How to save money when you're broke

Many of us want to save money to, say, buy a car, pay off our student loans ... or maybe just go out to dinner with friends without having a mini panic attack when someone suggests splitting the bill.

But meeting a financial goal can be tricky, especially right now. Americans are in more credit card debt than ever before — and prices are rising everywhere. So what should you do if there's something you need or maybe just want that seems out of reach?

Monique White has a few ideas. She's a credit counselor and the head of community at Self Financial, Inc., a credit-building organization that helps people with debt and low credit. No matter what kind of financial shape you're in, "you can set and keep financial goals," she says.

We asked White about some of the different financial conundrums we've been hearing from our audience: How do you save money when you're broke? How do you dig yourself out of debt? Here's her advice.

"There's something I really want to buy, but it's expensive and I have no savings. Where should I start?"

With a plan, says White. What is it that you want? How much will it cost? How much would you have to put aside each week to get it in the time you want?

Before you start stashing funds away, White recommends a detour. Save about 3 to 6 months of living expenses for a rainy day fund. It may feel discouraging to have to put your financial goal on hold, but White insists it's crucial. "Pay yourself first and make sure you have a safety net," she says. "You become financially confident when you have that backing in your savings."

Sometimes you can't put your financial goals on ice for too long. Say you need money to fix your car before it breaks down. In that case, White recommends setting up a couple of savings accounts (watch out for fees, of course!) and contributing whatever you can to both your emergency fund and your car repair fund.

"I'm in a lot of debt. I owe money on two credit cards and have a student loan. Help!"

List out your debts and see how much interest you are being charged for each, says White.

Then — this may come as a surprise — call your creditors and see if they can help. "You can negotiate down some of your interest rates, even lower your payments," she says.

If the thought of calling up your creditors makes you want to run into the hills and hide from civilization forever, White says you can always get a credit counselor to help you make those calls with you or even for you.

White says she makes these kinds of calls with her clients all the time — and the success rate is high as long as people have a good credit score (which creditors use as proof you pay your bills) and a history of on-time payments.

If they agree to be flexible, you can put the extra money that would have gone toward interest payments toward your financial goal.

However, if you don't have a great credit score and make late payments, don't distress, she says.

First, take steps to improve your credit score. Get a free credit report from one of the three credit agencies and see what is pulling down your credit. Then call your creditors and ask if they have a financial hardship plan or could make some kind of accommodation so you can start making on-time payments.

White herself has been in this situation before. Right after college, she went to buy her first car only to discover her credit had been ruined by a credit card she'd taken out during college. She was able to turn her credit around in less than two years and (yes) was able to get her car.

QUICK RED FLAG ALERT!

Unfortunately, there are companies that prey on people in financial stress. Be careful, says White. A lot of so-called credit consolidation companies are actually debt settlement companies that will often charge high fees and can really tank your credit. Vet any company or person before you entrust them with financial information. The Consumer Financial Protection Bureau has a list of providers they recommend. So does the National Foundation for Credit Counseling, the Financial Counseling Association of America and the U.S. Department of Justice.

"Apparently I'll be 100 by the time I can afford the car I want. What should I do?"

If you've paid down your debt and cut extra spending but can't seem to stash away enough income to buy the things you want, White says there is still a way: "Increase your income." Take on extra work. Deliver food, take a temp job or start a side business.

White herself had to start a side hustle during the pandemic to make ends meet after having twins. "It hit my household financially. I was on maternity leave and was getting reduced pay," she says.

So she got creative. White came up with her own small business putting together charcuterie boxes for people who were eating outdoors during the pandemic — and White got the extra money she needed.

"An emergency has come up. Do I have to pay for it using my rainy day fund? I worked so hard to save that money."

Yes, says White. Use your rainy day fund to deal with your emergency — along with any other savings you have in your bank account.

It might feel crushing, but this is an important moment, she adds. "I would feel extremely proud you had the money to cover that unexpected expense."

Then take a moment to reset your financial goals and move forward, says White. "That's everyone's journey when it comes to their finances: We're always shifting; we're always reprioritizing."

Your turn: How do you save when money is tight?

Give us your best tips and advice. Email lifekit@npr.org with the subject line "Money saving tips." We may include your response in a story on NPR.org.

The audio portion of this episode was produced by Clare Marie Schneider. The digital story was edited by Malaka Gharib. The visual editor is Beck Harlan. We'd love to hear from you. Leave us a voicemail at 202-216-9823, or email us at LifeKit@npr.org.

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