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Gen Z credit card debt is up over 50% year-over-year. The average balance is around $2,800. The average interest rate is a frickload!

It’s actually 22%. Which if you didn’t pay anything towards a balance of $2,800 would make it bloom to over $3,400.

The wild part isn't that people are in debt. It's that most don't know exactly how they got there. A moment on the “I’ll pay it off later…”-hips is a lifetime on the “frickload of credit card debt”-hips honey!

If you think credit card companies are looking out for your best interest (see what I did there?), THINK AGAIN.

Credit card companies aren't evil geniuses. They just designed a system that's extremely easy to fall into and extremely expensive to climb out of.

And if you’re broke, it makes it a lot easier to see a credit card as a financial saint than a satan.

So let’s learn how to budget when you’re broke.

Let’s say you work 15 hours a week at $15/hour. After taxes, you're clearing about over $800/month. Your phone bill is $50, and Spotify, Netflix, and whatever other subscriptions you have get you to another $30 a month.

You have $720 left.

If you’re a student this may mean you have little to no actual bills like rent or food. But maybe you do, and that makes this margin much more thin.

So how do you decide what to do with your cash?

Make sure you are covering essentials before anything else. Rent, food, transportation, all these should come first.

For some this may take up the majority of their paycheck, and that’s ok, what’s important is that these expenses are covered.

In our example above we’ll assume rent costs you $500 a month (you have 6 roommates sharing 1 bunk bed), and that you don’t have to cover food because you’re on a dining plan. This will not be the case for everyone, adjust accordingly.

You have $220 remaining.

Savings isn’t always Investing. Sometimes there are higher priorities. If you’re in credit card debt, savings may be paying down the debt that you have.

If you’re financially independent, you need to have an emergency fund. Chances are you’re being paid hourly. What happens if you come down with a serious case of chlamydia and can’t make it to work? Yeah, emergency fund (and maybe some protection) has got you covered.

We’ll assume between potential credit card debt and emergency fund savings this costs you another $150. You have $70 remaining.

Wants comes last in this case because if you’re broke, you unfortunately have to prioritize needs and savings first.

This is the category where your Spotify and Netflix subscriptions fall. Believe it or not, your “Heated Rivalry” obsession is not a necessity.

Most people skip this exercise because the answer scares them. But knowing you have $70 left to spend on whatever you want is infinitely better than finding out you have -$60 later. Or crippling credit card debt.

Just saying.

Note: If you have variable income (as in sometimes you make more sometimes less) take a conservative estimate of the minimum amount you’d make in a month, and budget based on that.

Say you’re not the biggest fan of doing this whole budget thing.

Fine. Force yourself to.

Move needs and savings money out of your checking before you can spend it. Live on what's left. Repeat.

Figure out what you need for whatever you’re most important purchases are, and automatic transfer that baby away to a savings account or preferably a High Yield Savings Account (HYSA) so that when you need that cash you have it. Then you can spend the rest guilt free.

If traditional budgets make your eyes glaze over, start here.

Also, quick reminder that I am not sponsored by any of the tools I note here. I wish I was! These are just the tools I use.

You have two options this week:

The overall moral is do your best to avoid credit card debt. It’s scary. It is the monster under your bed. They don’t deserve you.

And if you have credit card debt. Budget to pay your way out. Happy to help if you send me an email. ;)

Thank you so much for being a part of this newsletter. I am grateful to write to you weekly and I hope this helps you feel more confident with your finances.

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