WHAT TO DO IF YOU ARE BROKE ❌💰

Summary

In this video, the speaker discusses how to improve your financial situation when you're broke. He emphasizes that there’s no one-size-fits-all solution, but suggests two key approaches: reducing expenses (the defensive approach) and increasing income (the offensive approach). By cutting discretionary spending and finding ways to earn more, viewers can create positive cash flow. The ultimate goal is to invest that extra cash, growing wealth over time. The speaker stresses the importance of combining both strategies for lasting financial improvement, offering actionable steps for anyone willing to put in the work.

Takeaways

• 😀 There is no quick fix to getting out of financial hardship—avoid get-rich-quick schemes like starting a Shopify store or buying Bitcoin.
• 😀 If your income equals your expenses, you're not in the worst situation, but if expenses exceed income, you're heading into debt.
• 😀 Cutting down on discretionary expenses (like cheaper groceries or using coupons) is a good short-term strategy to save money.
• 😀 The defensive approach (cutting costs) can only go so far—it helps but doesn't solve the core issue of not having enough income.
• 😀 The offensive approach to financial improvement is to focus on increasing your income through extra work, side jobs, or education.
• 😀 Combining both the defensive and offensive approaches—cutting costs and increasing income—is the most effective way to improve your financial situation.
• 😀 Positive cash flow is key: the difference between your income and expenses can be used for savings or investments.
• 😀 Many people don't realize where their money goes because they don't track their expenses—knowing this is crucial for financial health.
• 😀 Investing positive cash flow into stocks or index funds can lead to long-term wealth growth and financial independence.
• 😀 The goal should be to move from earning money through active means (working more) to generating passive income through investments or business ventures.
• 😀 Always do your research before getting involved in business opportunities and understand that most claims of easy money are misleading.

Q & A

What is the main point of the video?

The main point of the video is to provide practical advice on what to do if you're broke, focusing on two strategies: cutting expenses (the defensive approach) and increasing income (the offensive approach).

Why is the speaker against offering a one-size-fits-all solution?

The speaker believes that financial situations vary from person to person, and offering a single, definitive solution like starting a business or investing in certain assets is unrealistic. Everyone's situation is unique, and what works for one person may not work for another.

What is the defensive approach in personal finance?

The defensive approach involves cutting down on discretionary expenses, like buying generic products, using coupons, or reducing luxuries, in order to create positive cash flow and avoid further financial strain.

Can cutting expenses alone solve financial problems?

No, while cutting expenses can help reduce financial strain, it has limits. You can only cut expenses so far, and eventually, the key to improving your situation lies in increasing your income.

What is the offensive approach, and why is it important?

The offensive approach involves increasing your income, such as through side hustles, part-time jobs, or further education to enhance earning potential. This is important because boosting your income directly addresses the root cause of being broke: insufficient cash flow.

Why does the speaker recommend both approaches—defensive and offensive—together?

Combining both approaches is the most effective strategy. By cutting unnecessary expenses and increasing your income, you can maximize your positive cash flow, which is the key to improving your financial situation.

What should be the end goal when improving financial health?

The end goal should be to increase positive cash flow by both saving and earning more, ultimately allowing you to invest, save for future goals, and move toward financial stability.

What practical steps should you take first when you're broke?

The first step is to track your expenses. Many people don't realize where their money is going, so identifying and cutting unnecessary spending is crucial before attempting to increase income.

How does understanding expenses help improve your financial situation?

By understanding where your money is going, you can identify areas where you can cut back. This provides an immediate way to reduce financial strain and start saving or investing for the future.

What is the speaker's personal experience with the defensive approach?

The speaker shares a personal story from when they were 15, helping their mother manage finances after a divorce by clipping coupons and shopping for sales to make ends meet. This experience highlights the importance of cutting expenses when necessary.