It is no fun living broke all of the time. Constantly pinching pennies and living in the rat race just to stay afloat can seem like a never-ending cycle of paycheck-to-paycheck living. However, there is a better way. It starts with paying attention to the details and launching a new plan to organize your income so you can win with money. The thing keeping you broke is usually not your income. Instead, it is usually what we spend and how we spend it that tends to create the stress and pressure many people feel every day. Let’s take a look at the 5 things we think are keeping you broke and how to fix it.
5 Things That Keep You Broke and How to Fix It.
Quit living paycheck to paycheck and make your money behave. Here are 5 things that are keeping you broke and how to fix it.
1. You Don’t Know Your Numbers
Most people who are struggling with their finances often don’t really know their income or true expenses because they are not using and following a monthly zero-based budget. Nothing will keep you broke faster than not following a budget. A budget is the pillar of financial control and is the only way to maximize your income, control your expenses so you can win with money. It is telling your money where to go and what you want it to do. A budget is telling your money that YOU are in charge. Many people who feel broke all of the time don’t even know what a budget is and that it might help. The effects of poor budgeting or not budgeting at all are significant.
How to fix it:
Start making a monthly zero-based budget that acknowledges your actual income for the month and plan accordingly. Budgeting is the pillar of financial wellness and control. Without a budget, you and your finances are like a rudderless ship drifting in the ocean. Where you are going depends on the wind of the day. No direction. No progress.
- Commit to sticking to your budget
- Don’t spend money based on what you feel that day. Instead spend money based on what your budget allows.
- Make a new budget every month so that you capture a true picture of the month’s income and expenses. For instance, if you get paid every other week, you get a paycheck twice a month except for 2 months of the year when you get 3 paychecks. Those extra paychecks are a valuable opportunity to make additional progress toward your financial goals. Budget for every month.
- Get a free zero-based budget planner pdf here.
- The answer often is not that you don’t have enough money. Often, the answer is in how you are organizing it. Build a budget and win with money!
2. You Ignore Your Numbers
Is this you? Do you know what a budget is and that you should be using one each month, but you just choose to ignore your numbers anyway? For many people, this represents their financial life. They are too afraid of what they will see if they pull back the curtain so they just plow ahead, making impulsive decisions and ignoring the truth behind their income and expenses. This is easy to do if your financial ship is not sinking. After all, if nothing is an emergency yet why make a change? Well, for starters, this strategy of managing your money is likely keeping you broke. You may be able to keep the ship afloat for now but the day will come when you are severely behind on retirement savings or simply cannot keep up with the debt payments any longer. Ignoring your numbers will catch up with you one day.
How to fix it
- Learn how to say no and begin using self-discipline. Winning with money is 20% math and 80% behavior.
- Don’t try to keep up with the Jones’s. Quit comparing yourself to others. More than 70% of US households are living paycheck to paycheck. Understanding this fact you begin to realize that the shiny outer shell of new cars and big houses is many times supported on the back of risky debt. Comparing yourself to others will only lead to poor financial choices that are not right for you. Live your life, not theirs.
- Use a monthly zero-based budget.
- Get a free zero-based budget planner pdf here.
3. You Don’t Have a Vision for Your Future
Without a vision or goal for your future, it is easy to drift aimlessly thru your life. “Aim at nothing and you’ll hit it every time.” (Zig Ziglar) Budgets reveal what your money is really doing and open the door for you to redirect your income and expenses toward a more productive future. Without a vision or goal for your future, it is not surprising that your money is walking away to other things and keeping you broke.
How to fix it
- Allow yourself to dream. Decide on what you want your future to look like and begin budgeting accordingly. Would you like to have a comfortable retirement? How about the goal of paying for your children’s college education with cash? These things will not happen without intentionality and advanced planning. So allow yourself to dream and believe that those dreams can come true. The budget each month with those goals in mind.
- Create goals: When we have goals our decisions, especially with money, tend to form themselves around our goals. In other words, simply having goals and acknowledging them can help improve our management of money. Creating goals, similar to allowing yourself to dream is a great way to move your money from lack of direction to intentionality.
- Create a monthly zero-based budget. A zero-based budget is important because it helps to make your goals and dreams possible.
4. You Are House Poor
There is nothing wrong with wanting a nice, large home to live in if that is your desire. But when you have more house than you can afford we call it “house poor”. House poor means that too much of your monthly take-home pay is going toward your mortgage or rent. There are few other things in your monthly budget that can cause you to feel broke more than being house poor. If your mortgage or rent is more than 25% of your take-home pay you will begin to feel it. When that percentage rises to 30-35% even the best budgeting wizards will feel the squeeze on an everyday basis. When your mortgage or rent rises to or above 40% of your take-home pay it can cause severe financial distress for anybody. You might be asking why you always feel broke if your mortgage or rent is more than 25% of your take-home pay.
How To Fix it.
There are just 2 ways to fix being house poor and they involve changing the math. If you are spending more than 25% of your take-home pay on your rent or mortgage you are risking being house poor.
- Increase your income so your mortgage or rent is 25% or less of your take-home pay.
- Find new living arrangements and reduce your mortgage or rent to at or below 25% of your take-home pay.
5. You Think Debt is a “Tool”
Debt equals Risk. Period. Debt is what you use when you admit you didn’t save enough money or plan far enough ahead to pay cash for whatever you want to go into debt for. When you introduce debt to your personal financial profile you introduce risk and truncate your ability to build wealth. You’ll read in other places that there is a difference between “good debt” and “bad debt”. In our opinion at Budget Coach USA debt equals risk and should always be avoided except for a mortgage in which you pay 20% down on your home.
When you are giving your income away to monthly payments on cars, credit cards, vacations, and more you are limiting your ability to get ahead financially and is keeping you broke.
Debt is not a tool. Debt is what you incur when you didn’t plan properly. Plan ahead, use a budget, and stay out of debt.
How To Fix it.
Set out on your debt-free journey today. Learn here how to pay off your debt and find the peace financially that you are looking for.
Final Thoughts on How to Quit Living Broke
If you want to know why you are always broke start by looking at yourself and your habits. You are in charge of your money, where it goes, what it buys, and how or if it is saved, invested, or spent. If you always feel broke, begin by making a zero-based budget each month and follow it. Learn to say no to spending that is not in your budget and discover your goals and dreams. By allowing yourself to dream and setting some goals your money will begin to point toward the right priorities. As you build momentum it gets easier along the way.
