10 Reasons You’re Flat Broke (and What You can Do to Fix it) – Post 396

10 Reasons You’re Flat Broke (and What You can Do to Fix it)by Patrick Chism October 20, 2015 Saving Money

If your bank account looks like one of those western movies where the tumbleweed drifts by, you may have a money problem. Before you throw your hands up and accept that this is your lot in life, consider this: Spending your hard-earned money wisely isn’t for the faint of heart. In fact, more than half of Americans are struggling with this discipline, living paycheck to paycheck with no savings to speak of. That’s right. Your average American is one flat tire or one sick cat away from catastrophe. It’s time to take a hard look at the decisions that got you here, as well as the way you’re going to abandon this sinking financial ship for something better. Let’s take some time to recognize the reasons you’re broke, as well as ways to develop strong financial habits.

You Don’t Know Your Money
If I asked you about your finances, including your debts, your savings and your assets, would you be able to come up with an answer? Better question – would you be satisfied with that answer? Knowing your money is an important first step to saving. You’ve got to understand how much you’re making and how much you’re spending, and the only way to do that is to create a budget. It doesn’t matter if you’re making minimum wage or sporting a six-figure salary; if you don’t know your money, you won’t be saving much. And statistically, a measly 32% of our fellow Americans are keeping track of their expenses every month.
This mainly comes down to the fact that budgeting is, without question, one of the least sexy things to do. With the exception of me and few other masochistic money crunchers, no one gets their jollies from building a budget. We like spending money and we like the idea of saving money, but we don’t want to take the time to see the way our finances are being used. Furthermore, it’s downright scary. Budgeting requires us to recognize our debts (our college-graduate audience just gulped) and make a plan for the future. This is the first and most important lesson you must learn if you plan to pad your wallet with more than lint.
You’re Not Talking about Money

We don’t like it when people ask us about our money. Our culture has an overall problem with this, thinking it a social faux pas to openly discuss finances. In fact, 44% of Americans say that talking about personal finances is the most challenging type of conversation. Seriously – we’re more comfortable chatting it up about death and politics than we are about money. And this doesn’t just pertain to conversations with strangers; we don’t like talking to our spouses or significant others, either. And when we’re not communicating about our money, we tend to run out of it. This, in turn, stresses everybody out. According to a survey by SunTrust Bank, money is the leading cause of anxiety in relationships. It’s also one of the leading causes of divorce. Money talks are an imperative part of our relationships, so we need to learn how to have them.
Accountability is one of the best ways to cut through the stress and set financial goals. It’s essential that you and your spouse are talking when it comes to these decisions. Take a page out of Dave Ramsey’s playbook and set up a time to budget each and every month. Together. Be aware of your money and talk about your mutual needs and desires.
No spouse? No problem. If you and your business partner, friend, child, neighbor, stranger – whatever – set financial goals for each other, you’ll be able to hold each other accountable. An accountabili-buddy forces you to actively speak about your money. And when we talk about it, we’re more likely to act on it.
You Don’t Have Mad Skills
With all the talk we’re hearing about student loan debt topping $1 trillion, a lot of people are wondering if getting a degree is worth the trouble. But according to David Leonhardt in an article from The New York Times, “Yes, college is worth it … For all the struggles that many young college graduates face, a four-year degree has probably never been more valuable.”
He’s referring to the fact that college graduates, on average, “made 98% more an hour … than people without a degree.” In other words, if you’re flat broke, it may be partially due to the fact that you don’t have a college education. Going back to school will typically allow you to make more money in the long run.
Even if college isn’t your thing, there are several high-paying skills you can acquire. One of my favorite financial writers, Mr. Money Moustache, has an excellent article about higher-paying careers that don’t necessarily require a traditional college education.
You shouldn’t run toward a career simply because of the salary, but you need to consider the money you need to make and how your job is going to make that happen.
You’re Not Saving or Investing
Your money doesn’t belong under your bed. It needs to be set aside and gaining interest. Many financial advisors suggest that you prepare an emergency fund for a rainy day (3–6 months of living costs). However, finance guru Ramit Sethi (you should really check out his blog) suggests that simply telling yourself to put an emergency fund together rarely works because it “produces little behavioral change.” Instead, he argues, you should be automating your account so a specific amount goes from your checking to your savings account every month. This forces you to start saving money. And who needs good financial habits if your bank is doing them for you?
Another trap that the broke and beautiful fall into is leaving all of their money in savings and checking accounts. The problem with this is that these accounts accrue incredibly low interest. Your savings account isn’t going to earn much more than 1% interest (and that’s on the high end). Instead, you need to be looking at opportunities to invest. Whether you’re looking at investing in the stock market (which is still a good option) or jumping into the real estate game, looking for opportunities outside of savings accounts is essential. If you’re planning correctly, the interest you gain from these investments should be your main source of income during retirement.
You’re Glued to the Tube
This one’s more of a public service announcement. Quit watching so much television! Right now, Americans are watching an average of five hours of television per day. That means, throughout a single week, you’re spending 35 hours watching the tube. That’s more than a whole day. You’re only spending 5.5 days living and the rest of your week caught up in a fictional world.
Thomas Corley, author of “Rich Habits,” found that 77% of those struggling financially “spend an hour or more a day watching TV,” and 74% are “spending more than an hour on the Internet” for recreational purposes.
So get off the couch and get your mind working. The television is where your finances go to die.
You Tried Keeping Up with the Joneses
If you want to start saving, you need to ignore the Joneses. This may seem like incredibly obvious advice, but for most of us, looking over at the neighbor’s yard or the coworker’s cubicle creates a pretty big temptation. Financial columnist Knight Kiplinger explains that “the biggest barrier to becoming rich is living like you’re rich before you are.”
Keeping up with the Joneses causes all kinds of financial follies. It’s likely one of the largest triggers for those impulse buys we accidentally make. The best way to ignore the Joneses is to cling to your budget. If Mr. Jones goes out and buys a new car or a new house, and you also want a new car and a new house, you first have to consult the budget. And if the budget says no (due to being used for other commitments and goals), then you’re out of luck. It’s much easier to get yourself under control when you can blame the budget. Find out what house you can afford with a mortgage that is right for you.
You’re Playing the Lottery
The fact that we need to write about this one is just depressing. But Americans spend more on the lottery than, well, just about all other forms of entertainment. This includes sports tickets, books, video games, movie tickets and music. We spent $70.15 billion playing the lottery last year.
First of all, it’s incredibly unlikely that you’re going to win. According to our statistician friends at the Huffington Post, the “probability of winning the jackpot is 1 in 175,223,510.” That’s a difficult number for us to wrap our heads around, but the fact is that you’re statistically unlikely to ever win the lottery.
But, of course, people will always argue with this information, responding with the age-old “well, someone has to win” logic. Don’t get caught up in this trap. Yes, that’s technically true, but for every person that wins, there are millions and millions of losers.
Low-income households (incomes under $13,000), on average, spend $645 each and every year on lottery tickets. That comes out to be 9% of their annual income. If, instead, they took that money and invested it (considering a 7% interest rate) every year for 40 years, they’d walk away with $147,436.77. That breaks down to over eleven years of their current annual salary.
Instead of the lottery, save or invest that money. It may not seem as pleasurable at the moment, but your future self will thank you. In the words of Dave Ramsey, “Live like no one else, so later you can live like no one else.”
You’re Carrying High-Interest Debt
There are two different kinds of debt: good debt and bad debt. If you’re trying to decide if your debt is evil or benign, just check out the interest attached to it. Good debt usually refers to student loans and mortgages because these are low-interest debts. Another attribute of good debt is that the purchase gains value over time. For instance, by paying for college now, you’ll be able to get a higher paying job later. Therefore, good debt also includes small business loans and loans used to purchase real estate. Sure, there will always be a risk involved with this kind of debt, but it can potentially help you financially down the road.
The other kind of debt – the bad debt – is largely made up of credit cards and car loans. Playing with credit cards is a dangerous, albeit necessary game. Credit cards are a great way to build your credit score, but if you’re going to use them, you should pay them off at the end of the month. All of it. No exceptions. There are a many advantages to credit cards, but only if you use them correctly. Make sure you’ve studied up on correct credit card behaviors before making the plunge.
Car loans on the other hand, are just ridiculous. That’s not a popular viewpoint, I’ll admit, but hear me out. New cars are incredibly expensive, and the second you pull off the lot, the “new” vehicle is dropping in value. Holding debt on property that’s plummeting in value is never a good idea. Save up and purchase your car in cash. Remember, you don’t have to keep up with the Joneses.
You’re Paying for Bad Habits: The Costly Three
Before you buy your next pack of smokes, consider how much you’re spending on these “necessities” each year. If you’re puffing away at a pack each day, you’re spending upwards of $5,000 a year. That’s the cost of a new (used) car!
Also take some time to consider the cost of your alcohol consumption. The average American has four drinks a week. If you’re having these drinks from the comfort of your home, you’re probably not paying too much. But if you go out and purchase these drinks, it’s going to cost you over a grand a year. And what if purchasing and consuming alcohol is more of a passion than a hobby? Four drinks isn’t really that much. If you’re getting more drinks each week, this number will skyrocket. This calculator will help you look at the real cost of your drinking.
Eating out is the last, but certainly not the least, of the costly three. The average American family spends $225 each month eating at restaurants, fast food establishments and perhaps the occasional pub. That adds up $2,668 a year. Take a moment to think about that, and then step slowly away from the chicken nugget.
On top of all these things, don’t forget about medical bills! Poor habits are not just expensive on the surface. They’ll follow you around for years. Yeah, if you feel broke now, just wait until you have to visit the doctor.
You’re Whining Instead of Winning
More than all of these things, putting cash in your bank starts with the right attitude. Pouting shouldn’t be your first reaction to an empty wallet. If you spend all of your time blaming others for your circumstances, you’ll never see the opportunity to start saving money. Yes, some people are born with more privilege than others, and some people just have terrible luck. Whining about your position isn’t going to change it. Instead, use that energy to make a plan or to tweak your current lifestyle. Simple changes can make big results when you’re trying to save money.

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