Lately I’ve been thinking about habits that are keeping many people broke. Why are some people so good with money and why are not? It may seem like an obvious thing to be aware of but it’s not or we would all be rolling in cash.

If you have found yourself in a position where every month is a struggle to stay afloat then maybe you have these habits that are keeping your broke. Let’s see what these habits are and how to get over them.

There is a study that shows thousands of people live paycheck to paycheck even when they make good money. It defies logic but without being intentional with money it’s very easy to be consistently broke even as we make more money than we did when we were younger. Being aware of these bad habits is as important as starting to break the cycle of being broke.

I’d like to point out that overcoming these bad habits isn’t something that can be resolved overnight and that you are not alone in having this problem. Having control over our money and ultimately financial freedom takes time and control. Habits are difficult to break but the good news is that they aren’t impossible to break.

As this post highlights the habits of broke people it also provides opportunities to manage money better. If you find that you can pinpoint exactly which habit you need to work on, I encourage you to share your resolve with someone. This keeps you accountable and diligent in achieving financial freedom and getting out of the perpetually broke cycle.

Habits that are keeping you broke

You Do not have a budget

Most people think a budget is only for people who don’t make a lot of money. It is almost as if once you start making enough money not to have to worry about bills you stop making good financial decisions.

Everybody needs a budget! Regardless of which point we are in life we need to be responsible for our money. We need to constantly and consistently be aware of where our money goes. It’s important to know how much you spend and what you are spending it on before you even spend it.

Most broke people have no idea where their money goes and what it is spent on. To start being responsible take the first step and adopt a simple budget. Evaluate the things you pay for or buy on a daily or weekly basis. Then look at what you make and find opportunities to save.

HOW TO CREATE A BUDGET THAT ACTUALLY WORKS!

You Do not save

Dave Ramsey who is a financial guru that I follow religiously recommends that people save for emergencies and for their future. Financially responsible people have $1,000 saved for emergencies. This is a fund that should not be touched unless there is an emergency. Most broke people typically do not have $500 to their name after their paychecks are deposited. I don’t mean to be harsh but everyone needs an emergency fund.

Another recommendation is to save at least 10% of what we make. This takes discipline and intention. You must plan for it. It cannot be something you do after the fact. The best way to achieve this is to set up a separate savings account that you can deposit money into directly from your employer. Essentially automate how you save. This is money that is not available to spend.

Broke people do not think about their future and will find themselves borrowing money to take care of bills at the end of the month. They are usually overdrawn on their accounts.

HOW TO SAVE MONEY LIKE A PRO IN 10 EASY STEPS

Buy things you don’t need

I have always used the rule of 24 hours. If I see something that I really want but it’s very expensive or something I would normally not buy, I give myself 24 hours. If I still want that thing after 24 hours, then I plan on how I will purchase it.

Notice that this is not a random purchase but rather it is one I am consciously spending my hard-earned money on. Just because you can afford something doesn’t mean you need it. It is important to realize that we will not always be able to work so it’s important to spend money on things that have value in the future.

Going on shopping sprees is a broke person’s mentality. It does nothing for your bank account in the end and only ends up in credit card bills which is ultimately debt. Similarly buying coffee at your favorite coffee shop everyday is not a great habit.

If you have a spending habit you can adopt the envelope system where you only spend whatever cash has been put in an envelope. If you run out before the week is done, then you can’t spend any more money.

Over extend yourself

Have you found yourself in a position where you are paying overdraft fees because you spend more than you have? This is one of the worst feelings. First you find that your debit or credit card had been declined because you have insufficient funds and then the embarrassment that comes with it.

Broke people do not manage their finances. They find themselves in situations where they spend more money than they make. This is usually the result of spending money without planning for it. Notice that it’s not that they spend money on bad purchases. It is a lack of awareness of how much they have to spend.

People who buy the best cars and live in the best neighborhoods but are struggling to maintain a lifestyle they cannot afford.  It is critical to get out of this cycle by offloading this type of expenses that ultimately keep you broke.

You want to Impress people

This goes along with over extending yourself. Have you heard the quote that people spend money they don’t have to impress people they don’t even know? With social media being so big people want to show off their great lifestyles to virtual strangers.

Shopping sprees, fancy cars and expensive vacations are posted everywhere. It is such an unnecessary expense that is avoidable with control and awareness. The best advice I can offer is to find other things that give you fulfillment. We don’t need anyone’s validation to prove that we have great lives.

Stop buying things you don’t need to impress people you don’t even like!

Spend your paycheck immediately

Are you the type of person who has a habit of spending money as soon as hits the bank. It’s money in and money out immediately. You don’t really save money so it never stays in your control. 

As much as I love Amazon I don’t love how convenience has created spending monsters. As soon as essential bills have been paid, broke people see any extra money as spending money. By the time the weekend is over they have run out of money and need to spend using their credit cards.

It’s a vicious cycle and the best way to stop it is to set ‘no spend’ goals. Write up a bullet journal like this one and track spending habits. It will keep you honest.

You Have no financial goals

Goals are important. They keep us honest and motivated. Financial goals keep us from being broke. As we assess ourselves it’s important to set financial goals to help us overcome habits that have kept us broke. 

Financial goals can be anything that is achievable. There is no use in setting goals that we will fail at. A good example would be a goal to be debt free, a savings goal or a spending goal. These are goals that will help control how much you spend and how much of your own money you spend.

One of my favorite type of goals is saving more than I think I can which means that I dont have money left over for buying things I dont need. Having a safety nest in the bank is good for morale and mental well being.

Using credit cards all the time

Credit cards are great for people who have the discipline for leveraging them to get benefits. Credit card companies make money from fees and interest. As soon as you are late various fees are tacked onto your bill. This leads to an ever growing credit card balance that can get out of control which is one of the habits that is keeping you broke.

Broke people will usually pay just the minimum payment on their credit cards failing to follow the debt snow ball system. They will sometimes be late which leads to high interest payments and late fees.

Additionally due to the nature of bad credit scores broke people pay more for anything that they use credit to purchase. They pay more for houses and cars because they aren’t responsible borrowers. 

These are all habits that can be broken. It will take some work and discipline so I encourage you to work on them at a time. Set a mantra for yourself as a reminder to be more responsible with money. It’s time to get out of the broke mentality.