- “My job doesn’t pay enough.” (Mine either.)
- “The system is stacked against me.” (That’s funny. Tell me another one.)
- “It’s too hard.” (Aw, poor baby. So is being broke. Pick your hard.)
- “I work hard, so I deserve to spend my money.” (LOLZ you deserve nothing.)
- “I’ll make up for it later.” (I wish this were true, but habit habits are hard to break.)
- “I’m doing better than my friends.” (Yeah, because they’re doing so well.)
You can’t blame everything on your circumstances or other people. If you can’t take responsibility for yourself, you are assuming the role of a helpless victim. Things don’t happen TO you, they happen BECAUSE OF YOU. With that being said, here are eight reasons you’re still broke.
I put this at #1 for a reason. Above all else, your first and most important loyalty should be to yourself. I could’ve made #1 “You don’t have a budget”, but to pay yourself first, a budget of some kind is necessary anyway.
Most people pay all their bills and then save whatever is left. You should be saving money and then paying bills with whatever is left. Set aside a certain portion of your income the day you get paid. You should get into the habit of covering your bases before rent, groceries, or as we’ll talk about later, cigarettes and lottery tickets.
According to a Bankrate survey, less than 25% of Americans have enough emergency savings to cover six months of expenses. Doesn’t this scare you into wanting to save more? I strongly recommend that you get onto an automatic savings plan to make saving money as painless as possible. Set up your bank account to transfer a certain amount from checking to savings on the same day you get paid. You won’t miss the money, I promise!
2. You don’t have financial goals.
In my new book, I literally wrote an entire chapter on setting financial goals. A goal is something that you plan to accomplish. Financial dreams are just hopes with no plans. Financial goals have a solid plan in place. Here are a few quick tips on creating financial goals.
- List your financial goals. Figure out what you want to accomplish. Is it paying off debt? Buying a new car? Saving a certain amount?
- Figure out the cost. You need to know how much money it will take to reach the goal, so do some research. When you get the number, double it. A goal is worthless if it doesn’t stretch you.
- Choose a target date. A goal is a dream with a deadline, so set a date by which to accomplish your goal.
- Work backwards. Figure out how much you need to save by dividing the estimated cost of your goal by the length of time until your target date. If you divide by the number of weeks, you’ll be able to see how much money you’ll need to save on a weekly basis to meet your goal.
- Work your budget to include the money you need. Check your old bank and credit card statements to eliminate unnecessary expenses. Be ruthless.
3. You don’t have multiple streams of income.
A lot of people have an underlying sense that increasing their income will help their financial situation, but they go about it the wrong way. If you’re working two or three jobs just to make ends meet, you’re not alone.
We are living in a gig economy – if you don’t have at least one side hustle, you’re way behind. You need to do whatever it takes. I’ve detailed cars, cleaned houses, sold ice at car shows, traded silver coins, helped people move, and transcribed audio to earn extra money. There’s no ego in making money, so don’t be afraid to bus a few tables or clean a few toilets if it means a fatter bank account!
Here are some additional streams of income you might consider:
- Real estate. Build your net worth, lower your tax liability, and get cash flow? I must be in heaven. You could fix and flip too.
- Royalty income. Write a book, sing a song, or develop a product. You could even buy someone else’s work and receive a royalty check each month.
- Become an affiliate marketer. You can team up with a company and sell their products. I’m doing it right now – don’t you see the ads all over the site?
- Start a side business. You can do this even if you have a day job. Figure out something you can do right now, without going back to school, that others will pay you for. Then figure out I way to make money from it.
- Investments. This is my passive income stream of choice. I love dividend stocks because they provide cash flow.
If you live like you’re rich before you’re actually rich, you’ll never get rich. Tweet that!
Isn’t it ironic that some people complain that they can’t afford health insurance or to save in an investment account, but they spend thousands of dollars on cigarettes and alcohol? I have no sympathy for these people.
On average, a smoker will spend around $2,000 per year on cigarettes, while a regular drinker drops about $500 per year on booze. If you cut out these vices and pocketed the money, you’d have $25,000. That doesn’t even assume you invest the money – it’s just cold, hard cash.
If you like to smoke and drink, have fun. Just remember that there are many costs associated with smoking and drinking. Let’s take a look at the costs that come with smoking:
- Life insurance will cost more since smokers have a greater risk of dying at a younger age.
- Home insurance will cost more since smokers have a greater risk of burning down their house.
- You guessed it – car insurance will cost more too. Smokers have a great risk of crashing their vehicle.
- Dental expenses will add up since smoking ruins your teeth.
Here are some other things you should stop spending money on:
- Bottled water. Why? Just why? Get a filter, dude.
- Incandescent light bulbs. Get CFLs instead; they last about five times longer and use around 75% less electricity.
- Late fees. Start being a responsible adult instead.
- Brand name products. Stuff like wrapping paper, detergent, dryer sheets, and cleaning products are remarkably cheaper at the dollar store anyway.
5. You load up your credit cards and make minimum payments.
According to Nerdwallet, the average indebted American household is $15,762 in credit card debt. When I first heard this statistic, I didn’t believe it. I thought, “There’s absolutely no way people could be that stupid.” Alas, tis true.
Carrying this much debt means the average household pays $6,658 in interest per year. That’s a tenth of the average household income. In just interest.
Credit cards make it easy to spend. It’s possible to buy a $3,000 something-or-other and only pay $60 per month until it’s paid off. You can afford $60 per month, right? Of course you can! However, the biggest mistake people make with credit cards is just paying the minimum payments.
Making minimum payments on your debt is the best way to stay broke. Interest charges will make you their little b****. Making minimum payments is like running on a financial treadmill – you get nowhere.
If you have an 18.9% interest rate credit card with a $5,000 balance, guess how long it would take you to pay it off by paying a $200 minimum each month?
$5,000 divided by $200 equals…. hmmm….. 25 months. A little over two years and it’ll be paid off, right?
Wrong. It would take you eleven years and five months to pay off the entire balance, meaning your original $5,000 debt would’ve cost your $8,109.
Pay more than the minimum, please. Note that I’m not saying you should get rid of your credit cards. I’m not dumb – we need them to reserve hotel rooms, rent cars, and book tickets for travel. However, you want to make sure you pay off your credit cards in full each and every month. You wallet will thank you.
6. You love playing the lottery.
Poor people sure love their lotteries, don’t they? They’ll do anything for a chance at a big payday, as long as they don’t have to work for it.
Lottery tickets return about fifty cents for every dollar played, but people still pour buckets of cash into them. Poor people spend nearly 10% of their income on lottery tickets.
Some people see the lottery as their best opportunity to improve their financial situation, even though buying tickets exacerbates the very poverty from which they’re trying to escape.
Now, I’m no stranger to the lottery – I buy a ticket every time the jackpot hits $400 million or more. But believe me, I’m not spending 10% of my income on pipe dreams.
Lottery tickets are regressive taxes on poor people, because each tickets costs relatively more for a poor person than a rich person. Because the government relies on lotteries for funding, they pump millions of dollars into the marketing machine convincing people that it’s a good idea. You may not have an equal chance of success through a job, connections, upbringing, or education, but everyone has an equal chance of winning the lottery! Of course, you could always increase your odds by winning the lottery with the law of attraction. Just saying!
Stop chasing some big windfall. Realize that lotteries are a vicious cycle. They exploit the desire to escape poverty while directly preventing you from improving your situation.
If you hang around five broke people all day, it’s naïve to think you won’t be the sixth. You are the average of the five people you spend the most time with, so evaluate your current friendships. Are your friends going into debt for vacations, taking on a massive mortgage, and wrecking their financial future? Well, take a look in the mirror, buddy!
Take some time to evaluate your friends and their financial habits. Keep in mind that this doesn’t just apply to money – it applies to love, success, fitness, and almost everything else in life.
8. Your income hasn’t increased.
This is a no-brainer. If your salary isn’t moving forwards, it’s moving backwards because of taxes, inflation, rising medical costs, etc. If you’re still earning starting pay at the job you started ten years ago, you’re doing something wrong. Either you don’t have any ambition or you haven’t increased your value to the marketplace (truth hurts, doesn’t it?).
Let’s say you start a brand-new job making $35,000 per year. If you just got the standard 3% raises (if that!) you’ll be at $47,000 per year in ten years. Depending on your skills and the value you bring to your company, start asking for a raise.
Use sites like Salary.com and Glassdoor.com to see how your current pay compares to similar positions. These sites will give you an idea of market-based pay rates for your job.
Planning and preparation are key to asking for raises, so make sure you do your homework. First, learn about your company’s pay practices. If the norm is to only give salary increases once per year after an annual review, sorry, but you probably won’t get a raise at any other time.
Assuming there’s still hope, here’s what you should do:
- Make a list of things that you’ve accomplished for your company. This will refresh your boss on how valuable you are and what you bring to the table. You should document cost savings, productivity improvement, above-and-beyond customer service, and any other way in which you’ve contributed to the success of the organization. These notes serve to justify your pay increase.
- Develop a goal for your pay increase. You must have a target in mind that rewards your contributions and extra responsibilities added to your job.
- Set up a meeting with your boss/supervisor to discuss your current compensation. Do not ambush your boss with this conversation! Give him/her time to prepare. Who knows, your boss might want the extra time to go to Human Resources and put together a pay plan for you…