Yahoo Finance ‘Why Am I Always Broke?’ Here’s Why Experts Say You Are
If you’re living paycheck to paycheck and struggling to make ends meet, it’s time to reassess your spending and saving habits. Although making more money might seem like the only solution, it’s not a realistic option for everyone — and may not solve the underlying problem.
After all, it’s not how much money you make but how you handle your money that counts in the end. This is why you must pinpoint which behaviors are keeping you in debt. From there, you can make a plan to banish these bad money habits for good and finally get on the road toward financial freedom.
Here’s a look at six reasons you’re always broke — and how to turn things around.
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You Have Little to No Savings
Saving money might not seem feasible when your budget is tight, but it’s a crucial step toward getting out of debt. Unfortunately, many consumers are struggling to stash away cash. In fact, a recent GOBankingRates survey found that nearly half of Americans have less than $500 in savings, and 60% have under $1,000.
When your rainy day fund is limited — or nonexistent — you might have to borrow money or rely on high-interest credit cards to cover unexpected life events such as a car accident or home repair. An emergency savings fund gives you the opportunity to get ahead when things get tough.
Treat savings like any other bill and pay yourself first. Transfer a percentage of your paycheck directly into a separate account so it’s out of sight and out of mind. Otherwise, automate transfers from checking to savings on a weekly basis for small amounts you won’t miss, such as $5 or $10 — over time, this adds up.
Melanie Musson, a finance expert with InsuranceProviders.com, said, “Save first. Don’t go through your month and save what’s left over at the end of the month. You won’t have anything left.”
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David Bakke, financial expert at Dollar Sanity, explained, “If you have no savings, you will, in fact, almost always be broke. Here’s a simple path. Get on a budget using an app like Mint and examine your spending. Look for ways to reduce every monthly bill and cut back on personal purchases. Once you see that you’re taking in more money than is going out, put the surplus in a savings account. That way, the next time the brakes on your car go out or your phone cracks up, you can absorb these expenses without killing your finances.”
You Carry a Revolving Balance on Your Credit Card
It’s tempting to charge purchases with the idea that you can buy now and pay later as you’re also earning valuable rewards like cash back or travel points. But if you’re carrying a revolving balance from month to month, this is a clear sign you can’t afford the purchases you’re making.
Refrain from throwing down the plastic until you pay off your balances in full, and only use your card to pay for expenses you can afford. Consider paying down your debts faster by consolidating debt using a low-interest, fixed-rate personal loan. Just make sure you don’t get slapped with sign-up fees, and be sure to read the terms carefully. Moving forward, stick to cash or debit to make your purchases, as this will train you to live within your means.
“Don’t accept a revolving balance as inevitable. If you pay off your balance every month, a credit card can be a great tool for gaining rewards, but it can also provide an avenue for overspending and wasting money on interest,” Musson said. “Pay down your credit card debt one at a time. Once you have a card paid off, use that card for spending each month as long as you pay it off. That way, you won’t pay interest on what you spend on that card. Then, work toward paying off your other credit cards.”
You’re Paying for Things You Don’t Use
You might be surprised to realize how often you’re paying for products and services you don’t use. For example, do you watch all the channels included in your pricey cable package? Or use all the data associated with your mobile plan? If not, adjust your packages accordingly.
There might be other memberships and services you signed up for with good intentions, like joining a gym or a monthly sample box delivery, but fail to use regularly. Take time to review your bank and credit card statements to reassess which recurring expenses are needed and cancel those that aren’t.
You Give in to Impulse
According to a recent Slickdeals survey, post-COVID inflation has cooled impulse spending by 48% in 2023 compared to the previous year. Despite this drop, consumers still made at least six impulse purchases a month, spending $151 on average.
Although occasionally picking up a magazine or candy bar won’t hurt, giving in to impulses regularly will keep you stuck in a lifestyle that doesn’t offer much financial flexibility. Take control of these bad buying habits by tracking your finances. Apps like Mint link all your financial accounts in one place and provide notifications on purchases in real time, keeping you accountable for each and every dollar you spend.
It’s also important to identify your spending triggers. If you shop after a fight with your partner or as a reward after a great day at work, it’s time to take control of your emotions in ways that won’t wreak havoc on your budget. The next time you’re feeling blue, go for a run or call a friend to vent instead of whipping out your credit card.
“Before making a purchase, make sure you need the item,” Musson said. “Give yourself at least a day to think it over. If it’s a big purchase over $100, fit that item into your budget. Don’t just spend it.”
She added, “Keep off the computer. Go shopping at a real store and bring cash. People spend less when they use cash, and going to the store limits the availability of all the things you can find online.”
You Dine Out Regularly
The average U.S. family spends over $3,000 annually at restaurants, according to the Bureau of Labor Statistics. While the convenience of dining out is tough to beat, the premium you’re paying for someone else to cook is another reason you’re broke. Cooking your own meals at home — even if it’s just brown-bagging a few lunches a week — can help you save big bucks on food. Spend time on meal planning and look for recipes using overlapping ingredients in order to reduce food waste.
If cooking feels like a chore most nights, carve out some time over the weekend to meal prep. You can even prepare several freezer meals once a week that are easy to reheat after a long day at the office, reducing the temptation to order takeout.
“Dining out is convenient, but it’s expensive.” Musson said. “Often, people eat out because they don’t have a plan and don’t want to go out to the grocery store to buy something to make themselves. If you plan your meals by the week or month, you’ll have a plan that can help keep you from giving in to convenience.”
You Have Serious FOMO
FOMO, aka the “fear of missing out,” can sabotage your budget and derail your efforts to overcome debt. If you constantly feel pressure to keep up with a lifestyle you can’t afford, it’s time to assess how much influence your social circle has over your spending. It’s better to surround yourself with people who are financially savvy and enjoy activities that don’t cost a lot of money. If social media is causing you to spend beyond your means, limit usage and unfollow those who regularly post pictures of activities and purchases that make you feel less than your best.
“The fear of missing out is a myth, in my opinion, perpetuated in the advertising and marketing tactics of various companies,” Bakke said. “Let’s face it: Your life is not going to be dramatically changed if you only have the iPhone 14 and not the 15, as one quick example. If you see an online deal that states it’s only good for the next 24 hours, again, you’ll be OK if you don’t take advantage. Understanding that FOMO is a myth that you should essentially ignore would be a big step in getting out of the situation where you’re always broke.”
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This article originally appeared on GOBankingRates.com: ‘Why Am I Always Broke?’ Here’s Why Experts Say You Are
