Reasons you are broke.
Personal Finance

This Is Why You Are Broke

If you are broke and living paycheck to paycheck, there is probably a good reason for it. You might think it is hard times or that you just have no luck, but the truth is, it is probably your fault. Take a look at some major reasons why people are broke and see how many apply to you. You might be surprised.

Broke? It Just Might Be Your Fault

Sometimes people are broke because of circumstances that are not under their control. Other times, they are entirely to blame. In most cases, the blame tends to fall on the person themselves because they make financial mistakes.

If you are broke, let’s look at some common financial mistakes and see how many of them that you make.

  1. You do not have an emergency savings.
    If you are living without an emergency savings, you are just one surprise expense from disaster. An emergency car repair or medical bill could send you spiraling out of control.
    Make it a point to set aside a portion of each and every check for savings. Even if you can only do a few bucks a check for now, do it. Just 20 dollars a paycheck would get 500 dollars worth of emergency savings in a year.
  2. You live only in the now.
    It is great to live for the moment, but you must consider the future as well. Spending as much as you want when you want it will lead to you needing some money desperately and counting the days until your next paycheck.
    Next time you pull out your wallet, think about whether it will leave you short of funds days before your next paycheck.
  3. You are competitive.
    Do you see something that a coworker or friend has and then instantly want it? The drive to compete with others has ruined many a budget.
    When you see others with things that you do not have, seemingly spending with disregard, ignore it. You do not know their finances. They could make more money or they could be over their head in debt. Live within your means and stop competing with others.
  4. You don’t have a budget.
    This is a huge mistake but a very common one. Without a budget, you will not know what you can afford to spend on things, it is as simple as that. Unless you have limitless funds, you need a budget. It will tell you how much you can afford on entertainment, food, etc, etc.
    Take the time to write out a simple budget, being sure to leave room for saving money. Allot set amounts to expenses like food, entertainment, etc and then stick to it.
  5. You lack self control.
    It takes a certain amount of self control to not make a purchase when you want something. If you lack this self control, you will buy whatever you want, even if you can’t afford it, leading to eventual disaster.
    If you are undisciplined, you know it. Admit  it and make some changes. Do not carry credit cards around with you and erase your payment information from websites you frequent. Also, avoid putting yourself in a situation where you might spend out of control. Don’t go to the mall or shopping in general unless you absolutely must. Lastly, carry cash instead of cards. It is harder to spend.
  6. You use too much credit.
    Buying on credit is acceptable in many cases, such as in the case of a mortgage, but it can be a problem. If you buy everything on credit, you will end up paying far more for it than you would have if you saved for purchases. The average household would need 18000 dollars to pay off their credit cards. Given the average interest rate of 17 percent on a credit card, that amounts to thousands of dollars of interest a year.
    You need to get the discipline to save for purchases instead of putting them on credit. Even if you encounter an eye catching zero interest promo, resist. Those promos are designed to get you to spend more than you originally intended and, if you do not pay the money back in time, you get charged back all of the interest.
  7. You think you are too young to save.
    Most people just starting out think that they are too young to save. They are often just starting out in their career and foresee making much more money in the future. There will be time to save later on during their career.
    The truth is, that money saved earlier in your life will have more time to accrue interest. 10000 dollars saved now is worth more than 10000 dollars deposited later because of the power of compound interest.
  8. You accept debt.
    Debt should not be a normal life although many people accept it as such. Much of this is learned behavior that we get from our parents. Everyone has credit card debt so if I need 1600 dollars for a new TV, why shouldn’t I just charge it instead of saving for it.
    Debt does not have to be a normal part of life. It could be costing you thousands of dollars a year in interest. Money that could be saved, invested or just used to pay regular expenses. Avoid racking up debt and work on a plan to get rid if it.
  9. You are in denial.
    For many, they are in debt because they simply refuse to accept their situation. They think that things are fine because they refuse to account for how much they are spending. They also might have an unrealistic of the future, thinking that a huge pay raise is just around the corner.
    Do not live in the future, live in the here and now. Accept your finances and the limitations that come with them. Make and stick to a realistic budget that keeps you from being broke while also allowing you to save money.

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