Meet "Broke Betty." Broke Betty is single and in her mid-20s. She has negative $250 of “financial fuel” most months. On average, she earns $3,650 after taxes and spends close to $3,900. This gap has led to no savings, $4,500 of credit card debt, and several past due medical bills. Sure, Betty wants to pay off the debt and build an emergency fund, but she doesn’t have the money. Each month feels worse than the last. She’s keenly aware of the overdraft fees, low account balances, and deferred payments. She knows this path isn’t sustainable. Still, she doesn’t see a clear solution. Broke Betty is stressed. In this blog, we'll break down Betty's situation as a case study for managing money in your 20s.

Which financial tools will help Betty?

Increase Income

Betty needs to make more money each month. First, Betty must commit to 55. This is the number of hours per week Betty needs to work toward earning money. If 55 is unrealistic, try 50. If 50 is too much, start with 41. For now, Betty must invest more of her time toward making money to get over the hump and build positive financial fuel.

Cut Expenses

The second option for Betty to build fuel is cut her expenses. Betty’s core expenses include rent/mortgage, utilities, cell phone, insurance, transportation, food, and medical. She also has discretionary expenses; however, helping Betty reduce her core costs will have a positive spillover effect on the overall budget.  

Avoid More Debt

Increasing income and cutting expenses will help Betty get to positive financial fuel.  Change will not happen overnight. Instead, life happens. Bills happen. Birthdays happen. Holidays happen. Emergencies happen. When they do, it’s critical that Betty doesn’t go deeper into debt. So, what are her alternatives? Betty needs to eliminate short and long-term dependence on credit.

Start Budgeting

The last step to help Betty increase her financial fuel is encouraging her to track progress. She’ll need a simple way to track her financial fuel and lots of encouragement along the way. Remember, what gets tracked gets improved.

A Healthy Dose Of Patience

It takes 6-12 months for Broke Betty to have consistent, positive financial FUEL. While each situation is unique, the tools above will give her the power to make progress and achieve her financial goals.