When in life you are attempting to permanently solve a problem, you look at the root cause. By just fixing the symptoms of the problem, you may never truly fix the problem because you haven’t uncovered the underlying issue. Money is no different. You can make tons of money, but you may still be broke and have no money. I have been there and done it before, so trust me your not alone.
Despite how you found yourself broke, in debt with no money, you must confront these reasons and come up with a plan to get yourself out of this rut.
Here are 10 reasons why you are broke with no money
You have cable and you can’t afford it
Each and every month that $120 bill comes to the house that gives us the privilege of watching another months worth of cable shows, sports games and the food channel. NPD Group made note that the average cable bill is around $120 ($1440 a year!). Our bill is $191 a month because that includes phone, cable and internet. That’s a whopping $2,292 a year!! That’s a nice vacation every year that we can’t have because we have cable.
We don’t use the phone portion of it and we have tried to have it removed, but our cable provider told us because we have a package if we remove the phone, our bill will actually be more! How ridiculous is that? If you have no money, perhaps this is a good place to start looking. If you have internet on top of cable, then perhaps you just resort yourself to watching YouTube. You can also acquire a digital antenna to get some of your broadcast digital channels. If you can’t afford it, then it’s not a requirement.
You treat your credit cards as your money
This is a mistake that I made when I first got a credit card. At the time it was a $500 card limit at the age of 18 just walking into college. I thought wow, what could I buy with $500 in cash. That was one of the worst mistakes I ever made in my life because it didn’t stop with that one card. Soon later I had another credit card and another credit card. In less time than it felt I could blink and eye I was over my head in debt.
You see they don’t teach kids even to this day about the dangers of credit cards. I at least didn’t grasp the concepts greatly at that age, not noticing the steep interest rates that are charged each and every money. I had no way to keep up with it. So moral of the story is don’t use credit cards as your own money. It’s a very expensive loan. Credit cards are bad! If you use them at all for points, its best to get those paid off every money.
Being in debt is just the American thing to do
Everyone is doing it. All my friends are in debt, it’s just the way of the world these days. In the most loving way possible, no it’s not! Believing that debt is just a normal function of daily life will keep you ball and chained to a bank for the rest of your life. It’s not “normal” to have debt and don’t think of it that way. Think of debt as being the most abnormal thing you can do and get that debt paid off as humanly possible. Financial freedom is so much sweeter. When you now have that money that you were paying to you debt every month in your pocket to do as you please with, you will be much more happier.
Don’t compare yourselves to others. It’s true, a lot of people have debt. According to Nerd Wallet on debt, they state that US consumers have $747 Billion in credit card debt. Of which the average household is carrying $16,061 in credit card debt for those that carry credit card debt. Don’t be a part of this statistic. Pay off your debt and free of this ball and chain.
I work hard so therefore I deserve these things
We have worked very very hard for the things we have in life. It’s easy to get into this rut of thinking to ourselves that we deserve to go out to dinner or buy that bigger TV, just because we worked hard and feel we deserve it. This can’t be an emotional decision, it always comes back to dollars and cents. Do you have the money to spare? Do you get to the end of your paycheck period and still have money to spare? If not, then you might want to think twice about going out to that extra dinner out or buying that new electronic device because your buddy just got a really nice one.
The worst place you can get yourself in is when you start “Keeping up with the Joneses“. Did you know that this phrase actually tracks back to 1913 from a comic strip by Pop Momand that ran in the newspapers at the time. I had to look it up and learned something new.
You pay too much for your phone bill
Our phone bill just came in at a whopping $229 for the month. That’s $2748 a year! Yet another really nice vacation and experiences we could be taking. You have to consider the importance that your phone holds in your life. Maybe you don’t need to always be able to play Candy Crush Saga and make a phone call at the same time. You have options and you may not even realize it. Some of the major retailers like Walmart has prepaid phones that you can buy keep and then you pick your plan. For example, you can get a 1500 minute plan at Walmart for $30 or unlimited talk, text and data for $45. Plus, you are not under a contract. If you don’t like the service then you just get rid of the plan.
You bought too expensive of a car
This one plaques many people. It’s the second or third largest purchase that people generally make in their life, next to their home. I made the mistake that many people make as they get into college and think that they must have a new car, so I bought one. It had 7 miles on it when I bought it. Well, I drove that car for the next 10 years and when that car limped into the car dealership 10 years later at almost 170,000 miles, I felt I got my moneys worth, but let’s run the math. I could have made a decision to not buy a new car. So rather than paying $375 a month for 60 months, I could have bought a reasonable used car for $1500 – $2000 out of savings in cash.
That was at age 19. I’m 39 now. If I would have bought the used car and invested the $375 in a mutual fund earning on average of 8% over the next 20 years, I would have had $220,882 in investments now. Now I would have had to buy more used cars over that period of time, but just imagine if I bought 3 or 4 more used cars over that period of time for $1500 – $2000 in cash. I would have only been out $8000, but in reality I am out $212,000 in cash that I could have had. When you look at it this way, I hope I liked that car because it was SUPER Expensive in the long term.
The killer of this is if I would have kept doing the same thing until retirement (Age 65), I would have amassed a whopping $2,146,790 in investments! HOPE YOU LIKE THE CAR!
By the way, that’s only if I earned 8% on that money. I earned 22% last year on my mutual funds.
Little things don’t add up
This one will take you out faster than you see it coming. One of the common things we would always run into when we were getting out of debt was that we would make it to the end of our pay period and have nothing left. We were left to wonder where all the money went. It’s not like we went and bought a big screen TV or went out to restaurants every night. In fact, quite the opposite. This is a little exercise you can do in order to see what I am talking about. Take an extra from your checking account of items that you spent money on that perhaps you didn’t actually need. I went and picked up a pop at the vending machine ($2) and then I picked up a Starbucks three times on the way to work ($15) and then I stopped by the hair salon and treated yourself to a cut and highlight.
The moral of the story here is that it all adds up. Your homework is to take the last month charges to your checking account and evaluate and add up every one of them. What you will find is that you spend collectively A LOT more money than you realize when you are not evaluating the overall monthly output as a total. After running that exercise and adding everything up, then multiply that by 12 months. That number will likely be quite substantial on all these little items that you thought were no big deal, however they add up over time and leave you at the end of the month with no money.
No Emergency Fund
This one is not as obvious to many people. According to CNBC, an amazing 66 Million Americans have no emergency fund at all. Nothing, Nadda. In fact, it’s noted that Gen Xers are the worst offenders of this recommendation. One third of all people aged 36 – 51 said they have absolutely nothing saved in an emergency fund. This is setting you up for the spiral effect, as I call it.
Bottom line, if you live on your own, you should have an emergency fund of at the very least $1000, but depending on your situation it could and should be much more. What happens if you loose your job? If you own a home, what if the furnace breaks? If you own a car, what if the car has keeled over and is in need of repair. An emergency fund can protect you from these unexpected life events where you are not left completely high and dry.
In this emergency fund you should definitely consider some of the following events:
- Home Repairs
- Car Repairs
- Unexpected Medical Expenses
- Unexpected Pet Medical Expenses
- Job Loss
- Unexpected time away from work perhaps to care for a family member
- Many other things that could happen that are specific to your life
This money needs to be accessible, but not staring at you to where you would be tempted to spend it. This should give you the cushion when unexpected life events happen that you can not predict.
You don’t make enough money
OK, so this would should be obvious. Hey I make minimum wage but why don’t I ever have any money. Well perhaps it’s completely because you make minimum wage or something close to minimum wage. I am not saying that you shouldn’t do what makes you happy and if a minimum wage job is what makes you happy, then go for it. However, there have been numerous studies done that shows clearly that making minimum wage puts you in a poverty category. I know you can do better than that so don’t settle because I believe in you. Every person in American has such a wonderful opportunity to make a great life for themselves. I have always had the fortune to have a great job, great family, great friends and I have used all this support to continue to push forward and build a great life for ourselves, but that didn’t happen by chance. We worked at our life over years of hard work to get to where we are today, so you have to convince yourself you deserve better and go out there and pound the pavement and bring the bacon home.
Being OK with Debt
We have done this many times where we will compare our situation to others, whether it be friends or family members. Well my friend Stacy has $10,000 in debt and my friend Lauren has $15,000 in debt, so it’s OK that I have $20,000 in debt. I’m here to tell you that it’s not OK to be in debt. Don’t fall into this trap because you will never get serious about paying off your debt and over the period of your life, banks will make a fortune off of you.
Let’s get serious about paying off debt so that we can focus on building a solid future.
Why do you think you are broke?