7 Reasons Why You Are Broke
There is a false belief amongst most people who struggle with money. The belief is that being poor is a lack of money. While they are correct by definition what they miss is that the main difference between them and wealthy people usually has more to do with mindset and daily habits than anything else.
Personal finance can seem difficult or almost impossible at times, but with a bit of help and self-realization, you could be on track to a new you! Let’s take a look at some of the most common money-making mistakes, and see if we can help you avoid them.
You Don't Have a Budget
The top of my list, for people who struggle with money, is not having a budget. A budget is something that so few people do, for so many different reasons. They believe they are too difficult, or that perhaps they believe they are “good” with their money. Many just don’t want to bother gathering up the paperwork. This is a huge mistake that could be costing you $100’s in savings.
I can’t stress enough how important a budget can be. Before doing my first budget I assumed I was making all the right decisions, and thought there was nothing I could improve on in my financial life. I of course was wrong just like most everyone else who assumes the same. A budget is the first step for any person who wants to make a real change in their life. Stop making excuses and start a budget right now!
Impulse Buying
Impulse buying is something everyone suffers from. Even the biggest penny pincher will fall victim to this money-wasting behavior. In fact, some studies show that shoppers make at least one impulse purchase each week. Those impulse buys add up to $5,400 each year, on average. Depending on the product, impulse buys can make up to 80% of all sales. It’s easy to see how this activity can cut into your saving potential and can’t be left unchecked.
Don’t be disheartened. I have a way of keeping you from impulse buying yourself into poverty.
I use this method all the time and it has served me well over the years. I am proud to say I am often described as “the most frugal person I know” by many of my friends. But, I will let you in on a little secret, I have the same tendency to overspend as many other people.
I often overspend when I have “too much” money in my checking account that is easy for me to access. We all have a number that when you see it in your account you tense up and a feeling of dread overtakes you. This number will be different for everyone. For some, it will be $2000 for others it won’t be until $200. Whatever that number is, keep that amount in your checking account and have another account where you “hide” the rest of your money. I use an account that takes 2 business days for the cash to transfer over. This allows for a “cooling off” period and gives you time to decide if the purchase is a want or a need. This is by far my favorite way to keep from making unnecessary purchases and I implore you to give it a try!
You Are Blaming Someone or Something Else
Excuses are like an a**hole, everyone has one! Making excuses is the thing I see my friends and coworkers do the most that keep them from meeting their goals. There is always someone or something else to blame other than themselves. It is human nature to blame others and to believe that you are making all the right decisions. If this describes you don’t be too hard on yourself. You are making a huge step forward by reading this article, and perhaps you will start to see some positive changes in your life as you take control of your finances.
I’m not a doctor or a life coach, and blaming others can stem from anywhere in your past. If you have some deep-seated issues, it is best to speak with a professional. But, perhaps you are just unwilling to take charge of your life and your decisions. I see many of my friends and colleagues doing this, unwilling to take the difficult path. All I can say is if you are unhappy with your current financial state, you deserve better, and the only one who is going to improve your situation is you. So take charge of your life, and stop making excuses. Start by making a budget, find like-minded people to talk to, and get motivated to make a new you. Drop a comment below about your struggles with finances! I would love to be your cheerleader.
You Don't Have Any Goals
When it comes to anything in life, without a goal to aim for, it is difficult to find your way. I believe that not having a financial goal is what undercuts most people’s ability to save. The excuse I hear the most for not saving for retirement is it is too far into the future. If every young adult in the US started with simple, long-term goals for retirement, the social security crisis in America, would no longer be an issue for most future retirees!
I know, I know! Retirement isn’t as sexy or appealing as a brand new Lexus! Well then, set short-term goals for what you want. Having a goal of something important to you makes it easier to avoid spending on things that don’t rank as high on your list. Skip ordering out at work, and instead pack your lunch. Then put that money you saved into your “Lexus Fund”! It’s hard to save up for a Lexus but you get the idea. Whatever it is that you want, set a goal, and aim for it!
You Compare Yourself to Rich People
Becoming independently wealthy takes a ton of self-discipline and hard work. Most people don’t think about the sacrifices most millionaires had to make to create their wealth. What they do think about are beautiful homes and luxurious vehicles! This is a mindset that will set you up for failure.
Sadly we live in a society that puts more value on a high-end sports car than a well-funded retirement account. People feel they need to look rich instead of making decisions that will lead to wealth in the future. Clearly buying homes and cars that you can barely afford, to impress your friends, is no way to improve your financial health. Instead of impressing your friends with all the money, you don’t have to spend, try and flip the script. Impress your friends with your ability to make sacrifices for what you want. Instead of buying a $7 coffee in the morning, come in proud of your home-brewed coffee only costing Pennie’s. Buy the smaller cheaper car that gets better gas mileage, skip ordering out for lunch and pack instead, or perhaps buy a fixer-upper home and do some DIY projects to make your dollar stretch further. People will find your ability to make the hard decision inspirational, and you may be able to influence some people yourself.
You Play the Lottery
Many in the financial community call the lottery a tax on the poor. This is precisely what it is, as most people who play the lottery are people who are lower earners. Many of these people feel the lottery is the only way to escape from their current life so they tend to use a higher percentage of their income to buy lottery tickets than higher earners. The saying “you gotta play to win” is a common saying to deflect from the hard truth, you likely will never win any meaningful amount and could have been working on daily or weekly savings with a much higher likelihood of improving your life in the future.
I have never been one to play the lottery, but when colleagues had an office pool I didn’t want to be left out. I almost gave in but what helped me was a visual representation of my chances of winning the lottery. This is the site I saw that put it into perspective for me. I’m not saying don’t put some money in the office pool, but just be aware of your actual chances of winning. After viewing this hopefully, you will start putting that extra $10 a week towards your car payment instead of throwing it away in the lottery.
You Surround Yourself with the Wrong People
Surrounding yourself with the wrong people goes along with comparing yourself with rich people. These are the people who pretend to be rich but are deep in debt and can’t afford anything. These types are best to be avoided. Find like-minded people who put saving over amassing more debt. There are more of us out there than you think, and we all have our reasons for doing it. I for one would much rather work less and spend more time with my family than have a larger house. Surround yourself with people who appreciate time with friends and family over working overtime to afford more “stuff.” This will make it easier to stop comparing yourself to others and focus on your own goals.
The key to finding success in life, I found, is to do the opposite of what most people are doing. You are going to take some heat for it. People like to normalize their bad spending habits and hate to see someone who can control themself. Look around and decide if you want to live the same “rat-race” lifestyle as your friends, colleagues, and family. If it’s not then start today by educating yourself and putting a plan into action, you don’t have to struggle with finances like everyone else!
