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So today we’re going to be talking about how to break out of the lower class and i just want to say the best way to do this that i recommend to people is to educate yourself or learn a more valuable skill in order to earn more money however this is not the strategy i’m going to discuss in this video because this is a way that anyone who is in the lower class
Anyone who’s not making enough money can get out of their current situation and get out of the lower class so while i do recommend educating yourself to earn more money because that will help you in the long run that’s typically a long term investment i mean if you decide to go to college that’s a multiple year investment and you can do things to improve your
Situation in the mean time or in a shorter amount of time so i wanted to give more broad advice that would help people in general aside from just telling you to go out there and get a college degree or get a certification of some kind so this is a four step process that should help you get out of your current income situation if you’re someone who is falling into
The lower class if you don’t have enough money if your paycheck to paycheck and you just can’t seem to get by but the first thing i want to do is actually define what the lower class is so if we take a look at the division of wealth here i kind of drew this chart here as in that top sliver there being the top one percent so if you’re in the upper class if you’re
In the top 1% of earners that’s a household income of three hundred ninety thousand dollars or more and then we have below that as the upper twenty percent that is the upper middle-class that’s a household income of $100,000 or more but no more than three hundred ninety thousand and then we have the middle class the middle class is the middle forty percent that
Is a household income between 35,000 and $100,000 and then we have the lower-class and the bottom which is the poverty line this video is this video could help people in the middle class as well who want to push their way into the upper class or people who want to just earn more money and be able to stop maybe living paycheck to paycheck so if you’re in the lower
Class you’re making between 19,000 and 35,000 household income and the poverty line is around 19,000 so below that you or under the poverty line so it really isn’t necessarily me telling you how to earn more money it’s how to be more responsible with the money that you have it doesn’t matter you could be in you know you could be making $60,000 and be paycheck
To paycheck and you could make $200,000 to be paycheck to paycheck that’s more on your financial education and what you’re doing with your money it doesn’t matter how much you make it matters how much you spend and what you’re keeping and what you’re doing with your money so that’s kind of what i’m going to discuss with this video but i want to throw a couple
Statistics at you that were very surprising to me first of all 49 percent of americans are living paycheck to paycheck so basically all the money they have coming in goes towards their expenses and there’s nothing left over at the end of the week so what does that mean that means that their one expense away one major expense away from going into debt because they
Don’t have a savings their paycheck to paycheck that just blew my mind that half of the people out there wanting to people that you see are one expensive way from going into debt because their paycheck to paycheck that is a problem ladies and gentlemen that is a problem and i think that if you guys are smart about what you’re doing with your money you can avoid
Being someone who is paycheck to paycheck so what does that mean if 49 percent of americans are paycheck to paycheck what it means is it’s not just the lower class because if we look at this the lower class is the lower 39 percent but 49 percent of americans are paycheck to paycheck so it’s a division across all the different classes it doesn’t matter how much
Money you make you could still live paycheck to paycheck if you’re irresponsible with the money you’re earning so don’t think this is just a problem for the lower-class you could be making a very small amount of money but you might be responsible with that money and as a result you are actually saving money and you have savings and you have a rainy day fund and
You are not what’s considered paycheck to paycheck which is good the average debt per credit card in the united states is four thousand sixty one dollars and remember most of us have more than one credit card so the average balance being over four thousand dollars is just astounding hopefully you’re not someone in that situation but if you are i’m going to show
You how to improve that situation and how to stop living paycheck to paycheck and kind of break out of that lower class and maybe you know make more money so the first thing you can do that i recommend is to pay off all of your debt so how do you do this the first thing you should do is make a list of everything you owe write it down on the list also write down
The list of the balances as well as the interest rates and then pay off the high interest debt first or do debt consolidation there services out there or they can collectively pool all of your debt together hopefully at a lower combined interest rate than you were paying individually and then you start making your payments you want to avoid the trap of making the
Minimum balance as far as the payment on your credit cards because when you’re doing that you’re paying mostly interest and barely any principal that’s a surefire way to be paying that card off for many years so you want to make sure you’re paying at least the minimum balance and hopefully significantly more and then what you also want to do is if you’re in the
Process of paying off debt if you’re in the process of paying off your credit cards stop using your credit cards don’t use them at all okay so i just want to give you guys an example here of what credit card debt looks like if you’re someone who’s not familiar so the average credit card interest rates on a low to high range the low range average was thirteen point
Two four percent per year and the high range is twenty two point nine nine percent so let’s say you’re someone who is in a serious problem okay you have fifty thousand dollars in credit card debt how much is that burdening you how much is that dragging you down is this the reason that you’re in the lower class is this the reason you’re not able to save up money
And maybe pay for a college education or get yourself moving because the thing is when you invest in yourself that costs money so if you’re someone who wants to invest in a college education you need to save up the money to do that so maybe you’re trying to improve your situation but you don’t have any money maybe it’s because you have debt dragging you down so
If you have $50,000 at thirteen point two four percent interest you’re paying six thousand six hundred twenty dollars a year in interest that’s how much you’re paying every year without is one penny of principal and a zero dollars of principal right there that is all interest or five four two fifty one dollars a month for some people that’s a car payment a very
Expensive car payment for others and maybe your your rent or your mortgage depending on where you live but let’s say you’re on the high end you’re on the high interest rate average of twenty two point nine nine percent at eleven thousand four hundred ninety five as a year before you even touch the principle that $50,000 that’s almost $1,000 that’s 958 dollars
A month that that person would be paying in credit card interest because their $50,000 in debt that is why it is crucial to get on top of your debt before you do anything else because that’s where your money’s going that is where your money is going if you if you are paycheck to paycheck and you’re in debt you need to get rid of that debt and stop contributing
To it by getting rid of those credit cards that is the first thing you need to do if you’re trying to improve your income situation all right so now that you are getting your debt under control what is the next step the next step is to budget your money so what do i mean by this it’s very simple i want you to collect all of your bills your statements as well as
Your receipts now if you’re someone who is not keeping these things i want you to start doing that today okay get a shoebox hopefully a little more organizing a shoebox get a system to organize all of your bills all of your statements and your receipts if you have online banking you can get a history of all of your statements and oftentimes their itemized and
You can sort them to and see where your money is going if you’re not tracking it you have no idea where it’s going you can’t just say oh my money is disappearing because unless you’re getting it stolen from you like the cash is physically being taken out of your pockets then it’s going somewhere and you need to figure out where your money is going okay then what
You want to do is determine your cash flow so how much cash is going in and how much cash is going out it’s your paycheck to paycheck it’s all going out if you’re in debt more is going out then it’s coming in so if that’s the case you need to have less money going out or figure out how to get more money coming in but the first thing you need to do is figure out
How to get less money going out because if there’s a way to do that that’s a good way to get started and then when you have more money coming in it’s more money in your pocket or more money that you’re going to be investing we’re going to talk about that in a second so what i also recommend is if you can go back a couple months go back a year if you’re ambitious
Figure out where your money is going figure out how much money you’re spending maybe you spend a ton of money on the holidays maybe you spend a ton of money in the summer going to bars and doing things figure out where is your money going what are you doing with your money why is there more money going out than there is coming in and then what you want to do is
List all your expenses also remember that there are monthly and annual expenses so maybe you’re someone who pays your insurance every six months maybe you pay for memberships to certain websites certain services once a year make sure you factor those expenses in so if it’s an annual expense divide it by 12 and figure out what it would cost you each month and
Then set aside money for that but we’re going to talk about that in a second setting aside money for planned expenses that’s something else you’re going to have to do but i want to show you guys something very important here you don’t many people don’t realize this but there’s a difference between fixed expenses and discretionary expenses so what are fixed
Expenses these are your necessary expenses these are things you need to stay alive these are things you need no matter what so this is your mortgage this could be your utilities so maybe that’s your water bill your power bill your gas bill that’s your insurance for your car your insurance for your home that’s any loans you’re paying back maybe you have student
Loans that’s your household expenses that’s your groceries that’s your car loan things like that some of these fixed expenses can be lowered for example the amount you’re spending on groceries the amount you’re spending on a luxury vehicle if you have a car that is beyond what you really need so then you also want to look at your discretionary expenses this is
Where you’re really going to find a lot of stuff you can get rid of this is the optional expenses guys this is the alcohol this is the dining this is the entertainment the luxury the convenience maybe you’re a smoker maybe you smoke you knows things other than cigarettes those are things that you are spending money on that are optional expenses and if more money
Is going out than is coming in you really need to get control of your discretionary expenses so i want you to analyze your fixed expenses figure out where you can lower those maybe you’re buying name-brand groceries and you could settle for the do you know whatever the store-brand is maybe you’re spending $100 a week on alcohol and dining maybe you want to quit
Smoking and you know save 10 bucks a day that’s where you need to find the money you need to figure out where your money’s going okay and then eliminate stuff get rid of stuff you don’t need or you know do less of it do less entertaining do less dining once you’ve done that why are you doing this i want to show you guys what you’re trying to accomplish here
You’re trying to accomplish a positive cash flow right now you have a break-even or a negative cash flow if you’re in a bad situation so let’s do this as an example right here this is with $2,500 that comes in that’s their cash in every month okay and they’re in a paycheck-to-paycheck situation because they have some debt they’re paying $500 a month and credit
Card debt and they’re paying down their balance and then they have two thousand dollars of expenses all right so their first step if you follow this is to get rid of your debt so let’s say over time they’re working on paying down their debt they get it down to a $300 a month payment because they’re you know getting their balance down and then they get to a point
Where they have no debt at all they have zero dollars in debt they’re not paying any money and interest now you have a surplus coming in there you have a surplus of cash that was originally going towards debt that’s now not going towards anything so at first you are spending it all on debt now you had a two hundred dollar surplus once you’re getting your bills
Paid down and once you’re debt-free there’s a $500 surplus of money right there the second step here was to budget your money that’s where you’re taking a look at your expenses so let’s say you’re someone who has a lot of discretionary expenses you have $2,000 going out so let’s say you’re someone who decides okay i’m going to quit smoking a pack of cigarettes
A day that’s $300 a month right there next thing you know you have a $300 surplus plus your 200 because you’re down on your debt as well now you have a $500 a month surplus now let’s say you figure out okay i have even more discretionary expenses things i don’t need to be doing i’m spending a lot of money on dining and alcohol you figure out how to find another
$200 a month this is 50 bucks a week this is not a lot of money that’s one night out a week for most people next thing you know you’re debt-free and you found five hundred dollars worth of discretionary expenses that you don’t need you now have a $1,000 a month cash surplus but what do you do with your surplus that’s the biggest thing what do you do with that
The very next thing you’re going to do is set up a rainy day fund because when do we use credit cards we use credit cards when we’re overextended when we can’t afford to pay for something so you want to save up a six month cash surplus enough money to cover all of your expenses for six months i don’t care if it takes you a year two years to save this up whatever
It takes you need this this is an absolute necessity because you’re preventing the need for future credit you’re preventing this from happening again and the way i wanted to show this to you guys as well here if you take a look at this what your idea here is to burn the candle at both ends and shrink both your debt as well as your expenses but you want to eliminate
The need for credit cards in the future and what you can do if you need to draw from that rainy day fund i recommend extending yourself a line of credit paying yourself that interest that’s going to discourage you from using it for things you really don’t need to this is for absolute emergencies this is like you lose your job or next thing you know your furnace
Goes out although your furnace that’s what i say set aside money for planned expenses so if you know your appliances or your roof is going bad start setting aside money for that and a separate account this is like i lost my job type money okay this is like dire straits i need to put food on the table for my family this is not i want the new iphone or i want
To go on vacation and to discourage yourself from doing that charge yourself a 20% interest rate on that but pay yourself that interest so let’s say you have $10,000 in there and you take money out maybe you put 11,000 back because you charge yourself interest and you just build that cash cushion because you’re eliminating that need to use credit cards in the
Future you’re never going to put yourself in this situation again once you do that once you have a six month rainy day fund what’s the next thing you want to do you want to invest alright i recommend the first thing you do is invest in yourself because what you’re going to do is you’re going to increase your cash in you’re going to increase how much money you’re
Making but with your most important part guys you’re not going to increase your standard of living all right this is the mistake that everyone makes this is the step that nobody follows this is why forty nine percent of americans are paycheck to paycheck because they increase their standard of living they make more money and they go okay i deserve a nicer house i
Deserve a nicer car i’m going to buy more things there they’re going to consume and as a result they’re going to have more expenses and they’re going to have more money in and they’re just going to break even you could be breaking even on a twenty dollar an hour job you could be breaking even as a person making $200,000 you could be making money as somebody with
A minimum-wage job it doesn’t matter all it all comes down to is your financial responsibility at the end of the day but i encourage you guys first to invest in yourself the idea is to learn more and earn more so what do you do you save up you go get a college education you get certified in something you start a business you do something i’ve done i’ve talked
About this so many times on my channel i we throw new ideas that you guys as far as things you can do to earn more money so i’m not going to get into it in this video just check out my channel you want to maintain your standard of living that’s one of the most important parts as we said as you earn more you want to keep your expenses the same and you want to
Stay out of debt and you want to increase your cash surplus and what do you do with that surplus you’re going to put any surplus aside cream what goes into your rainy day fund in your planned expenses into assets what are assets that could be stock so it could be bonds it could be buying houses you’re going to buy things that appreciate in value another thing
You want to look at is the difference between assets and liabilities if you don’t understand that you need to educate yourself on that i should probably do a video on that as well now that i’m saying that so i probably will but you want to put your money into assets things that appreciate in value and then what you’re going to do is you’re going to grow pennies
From dollars and reinvest that’s called dividends that’s called earning a return on your investment and reinvesting and that’s how people get freaking rich they put their money to work they’re not working themselves and this is the big picture guys this is how you go from someone who is in the lower class to getting out of your current situation to being able
To afford an investment in yourself to being able to afford a college education or certification then you’re going to figure out how to have control of your money and then you’re going to have a surplus every month that you’re going to put into something that’s also going to grow in value you’re going to make money with your money and you’re going to get out of
The lower class you’re going to get out of your current income situation and there it is that is the solution that’s how you get out of the lower class i hope you guys enjoyed this video i certainly appreciate those of you who stuck around for the whole video i know this was a long one but it was packed with very good information i think this will help a lot
Of people and i hope you guys leave me a comment below and tell me what you think are you planning on following any of these steps and if there’s anything you can add as far as tips maybe you’re someone who has been in a situation where you were in debt and you got out of debt let us know what tips you have if you are new to my channel please consider subscribing
And as always i thank you guys for taking the time to watch this video you
Transcribed from video
FIX YOUR LIFE AND GET OUT OF DEBT! 💰 Break Out Of The Lower Class By Ryan Scribner
