How Being Broke Made Me Really Good With Money

This personal finance writer shares what she learned about being broke.

When I was newly out of college, I was making $10 an hour, paying nearly $1,000 per month in rent, and had a student loan bill that topped $800 a month. To say I was short on cash was an understatement. Bills got paid late, going out was limited, and there was little extra moneyif anything was left over at all. Still, I had what I needed. And that wasn't by chance or good luck; it's because I became really good with the little bit of money I did have. Because I was forced to.

When money is in short supply due to pay inequalities, inaccessible healthcare, and rising costs of living, financial awareness becomes more of a survival tactic than a money habit. For me, learning how to stretch $2,000 to cover a month's rent, bills, food, transportation, and more was a necessity that often resembled a magic act. It can feel impossible to keep a roof over your head, maintain a car, pay all utilities, keep up laundry expenses, maintain your mental health, have some sort of social life, and eat.

But somehow, I did it—using the fight-or-flight skills that so often come with being broke. And while I wouldn't dare go back to living like that or wish it upon anyone, I'm certainly grateful for the much-needed financial lessons that my broke days taught me—lessons that are surprisingly necessary to achieve financial freedom, yet which are missed by so many who actually have money. Here's what I learned about being broke.

What Does Being Broke Mean?

The term "broke," of course, is subjective; a survey of 1,000 Americans cited having less than $878 in the bank account as "broke." But regardless of your definition, broke or poor or otherwise financially struggling people are forced to make tough decisions every day, gamble with those decisions, and make sacrifices to fund the things that truly matter.

How Broke People Deal With Immediate Financial Needs

Putting off dealing with your financial fears and stresses? That's a luxury that broke people simply don't have. And while the necessity of scrimping and saving does become burdensome (it's exhausting and definitely takes a toll on your physical and mental health), there is a silver lining: Being forced to think about money constantly means you naturally become...very good at thinking about money. For me and many others who have struggled with being broke, that also includes managing money problems and coming up with financial solutions that fit your immediate needs.

Poor people are constantly criticized for prioritizing immediate needs over long-term ones. And yes, just planning for the next thing is not ideal; we should also have opportunities to build wealth, save for retirement, and more. But for me, immediate money planning was my only option during times of financial distress. You can't set aside money for a $1,000 emergency fund when you don't have enough money for rent today. Every day was a financial emergency.

Those optics alone (no emergency fund, no retirement, mounting debt) certainly lend themselves to the illusion that someone is "bad with money." But for me, and many people like me, it's quite the opposite.

How to Prioritize Money When Broke

My broke self knew exactly how much money I had available at all times, when bills were due, and how long I had to replenish my account to avoid costly overdraft fees or penalties if my bank account fell below a certain threshold. (Overdraft fees are one of the reasons why so many people below the poverty line don't have a bank account.) In some cases, I knew down to the minute what time some bills would be withdrawn, so I'd be able to squeeze in an extra side gig at the eleventh hour if necessary to make ends meet.

Poor people are less likely to make many of the financial mistakes that wealthier people do—and are more adept at arriving at accurate conclusions as they relate to determining value and perceived expense.

Sometimes I only had enough money for three bills, yet had five to pay. In these times, I became an expert at prioritizing—via analyzing every payment term, knowing when late fees would be applied, and understanding how long I would have before services got cut off or accounts would be transferred to a collection agency.

It was a never-ending cycle of paying the minimum amount at just the right time—which, of course, didn't make a dent in my balance. But it did leave enough money to put gas in my tank so I could get to work. It's not uncommon for broke people to have to choose between paying the internet bill so they can apply for better-paying jobs or paying the electricity bill before it gets cut off, so they actually have power to use the internet.

How to Make Mindful Decisions About Money

Poorly thought-out purchases on a whim are a privilege that broke people just don't have. We are routinely required to analyze every purchase—because one small slip-up could result in severe consequences. When I was broke, buyer's remorse was a nonexistent phenomenon in my world; there was no mistaking the difference between "wants" and "needs."

While the memes and financial pros may trick you into thinking the reason broke people stay broke is because they keep buying coffee or splurging on the Big Mac with extra cheese, remember: That purchase was most likely a conscious decision that the person debated for days. The few times I splurged on "wants" as opposed to "needs," it was to buy fast-food fries or a sheet mask. I wrestled with these decisions—fully acknowledging that this would mean I'd have less money to apply toward a necessity.

But when you're spending all your free time picking up extra side gigs to barely get by at the expense of your mental and physical exhaustion, a $10 splurge on a "want" can be worth it. It could provide reprieve and the motivation to cycle through the day again. I'd argue that a "want" may even be your wisest expense at times.

How to Avoid Financial Blunders

Prioritizing mental health and motivation is actually a component of reaching financial independence. According to a 2016 Princeton University study, poor people are less likely to make many of the financial mistakes that wealthier people do—and are more adept at arriving at accurate conclusions as they relate to determining value and perceived expense.

Some financial experts suggest that broke people are broke because they make bad choices. But when you're broke, the problem isn't that you're making bad choices. The problem is that you don't have enough choices—so you make the best choice from the options given. Broke people are often choosing between buying everything they need on their budget-friendly grocery list and having enough money to pay their electric bills.

Some of the most financially sound people didn't make good choices; they had good choices—choices that broke people can only dream of making. And that's the problem with a lot of financial advice: It's often directed at middle-class people who make bad decisions rather than at people who have several wealth-building barriers to overcome. These broke people make the best decisions they can with the very little money they have.

Now that I'm no longer broke, I'm still able to take these money management lessons with me as I strive to grow my savings, expand my investment portfolio, and create generational wealth for years to come.

So instead of vilifying poor people for indulging in that latte or going out to a restaurant every few months using money that might have put a small dent in their growing debt, we need to start applauding broke people for making tough money judgments on a daily basis—and celebrating their efforts to sustain life on meager means. Because it truly does take a skilled person to make that happen.

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  1. Shah AK, Shafir E, Mullainathan S. Scarcity frames valuePsychol Sci. 2015;26(4):402-412. doi:10.1177/0956797614563958

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