Why Am I Always Broke? Let's Fix It
Do you ever get to the end of the month and realize "oh sh\t, I don't have any money left again? Why am I always broke?" Well, I have some good news and some bad news.
Do you ever get to the end of the month and realize “oh sh*t, I don’t have any money left again? Why am I always broke?” Well, I have some good news and some bad news. The good news is, you aren’t the only one. As a matter of fact, you’re in the majority. The bad news is, I wish you’d found this article sooner. :)
The majority of people reading this article probably make a very decent income. That’s what’s confusing — why are they always broke when they really shouldn’t be?
The median household income in the United States is now around $80,000. Just looking at that number, it doesn’t make sense that the majority of workers live paycheck to paycheck. Eighty grand is a lot of money, right?
Today, we’re going to fix this and have you not be always broke anymore.
1. You are simply spending too much
All right, I’ll spare you the nonsense and state the obvious. More than likely, you’re broke because you’re spending way too much each and every month.
Do you have a budget? If you don’t, there’s your answer. If you just worked on this one thing first, you’d be much better off. Trust me.
Have you ever noticed that your bills always seem to be just about equal to how much you make? A person making $40,000 a year might be living paycheck to paycheck, and a person making $120,000 may also be living paycheck to paycheck. How can that be? Lifestyle inflation.
Your standard of living tends to rise to meet your salary. As human beings, we tend to spend about as much as we make. So take a second to draft up a budget and figure out exactly what you’re spending every month, and how you can reduce it. A simple way to start is the 50/30/20 rule, and the free money dashboard keeps it all in one place so you can actually see where the money’s going.
It’s really not as difficult and confusing as it sounds. I wrote an extensive guide covering exactly that, and I’m sure you’ll find it super helpful:
2. You don’t make enough money
I’m sure I got a bit of a reaction with this one. “But Field,” you ask, “isn’t that a bit obvious?” No, my dear reader, it’s not as obvious as you might think.
The majority of people are employed in jobs that underpay them. It might seem obvious reading it now, but have you ever actually considered asking for a raise or switching jobs to somewhere that pays you much more than you currently earn?
I’ve asked this question to so many people, and the typical response I get is “yes, I will, soon.” But soon never comes. They end up staying at that job for years on end, earning much less than they’re worth.
Always consider asking for a raise if you feel you deserve one — asking never hurts. I know, it’s a scary thing to do, but if you don’t ask, you’ll never know. And if your employer simply won’t give you a raise, that’s their loss, not yours. You can look for a better-paying job and earn more, or pick up a side gig to bridge the gap.
3. You are house poor
Did you know the median size of a new home is around 2,400 square feet? That’s hundreds of square feet bigger than it was a few decades ago — even though the average household has actually gotten smaller.
What these statistics tell me is that people are buying more house than they really need. Just because you can qualify for a huge mortgage doesn’t mean you should take it. This is one huge mistake people make, and a big reason they stay broke month after month.
This applies to renting too. Don’t rent the nice downtown loft when you’re living paycheck to paycheck. That leaves very little wiggle room in your finances.
The two most expensive purchases in your life are your car and your housing, with your home being the biggest. If you spend too much on housing, the majority of your income goes straight to that mortgage or rent. Imagine earning $4,000 a month with a $2,500 mortgage or rent payment — that’s over 60% of your income going just toward housing, before utilities, expenses, or savings. A good gut check is the debt-to-income calculator, which shows exactly how lenders (and you) should read that ratio.
4. You are car poor
Yup, you know exactly where I’m going with this. Just like being house poor, you can also be car poor. Yes, it’s a real thing.
The average price of a new car is now around $48,000. Forty-eight grand for four wheels. What? What ridiculousness is this? Who pays nearly fifty grand for a car? It really doesn’t make sense.
A car depreciates about as fast as a rock sinks to the bottom of a lake. It’s a nonstop train to being broke — and what’s worse, the majority of buyers are financing them. A car payment can be a huge sink in your monthly budget.
If your car payment is $600 a month, imagine what not having that payment would do. What would you do with an extra $600 a month in your pocket? I bet a lot. Before you sign anything, run the numbers through the car payment calculator so you can see the total cost, not just the monthly.
If you can, avoid car payments like the plague. No matter what everybody tells you, you don’t have to have one. There are plenty of cheaper cars you can buy in cash that are just as reliable. A four-year-old car isn’t an unreliable one — heck, going even older than that could leave you way better off financially. Trust me, the numbers don’t lie.
5. You are a brand slave
Do you hate generic products? If so, why? Is it the packaging, or is it that somebody told you they’re inferior? If your answer is yes to either, you’re doing this all wrong.
The majority of generic products are almost identical to name-brand products. This is especially true when it comes to medication.
Do this little experiment for me. Walk into a pharmacy and compare the generic to the name brand. Chances are, you’ll notice the active ingredients are literally identical. So why would you buy the name brand instead? Marketing.
Name-brand companies spend billions of dollars every year to convince you that they’re better than generics. Of course, there are exceptions — but they’re the exception, not the rule.
Next time you’re shopping, hold the generic next to the name brand and compare the ingredients. If they’re the same, the products are literally identical except for the packaging. Just by switching to this mindset, you can save thousands of dollars a year simply by opting for the cheaper generic.
By the way, the same applies to clothing. Just because a shirt has the Supreme logo on it doesn’t mean the cotton was woven by angels on golden chairs. Nope.
6. You buy too cheap
It took me a very long time to snap out of this one myself. I was definitely a culprit of buying things way too cheap.
I would go to the dollar store just to save a couple of dollars on whatever I was buying — a pair of scissors, kitchen knives, a can opener. Do you know what kept happening? These things kept breaking.
I’d end up back at the dollar store every other month to replace the broken items. After a while, I realized there’s a reason they cost so little: the materials are brittle, soft, and low quality.
If you keep buying really cheap items, they won’t last and will need replacing far more often. That doesn’t save you money — it actually costs you more in the long run. Buy quality once instead of junk three times. Keep that in mind.
7. You have too much debt
Now that I’m thinking about it, this probably should have been higher up on the list — but no matter, the point is the same. Having too much debt is a recipe for disaster and a sure-fire way to stay broke.
The thing about racking up debt is that, at the time, it seems so small. You buy something on credit and the payment is $30 a month. You think to yourself, “oh, that’s it? I can do that.”
What you don’t realize is that it all adds up. $20 a month here, $15 a month there — you get the idea. It’s so easy to rack up debt and so hard to get rid of it.
If you already have tons of debt, then the best time to stop accruing more is now. Get up from wherever you are and cut up those credit cards. Then make a plan to attack what you owe — our guide to escaping debt and credit card tips lay out how, and the debt-to-income calculator shows how deep the hole really is.
8. You don’t buy in bulk
Hear me out on this one. Do you know what economies of scale means? Here’s the gist: you do things more efficiently as size increases.
When you go to the store and buy groceries, do you buy one thing at a time? One pack of paper towels, one box of toilet paper, one pack of chicken — you get the idea.
When you shop at bulk discount stores, you save so much more by buying necessities in bulk. It’s simple math, really. You spend less time at the store, less on gas from going so often, and less on the groceries themselves thanks to the bulk discount. Just don’t let “bulk” become an excuse to buy stuff you’ll never use. Give it a try :)
9. You are a victim of lifestyle inflation
Have you ever received a raise, only to realize you’re still broke at the end of the month? But how can that be? You’re literally earning more than before, yet you’ve still got nothing left over. This is called lifestyle inflation.
It’s human nature to adjust our lifestyle based on our income. The more money we earn, the more we spend. The less we earn, the less we spend. We tend to spend almost exactly what we make, ending up with little to nothing left at month’s end.
Whenever your income goes up — from a raise or a side hustle — it’s important to keep your expenses in check. Just because you’re earning more doesn’t mean you deserve to spend more. If you keep your expenses the same, you’ll be able to save more and more as you earn more. Simple as that. (This is the easiest place for the dashboard to catch you — when your spending and savings sit side by side, lifestyle creep gets a lot harder to ignore.)
10. You are afraid to face the truth
Have you ever taken a second to take a cold, hard look at your finances to figure out exactly why you’re always broke? Are you afraid of the big numbers looking back at you? Believe me, you aren’t the only one.
I know, it’s scary to think about. But ignoring it and pretending it’s not there only makes it worse. Knowing what your credit card minimums are is one thing; figuring out a game plan to completely pay them off is another.
Just take a deep breath and be courageous. These finances are your responsibility, and ignoring them won’t make them go away. The fastest way to stop being afraid of the numbers is to actually look at them — put them all in the dashboard and the fear usually turns into a plan.
Once you have a strategy in place to stop being broke, you’ll feel so much better.
Final thoughts
There are probably other reasons you’re always broke, but these 10 are likely the biggest culprits.
You don’t necessarily fall into every one of these, but chances are you’re doing one or more. If you are, then be honest with yourself and make the necessary changes.
Nobody else will do it for you, so it’s time you do it for yourself. With persistence and perseverance, you can definitely come out on top! Being broke is temporary, but being poor is a mindset. Anybody can get out of being broke — and so can you!
