It’s the 20th of the month, and payday is still a week away. How are you going to survive on the $2.34 that’s left in your bank account?
So many Americans face this financial dilemma every month. It seems like a never-ending story that continually repeats itself, leaving you with more month than money in your bank account.
Why are you always broke? It seems that no matter what you do, you still end up in line at your payday lender to cover your monthly shortfall. It might surprise you to learn that there’s a reason why this happens, and it’s a lot simpler than you think.
People that end up broke before payday follow a set of behaviors and habits that put them in this position. As creatures of habit, we end up repeating these same behaviors unconsciously, leaving us in the same financial situation.
Relax, there’s a way to stop the cycle and readjust your spending to allow you to make the most out of your money.
Let’s unpack the reasons why you’re always broke, and what you can do to stop this from ever happening to you again.
You Have No Financial Education
Speak to anyone that’s always broke, and you’ll find that while they’re quick to blame the economy or their boss for not paying them enough, they rarely take any financial responsibility for their situation. This situation is a tell-tale sign that the person has no idea how to manage their money efficiently.
People that don’t understand the value of money always end up putting other priorities first, leaving them without any cash later in the month. However, the reality is that they don’t know how money works, or what to do with it when they have it.
If this sounds like you, then you need to increase your financial literacy. Financial literacy is a term that describes your level of understanding of money.
- What is the economy?
- What are savings and investments?
- Are you an employee, business owner, or investor?
Understanding how money works is the first step to ensuring you never go broke again.
Fortunately, the internet provides you with a wealth of information on the topic. Watch some YouTube videos on financial education, and spend some time every day educating yourself on your finances.
The more you learn, the more you’ll be able to identify your bad habits that keep you broke.
You Have a “Spend not Save” Mentality
Most Americans live from paycheck to paycheck, and almost 20-percent of all Americans admit to using a payday loan to help them cover their monthly expenses. Unfortunately, we live in an economy driven by spending instead of saving.
Back in your parent’s day, then focused on saving money for retirement, building a nest egg that would get them through their golden years. However, today, consumers experience a bombardment of adverts enticing them to spend. Ads are everywhere, on the websites you visit, and the social platforms you use every day.
Advertisers know how to pull your emotional buying triggers, and they have no issues with you spending every dime you own on the latest consumer product trends. However, you need to change your mindset from spending to saving.
Sure, you might want that new pair of Jeezy’s or the latest iPhone offering, but do you need it? Instead of wasting your money on these items, you could be funneling it away into investments that yield you a return through interest.
If you find yourself aimlessly wandering through an online retailer’s offerings, then stop what you’re doing and forget about spending money. Adopting a frugal mindset will help you avoid wasting money where it’s not necessary.
It takes a few weeks to get into living a frugal lifestyle, but after a while, you’ll get the hang of it and start challenging yourself to see how long you can go without spending any money.
You have No Mentor
Speak to the most successful people in the world, and they’ll tell you that they rely on their mentor’s advice when making important financial decisions in life. A mentor is someone that you look up to in life. These people have already experienced what you’re going through, and they can offer you advice to avoid the pitfalls they made in their life.
When people think of finding a mentor, they often think of dealing with a real person in a face-to-face setting. However, the onset of the internet changed everything. Now you can find a mentor online, and you might never meet them in the flesh.
A mentor is a critical part of your financial plan for success. These individuals can show you where you’re going wrong with your finances, and then point you in the right direction.
You Need More Income
The easiest way to stop being broke is to earn more income. If you find that your bank account is always looking thin at the end of the month., then ask yourself what you’re doing with your spare time.
Most people get home from the office after working a 9 to 5, and then spend the rest of the evening on the couch watching TV to “wind down” from the stresses of the day. However, if you’re broke, then the most significant source of your stress will be your bank account at the end of the month. Sitting on the couch, worrying about your financial situation isn’t doing your mental health any favors.
Take a notepad and write down how many hours you spend doing nothing each day. If you get home from work at 5 pm, have something to eat, and then find yourself sitting in front of the TV from 6 pm to 11 pm, that’s 5-hours of your day you’re wasting doing nothing. That might not seem like a biggie, but the reality is that you’re losing 25-hours during the workweek that you could use to earn more income.
We haven’t even taken weekends into account with this exercise.
The gig economy presents you with plenty of opportunities to make more money. Sign up for freelance sites and put your skills on the market. Many of the jobs on offer on these platforms you can do from the comfort of your home.
If you want to get out, then sign up as a driver for Uber or Lyft. You can make a few hundred dollars extra every week that can tide you over to payday.
Your Social Life Is Expensive
Going out with your friends for dinner drinks and a bit of dancing takes its toll on your bank balance. Many people wonder why they’re broke, but they spend three nights a week partying with their friends. Cut back on your entertainment expenses, and fill your time with something else that doesn’t cost you money, like learning about financial literacy.
Sure, everyone needs to get out on the town to blow off some steam from time to time. However, there’s no reason why you should be doing this regularly throughout the week unless you’re an Instagram Influencer.
By saving your money and limiting your entertainment expenses, you could probably cover your financial shortfall this month – Is that worth it to you?
You Have No Financial Plan
To be successful at any endeavor, you need a plan. Without a plan, you doom yourself to failure. It’s the same for your finances. You need a plan to follow that can hold you accountable for your spending habits. However, how can you create a financial plan if you have low levels of financial literacy, and you don’t know the first thing about financial planning?
Fortunately, some professional financial planners know everything about money that you don’t. Most financial planners charge you for a consultation. However, don’t let the price tag of the consult deter you from seeking counsel.
Financial planners unpack your finances in front of you, and they account for every dollar you spend during the month. These professionals will write you a detailed financial plan that includes a budget, savings, and investment goals, as well as advice on how to make your budget work.
In most cases, you’ll probably recover the costs of the advisory fees in the first month you start executing their plan for you.
You Have No Budget
Expanding on the point above, one of the most prominent reasons why most Americans end up broke is because they don’t have a budget. A budget lists all of your income and expenses for the month. You allocate funds to your budget, and then make sure that you don’t overspend in any of the categories.
A budget shows you a visual representation of where you’re spending your money. Some of the categories listed on a standard budget include the following.
- Rent or mortgage costs
- Utility payments
- School fees for the kids
- Cellphone costs
- Gas for your car or other transportation costs
- savings and investments
Use a Budgeting App
This list is only the tip of the iceberg when it comes to categories you can add to your budget.
We recommend you look at downloading an app like Personal Capital to help you manage your budget from your phone without any effort.
Plus, it’s Free!
Personal Capital lets you create spending categories for your budget. The app notifies you when you overspend, and helps you move money around in your budget to make it to the end of the month. These apps keep you accountable with your finances, and Mint is free for download and use.
You Have Too Many Expenses
When setting your budget, take the time to list pout all of your expenses. Take an honest look at the list, and determine what costs you can live without – Do you need that second or third streaming subscription? Could you downgrade your cellphone package to a cheaper contract?
Analyze each of your expenses in detail and work out what’s essential in your life, and what you can do without. Cutting back is something that nobody enjoys doing, but if it gets you through the moth, then it’s a worthwhile exercise to complete.
Your Car Lease Is Too Expensive
We live in a society that judges us by our material success. It’s a sad fact, but it’s the truth. As a result, most Americans dream of owning the best car they can afford. After all, your vehicle is a status symbol, and everyone will turn their heads as you drive down the street in your new 3-series BMW.
However, can you afford the lease on your vehicle? Many Americans make the mistake of taking a lease that’s outside of their financial reach. As a result, they end up taking on debt they can’t afford, and sooner or later, they default on their lease payments.
If you default on your lease, then the lender notifies the credit bureaus of your slow payment behavior. As a result, the credit bureaus drop your credit score to discourage you from taking on other debt.
Instead of rolling through your neighborhood in the latest German masterpiece from BMW or Mercedes-Benz, consider cutting back and lease a car that you can afford. It might feel like you’re cheap, but you’ll thank yourself for making a prudent financial decision a few months down the road.
In Closing – What’s holding You Back from Financial Freedom?
The answer to this question is simple; You are the only person holding you back from financial freedom. Your habits and actions speak volumes as to why you’re always broke at the end of the month.
Take a few ideas from this list and start implementing them in your life. You might find it surprising the impact of making a budget or cutting back on your expenses can make. Practicing a frugal lifestyle might feel unnatural at first. However, after a few months of practice, you’ll laugh at your old spending habits.
The biggest tip we can give you in this article is to increase your financial literacy. By understanding the importance and value of money in your life, you’re more likely to start pushing yourself towards a financial plan that leaves you with cash in your bank account at the end of the month.