8 Reasons Why I am Always Broke
Do you seem to be saying “I am always broke” more often than you would like? There is a false belief amongst most people when it comes to money… The belief is that the only difference between broke people and everyone else, is a lack of money.
While they are correct by definition what they miss is that the main difference between financially successful people and most people who are living paycheck to paycheck, frequently has more to do with the right money mindset and daily habits more than anything.
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.
1 - You Don't Have a Budget
The top of my list, for people who struggle with money, is not having a budget. Although budgeting has many benefits, it is often overlooked by people due to a variety of 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 hurting your bank account balance more than you think.
Establishing a budget is of utmost importance and should not be taken lightly. Before I began to budget, I assumed that my financial decisions were flawless and there was nothing more for me to do in order to improve my economic wellbeing. 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 the way they spend money. Stop making excuses and start a budget right now!
2 - No Emergency Fund
Being broke is no fun. It’s even less fun when it happens on a regular basis! It might not feel like you have much of an option, but having an emergency fund can make all the difference.
The persistent cycle of needing money for unexpected costs, and not having any, puts us in the incredibly difficult position of either having to borrow from friends or family, or worse – resorting to high-interest credit card debt, neither of which has a positive outcome. Putting away a portion of each paycheck for an emergency fund can help stop the endless cycle of being stuck with no options.
3 - 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.
How to avoid impulse buying
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. Once you cover basic living expenses, we all tend to spend until we get to a certain amount in our accounts. Once you go below that number you tense up and a feeling of dread overtakes you. Your money mindset will change and instead of impulse buying you’ll spend less.
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 bank 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 spending more money and I implore you to give it a try!
4 - You Are Blaming Someone or Something Else
There are lots of great sayings when it comes to excuses, and everyone loves making excuses for bad habits we have. If I had to pick the one activity that my friends and colleagues indulge in, holding them back from financial security, it would have to be making excuses.
Blaming anyone or anything other than ourselves is an instinctive response to our own missteps. Despite knowing we are usually the ones in the wrong, human nature persuades us to forge ahead and confidently assume that our actions are correct all of the time.
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.
It’s easy to blame others, or feel that the system is unfair, but none of that is going to help your personal finances. If you want to be more financially successful, you need to look at the bigger picture. Take ownership of your spending problem, educate yourself, and save more money for you and your family.
5 - 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. This is especially true when it comes to money management.
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!
Planning for retirement can sometimes feel like a daunting and insurmountable challenge. When considering the amount of time between now and retirement, it can be hard to know where to begin or what savings goal to set.
The important thing is to not get overwhelmed; instead, focus on setting a short-term goal. Once you have achieved that first goal, you will have motivation to plan and save money for the long-term future.
6 - 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.
Instead people tend to focus on the beautiful homes and luxurious vehicles! This mindset will only set you up for failure when it comes to building wealth.
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 expensive cars that you can barely afford, to impress your friends, is no way to improve your financial health. Instead of impressing your friends by spending money you don’t have, try a different approach.
Impress your friends with your self discipline
Impress your friends with your ability to make sacrifices for what you want. Instead of buying a $5 cup of 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.
7 - You Play the Lottery
Many in the financial community call the lottery a tax on poor people. This is precisely what it is, most people who are always broke, are also the same people who play the lottery.
It’s a common belief, of a good deal of people, that the lottery is the only way to become rich. This is why low earners tend to use a higher percentage of their income to buy lottery tickets than higher earners.
The saying “you have to play to win” is a common saying to deflect from the hard truth, you likely will never win any meaningful amount from the lottery. Instead of wasting your hard-earned money, you should be investing it into a savings account. Doing so will not only guarantee a positive financial change in the future but also provide more security and stability to your life.
Although I’ve never been much of a gambler, when my colleagues started an office lottery pool, I didn’t want to miss out on the fun. 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.
Although putting a few dollars in the office pool may be enjoyable, make sure you understand your actual odds of winning. After reading this article, I hope you will start to put that extra $10 weekly towards paying off your car loan rather than losing it on lottery tickets.
8 - You Surround Yourself with the Wrong People
Surrounding yourself with the wrong people makes it nearly impossible to make the personal finance decisions necessary to avoid being broke. 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 money over amassing more bad 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.
I’ve realized that the secret to achieving success is doing something contrary to what most people are. As a result, you’ll likely receive criticism since folks enjoy normalizing their bad financial decisions and seeing someone else make great choices forces them to contemplate their own behavior.
Take a few moments to evaluate if the same “rat-race” lifestyle that your peers and relatives live is what you want. If not, begin today by educating yourself and improving your spending habits – you don’t have to suffer financially like everyone else!
Conclusion
If you’re reading this blog post, it means that you are at least interested in making a change in your life when it comes to finances. That’s the first step! Acknowledging that there is a problem is vital before taking measures to correct it. Be sure to avoid any of the traps and pitfalls we listed above –they will only leave you broke.
It’s time for all of us to take an honest look at our spending habits and make changes where necessary so that we can live more financially stable lifestyles. If you have any additional tips or tricks on saving money or avoiding debt, please share them with us in the comments section below!
