7 Tips for Breaking the Cycle of Poverty

Breaking free from a cycle of poverty is one of the most difficult financial challenges to overcome. The U.S. Census Bureau reported that in 2023, nearly 37 million Americans were living in poverty. And while this figure represents a slight decrease compared to the previous year, statistics still show that around 11% of people in the U.S. face the difficulties associated with a life of poverty.^[1]

For families, this type of financial struggle often passes down from one generation to the next, creating long-standing cycles that feel impossible to escape. But the truth is that while breaking the cycle of poverty is far from easy, it is doable.

Making meaningful progress can be complicated, of course. Overcoming poverty often requires a mix of mindset shifts, access to resources, addressing financial trauma, and making small but consistent steps toward stability. In this guide, we’ll cover seven strategies that can help individuals and families build a foundation for financial stability and long-term success.

1. Prioritize education and skill building

One of the most effective ways to break the cycle of poverty is to make education a priority. Education (or a lack of it) can have a huge impact on your earning potential. It’s also a strong predictor of upward mobility.

According to 2024 data from the U.S. Bureau of Labor Statistics (BLS), median weekly earnings for a full-time worker with less than a high school diploma are $734. Meanwhile, the median salary for a high school graduate is $946, and workers with advanced college degrees earn a median income of $1,916 per week. When you compare workers without a high school diploma to those with advanced degrees, the difference translates to over $60,000 per year.^[2]

When it comes to investing in your education, you have numerous options (all of which have the potential to benefit you in different ways).

• Formal education: Options may include high school completion, vocational and trade training, and higher education. Earning a trade certificate, associate’s degree, bachelor’s degree, or advanced degree could dramatically increase your earning potential.
• Skills certifications: Short-term training programs, like coding bootcamps, certain trade licenses, or IT certifications, could quickly open doors to better-paying jobs without the cost of a full degree.
• Continuous learning: Free or low-cost online courses (through platforms like edX, Coursera, or local libraries) let you audit classes for free to explore educational paths before committing.^[3][4] While auditing alone won’t land you a job, it may help you test different fields and decide if further training or certification is worth the investment.

Investing in education, either for yourself or your children, can create ripple effects that extend across multiple generations. The Department of Education also provides online resources to help you better understand the different types of financial aid for college and career school.^[5]

2. Create a realistic budget (and stick to it)

Building a budget is another key step for anyone wanting to improve their financial situation. Unless you have a clear picture of where your money is going each month, it’s nearly impossible to break free from financial instability.

For many people living in poverty, this challenge is made harder by the nature of the low-wage labor market. Earnings and hours often fluctuate because of factors like unpredictable scheduling, seasonal demand, and a lack of paid leave (not due to personal preference).^[6] But a budget can help you navigate that uncertainty and plan ahead during times of inconsistent income.

If you’re new to budgeting, the tips below can help.

• List income and expenses. Use a budgeting app (like Goodbudget, WalletHub, Monarch Money, EveryDollar, YNAB, or Honeydue). Many online budget apps offer a free version, and your bank may offer built-in budgeting tools as well. Yet there are often upgraded, paid versions of these apps as well. And it’s important to be sure that they’re worth the added cost before you get too invested. If apps or online budgeting tools feel complicated, a simple notebook and paper work, too. Plus, you can find free budget worksheets online, like this option from the Federal Trade Commission.
• Separate needs from wants. Within your budget, make space for essential spending categories like housing, food, transportation, and healthcare first. (Though, you can still look for opportunities to save within these budget categories as well.) From there, set limits on non-essential spending.
• Identify your financial goals. A budget without a plan just feels like deprivation. So, it’s important to map out the reasons you’re going through this exercise. Perhaps you’re building an emergency fund (even slowly) to avoid payday loans or new debt. Maybe you want to pay down high-interest credit card debt. Whatever your financial goals, define them clearly and it should become easier to say “no” to spending that doesn’t align with your long-term plan.
• Plan for irregular income. If your income fluctuates, base your budget on the lowest amount you might bring home. This approach should help you avoid overspending. If you earn more than this amount, you can direct any extra income toward other key financial goals. For example, you could create a savings buffer for months with lower earnings, add money to an emergency fund, pay down debt, invest in your education, and make other financial moves that improve your situation.

People who use even a simple budget are more likely to pay bills on time, build savings, avoid late fees, and pay down debt (or avoid it in the first place).^[7] But not having a budget can lead to financial stress and a lack of confidence about the future.^[8]

3. Build your credit

Credit can either be a ladder you use to climb out of poverty or an obstacle that keeps you stuck. Good credit can make it easier to access loans (and competitive interest rates), affordable housing, lower insurance rates, and even certain types of jobs.

Yet despite the importance of having good credit, many people struggle in this area. Experian reports that close to 106 million Americans lack access to competitive interest rates because they either have no credit or bad credit scores (also known as subprime credit).^[9]

The good news is there are steps you can take to build credit over time, including:

• Open a credit card. A secured credit card may be a good choice if you’re just starting the credit-building process or if you have damaged credit. No matter what type of card you open, manage it responsibly with on-time payments and a low credit utilization rate.
• Consider a credit builder loan. Unlike traditional installment loans, a credit builder loan can help you build credit history and savings even if you have poor or limited credit history. With this type of loan, the lender places the loan proceeds in a savings account or CD while you make your monthly payments. At the end of the term, you’ll receive the lump sum you borrowed (minus interest and fees). In the meantime, the lender may also report your monthly payments to Equifax, TransUnion, and/or Experian. (Note: Self reports to all three major credit bureaus.)^[10]
• Get credit for bills you’re already paying. Consider signing up for a third-party service that reports your rent and utility payments to one or more of the major credit bureaus. These types of accounts don’t typically appear on your credit reports (unless you stop paying them).^[11] But you can use services like Self’s Rent & Bill Reporting* to proactively share this type of bill payment information with the credit bureaus and build credit in non-traditional ways.
• Become an authorized user. Ask a family member or friend to add you on their credit card account as an authorized user. If they agree (and if the card they add you to has positive credit history), being an authorized user might give you a headstart on your credit-building journey.

Good credit won’t solve every problem when you’re trying to overcome significant financial obstacles. But it does have the ability to help you save money in numerous ways. Good credit can also provide access to affordable financial tools and solutions with the potential to help you move forward.

4. Establish an emergency fund

A lack of savings is one reason why many families fall deeper into poverty when unexpected expenses come up. According to the Federal Reserve’s 2024 Survey of Household Economics and Decisionmaking, 37% of Americans would struggle to cover a $400 emergency with cash.^[12]

Of course, saving money can feel overwhelming when you’re living on a tight budget. But building an emergency fund can be life changing, even if you need to start small.

Remember:

• Saving even $10 to $25 per paycheck adds up over time.
• Keep your savings in a separate, accessible account (like a high-yield savings account where you’ll earn more interest on your cash).
• Aim for at least $1,000 as a starter emergency fund, then set a bigger goal.
• Stay consistent. Consider setting up automatic withdrawals and treat your savings goal like a bill.

Having even a small financial cushion can help you reduce reliance on predatory payday loans, cash advances, or high-interest credit card debt. These forms of debt often trap families in cycles that are difficult to escape. So, any savings you can create can be a meaningful step toward long-term financial stability.

5. Seek out community and government resources

Breaking the cycle of poverty can be incredibly difficult. It’s important to acknowledge this fact and accept that you don’t have to approach the challenge on your own.

There are numerous resources available at the local, state, and national levels that can provide you with an added safety net. Below are a few to explore.

• Food assistance: Programs like Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children program (WIC), and local food banks may help ease grocery costs and potentially relieve some strain from your monthly budget.^[13][14][15]
• Healthcare support: Medicaid, Children’s Health Insurance Program (CHIP), and community health clinics provide access to affordable medical care.^[16][17]
• Housing help: The U.S. Department of Housing and Urban Development (HUD) offers rental assistance and housing counseling for families seeking safe, stable living conditions.^[18]
• Education and childcare: Head Start and similar programs support families with young children. StudentAid.gov also provides details about financial aid options for college and career training, including grants, loans, scholarships, and work-study programs.^[19][5]

You may find community and national nonprofit organizations that focus on breaking generational poverty through job training, financial coaching, and housing support. Examples include Feed the Children and RaiseUp Families.^{[20] [21]}

Asking for help can be difficult. But remember that it isn’t a sign of weakness. It’s a proactive step toward building a stronger financial future.

6. Focus on mental health and stress management

Living in poverty is incredibly stressful, and that stress can influence the decisions you make. The American Psychological Association found that financial stress can reduce long-term problem-solving skills. People without the resources to meet their immediate needs might choose short-term fixes, even if they cost more or hold them back in the long run.^[22]

If you’re struggling with negative thoughts or feelings related to money, you’re not alone. Financial stress is one of the most common sources of anxiety for adults in the United States. And over time, debt and financial strain can lead to problems such as lower self-esteem, reduced productivity, and even depression.^[23]

Strategies that may help you cope with financial stress include:

• Community counseling: Many nonprofits offer low-cost or free therapy services you can explore.
• Exercise and routine: Even short daily walks may improve mood, overall mental health, and resilience.
• Keep a journal: Writing down your thoughts may lower stress levels and boost your mood.
• Get an accountability partner: Share your goals with a trusted friend or family member. Talking openly about progress, wins, and setbacks can provide encouragement and reduce feelings of isolation.

Breaking the cycle of poverty requires both mental and emotional stamina. Taking care of your mental health puts you in a better position to make clear, healthy financial choices.

7. Set long-term goals (and celebrate progress)

Improving your financial situation isn’t about quick fixes. Instead, it requires creating a plan that prioritizes your long-term financial goals. Most importantly, you need to follow that plan on a consistent basis—even when progress feels slow.

Here are some tips you’ll want to keep in mind.

• Set specific financial goals. These might include short-term goals (like paying off $500 in debt or saving $1,000 in an emergency fund) and long-term financial goals (such as earning a college degree or helping your child do the same).
• Celebrate milestones. Recognize that small wins build momentum. Don’t get so focused on the big picture that you forget to enjoy the journey.
• Think about generational change. Even small steps forward improve the odds for your children and future generations. Your hard work today can have long-lasting impacts for your family.

According to the National Academies of Sciences, Engineering, and Medicine, around 34% of children who grew up in households at or near the poverty level in the 1980s were still living in low-income households by their 30s.^[24] For those who do overcome poverty, common factors include education, access to healthcare, stable employment, and consistent long-term planning. The small actions you take today can shape a dramatically different future for yourself and your family.

Bottom line

Poverty is complex, especially if it’s something you’re facing on a generational scale. Breaking free from a cycle of poverty often requires a long-term plan, consistency, and more than one solution.

Focus on factors you can control by making small, positive changes. Invest in education, budgeting, credit building, and finding community resources to support your journey. Along the way, be sure to prioritize your mental health and save as much as you can afford toward short- and long-term financial goals.

No single action will erase poverty overnight. But when you take these steps together (and on a regular basis), these strategies can help you move closer to financial stability. Every bit of progress matters, both for yourself and future generations that follow.

*Results vary. You may not receive an improved credit score. Not all lenders use scores impacted by rent/utility payments.

Sources

1. Census.gov. “Poverty in the United States: 2023.” https://www.census.gov/library/publications/2024/demo/p60-283.html
2. BLS.gov. “Median weekly earnings $946 for workers with high school diploma, $1,533 for bachelor’s degree.” https://www.bls.gov/opub/ted/2024/median-weekly-earnings-946-for-workers-with-high-school-diploma-1533-for-bachelors-degree.htm
3. BusinessInsider.com. “Why edX, a learning platform founded by Harvard and MIT, should be your go-to for free and affordable career development.” https://www.businessinsider.com/guides/learning/edx-overview-faq
4. USNews.com. “What to Know About Coursera.” https://www.usnews.com/education/coursera-overview
5. Studentaid.gov. “Types of Financial Aid: Grants, Work-Study, and Loans.” https://studentaid.gov/understand-aid/types
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7. PMC.NCBI.NLM.NIH.gov. “Impact of financial literacy, mental budgeting and self control on financial wellbeing: Mediating impact of investment decision making.” https://pmc.ncbi.nlm.nih.gov/articles/PMC10645357/
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9. Experianplc.com. “Experian and Oliver Wyman find expanded data and advanced analytics can improve access to credit for nearly 50 million credit invisible and unscoreable Americans.” https://www.experianplc.com/newsroom/press-releases/2022/experian-and-oliver-wyman-find-expanded-data-and-advanced-analytics-can-improve-access-to-credit-for-nearly-50-million-credit-invisible-and-unscoreable-americans
10. Support.Self.inc. “Does Self report to all three credit bureaus?” https://support.self.inc/s/article/Does-Self-report-to-all-three-credit-bureaus
11. Chase.com. “Does paying monthly bills build your credit history?” https://www.chase.com/personal/credit-cards/education/build-credit/does-paying-monthly-bills-build-credit-history
12. FederalReserve.gov. “Report on the Economic Well-Being of U.S. Households.” https://www.federalreserve.gov/consumerscommunities/sheddataviz/unexpectedexpenses.html
13. FNS.USDA.gov. “Supplemental Nutrition Assistance Program (SNAP).” https://www.fns.usda.gov/snap/supplemental-nutrition-assistance-program
14. FNS.USDA.gov/WIC. “WIC: USDA’s Special Supplemental Nutrition Program for Women, Infants, and Children.” https://www.fns.usda.gov/wic
15. FeedingAmerica.org. “Feeding America.” https://www.feedingamerica.org/find-your-local-foodbank
16. Medicaid.gov. “Keeping America Healthy.” https://www.medicaid.gov/
17. Healthcare.gov. “The Children’s Health Insurance Program (CHIP).” https://www.healthcare.gov/medicaid-chip/childrens-health-insurance-program/
18. HUD.gov. “U.S. Department of Housing and Urban Development.” https://www.hud.gov/helping-americans
19. HeadStart.gov. “U.S. Department of Health & Human Services.” https://headstart.gov/
20. FeedtheChildren.org. “About Us.” https://www.feedthechildren.org/about/
21. RaiseUpFamilies.org. “About RaiseUp Families.” https://raiseupfamilies.org/about/#:~:text=Since%201994%20RaiseUp%20Families%20has,and%20teaching%20invaluable%20budgeting%20skills
22. APA.org. “Take the money now or later? Financial scarcity doesn’t lead to poor decision making.” https://www.apa.org/news/press/releases/2023/09/financial-scarcity-decision-making#:~:text=Overall%2C%20they%20found%20that%20when,or%20$300%20several%20months%20later
23. APA.org. “Face the numbers: Moving beyond financial denial.” https://www.apa.org/topics/stress/money
24. NationalAcademies.org. “New Report Identifies Policies to Reduce Intergenerational Poverty in the U.S.” https://www.nationalacademies.org/news/2023/09/new-report-identifies-policies-to-reduce-intergenerational-poverty-in-the-u-s

About the author

Michelle Lambright Black is a nationally recognized credit expert with two decades of experience. She is the founder of CreditWriter.com, an online credit education resource and community that helps busy moms learn how to build good credit and a strong financial plan that they can leverage to their advantage. Michelle's work has been published thousands of times by FICO, Experian, Forbes, Bankrate, MarketWatch, Parents, U.S. News & World Report, and many other outlets. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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