: Okay, great. I really appreciate it, Boss. So I’ll get to work on this and keep you in the loop with a status update every four weeks as usual. The last thing I’d like to talk about is: If I do an extraordinary job, then at the end of the six months all I ask is that we sit down to discuss a possible compensation adjustment. But let’s cross that bridge when we get to it, OK?
BOSS: Sounds fine. Looking forward to seeing what you can do.
YOU: Great. I’ll type up these notes and send them to you. Thanks again!
You’ve made it clear what you want: to be a top performer. You’ve enlisted your boss’s help on getting specific about what that means. You’ve also taken the initiative to follow up—in writing—to clarify those goals.
Now it’s time to deliver. Start tracking everything you do at work and the results you get. If you were on a team that sold 25,000 widgets, figure out what you did to help make that happen and, as much as possible, quantify it.
If you can’t figure out the exact results you’re driving, ask someone at work who’s more experienced and knows how to tie your work to company results.
Be sure to keep your boss in the loop so he or she knows how you’re progressing. Managers don’t love surprises; they love brief status updates roughly every week or two.
Approximately two months before you ask for a raise, meet with your boss again and demonstrate your tracking from the previous month. Ask what you could do better. You want to know if you’re on the right track with your work, and it’s important that you regularly communicate your progress.
One month before the big event, mention to your boss that because you’ve been doing so well, you’d like to discuss compensation at a meeting the next month. Ask what you’ll need to bring to make it a fruitful discussion. Listen very carefully to what he or she says.
Around this time, it wouldn’t hurt to ask your fellow coworkers to put in a good word with the boss. This assumes, of course, that you’ve been exceeding expectations and driving concrete results.
I learned this technique from a Stanford professor of mine, who put in a good word to an admissions committee for me. Here’s what a sample coworker email could look like:
I wanted you to know how much of an impact [Your Name] is having on the Acme project. She managed to convince our vendor to cut their fees by
15 percent, which saved us $8,000. And she’s running two weeks ahead of schedule, which speaks to her ability to stay organized and keep us on track.
Now you’ve set the stage.
Two weeks before you ask for a raise, ask a couple of friends to role-play your job negotiation. This seems really weird, but negotiating is not a natural behavior. It will feel extremely odd and uncomfortable the first couple of times you do it.
Better to do it for the first time with friends since you’ll eventually be negotiating with your boss. And pick good friends—people who have business experience and will give you feedback on how you performed.
Specifically, while I’m hoping your boss immediately recognizes your work and agrees to a raise, sometimes it isn’t that easy. Prepare for the following scenarios:
■ “You didn’t hit those goals.” If you genuinely didn’t hit your goals, you should have communicated that earlier and decided on a plan of action with your boss. But if your boss is simply using this as an excuse—to obfuscate what the goals were, or to move the goalposts—here’s your response: “If there are areas for me to grow, I’d love to discuss them. But on [date], you and I agreed to these goals. And I’ve sent you a weekly update since then. I’m all for exceeding goals—which I’ve done, as you can see from [Specific Project]—but I want to be compensated in good faith.”
■ “I didn’t agree to a raise.” Your response: “That is true. But as we discussed on [date], we both agreed that if I hit these goals, I’d be considered a top performer—and that we’d discuss a compensation adjustment in the future.” (Pull out a printout of the email chain.)
■ “We can discuss this another time.” Your response: “I understand if there’s a timeline for raises and we’re off cycle. But I’ve put six months of work in to hit these goals and I’ve updated you along the way. I plan to continue exceeding my goals, but I’d like to get clear that I’m on track for a raise on our next cycle—in writing.”
On the day you negotiate, come in with your salary, a couple of competitive salaries from salary.com and payscale.com, and your list of accomplishments, and be ready to discuss fair compensation. Remember, you’re not asking your mommy for lemonade; you’re a professional who’s asking to be compensated fairly. You want to proceed as partners, as in “How do we make this work?”
Budgeting is outdated. Build your conscious spending plan to take control of your finances and spend guilt-free on the things you love. Find out how in our FREE guide.
This is the culmination of all your preparation and hard work. You can do this!
If you get the raise you were looking for, congratulations! That was a huge first step toward increasing your income. If you don’t, ask your boss what you can do to excel in your career, or consider leaving to find another company that will give you greater room to grow.
COOL TRICK: QUICKLY DISCOVER HOW MUCH YOU MAKE
To find your annual salary, just take your hourly rate, double it, and add three zeros to the end. If you make $20/hour, you make approximately $40,000/year. If you make $30/hour, you make approximately $60,000/year.
This also works in reverse. To find your hourly rate, divide your salary by two and drop the three zeros. So $50,000/year becomes approximately $25/hour.
This is based on a general forty-hour workweek and doesn’t include taxes or benefits, but it’s a good general back-of-the-napkin trick. And it’s very useful when you’re deciding whether to buy something or not. If that pair of pants is going to cost you eight hours of work, is it worth it?
Method #2: Get a Higher-Paying Job (I & start saving more money!)
This takes us to the second way to increase your income. If you find that your existing company doesn’t offer you growth potential, or you’re in the process of getting a new job, negotiating your salary will never be easier. During the job hiring process, you have more leverage than you’ll ever have.
I cover negotiating a new salary in detail.
Method #3: Do Freelance Work
One of the best ways to earn more is to start freelancing. A simple example is becoming an Uber driver, but go deeper. Think about what skills or interests you have that others could use.
You don’t necessarily have to have a technical skill. Babysitting is an example of freelancing (and it pays very well). If you have free time at home, you can sign up to be a virtual assistant on sites like upwork.com.
When you embrace the idea that you can earn more, one of the biggest surprises you’ll discover is that you already possess skills others would pay for—and you’ve never even realized it.
In my business, we built an entire course around this, called Earn1K, and I absolutely love highlighting the different ideas that my students turned into profitable businesses.
For example, one of my readers, Ben, loves to dance. Through our Earn1K course, he learned how to turn that skill into a business of teaching men how to dance. Soon after he launched his business, Good Morning America called to feature him.
And then there’s Julia, a caricature artist who was charging $8 per hour to draw faces. We showed her how to turn that into a six-figure business.
There are thousands of other possibilities, even ones as simple as tutoring and dog walking. Remember, busy people want others to help them with their lives. A great place to start is the jobs section on craigslist.
If you have expertise in something, reach out to companies who might need someone like you. For example, when I was in high school, I emailed fifty websites from different industries that looked interesting but had poor marketing and copywriting.
I offered to help them rewrite their websites. About fifteen responded, and I ended up editing copy for one company that eventually promoted me to run their sales department.
Later, during college, I consulted for venture capitalists, teaching them about marketing with email and social media. This is stuff you and I know like the backs of our hands, but it was new to these VCs—and valuable enough that they paid a great consulting fee.
For more side hustle ideas, see my article on 50 side hustles you can start today.
Frequently Asked Questions About Saving Money
Is worrying about money normal?
Money worries are common for many people and can have an impact on our mental health and wellbeing. If you’re having to make hard decisions about what you can afford, it’s normal to feel stressed or down.
Is it normal to not have savings?
The reality is most Americans have no savings, either. And that can make many people feel like they are starting from scratch. But the fact is that the steps to building a solid financial future can be done over time and they absolutely do not have to overwhelm you.
How do you deal with fear of money?
It’s easy to feel overwhelmed by myriad financial responsibilities: Retirement planning, paying off student loan debt, saving for a down payment on a house. But overthinking these issues can be just as harmful as not thinking about them enough.