Being broke is easy. Lots of people are really good at it. But most of these people, at least on a certain level, aspire to achieve some level of wealth and financial security. Even if broke folks don’t have illusions of private yachts and mansions, they still want to live a life where they don’t have to worry if bills will be paid. This is a totally legitimate (and achievable) goal, but there are many factors standing between people and the achievement of this goal. Here are five of the biggest reasons people stay broke.
#1 Debt Grows Fast
Investors work very hard to make their money grow a mere 5-10% in a year. But debt grows much faster than this. For most people, credit card debt accrues at more than twice this rate, meaning that it’s easier to lose money than it is to gain it. This shouldn’t come as any surprise, but it’s a good reason to take debt very seriously, making radical personal decisions that can cut it down fast.
#2 Money Slips Away Unnoticed
In the unexamined financial life, it’s easy for people to make spending decisions without thinking. But there are also plenty of expenses which pile up passively. I’m talking about forgotten subscription services, like internet TV/movie deals which go unused. There are also services which people sign up for without realizing, like PPI in Europe. Check out this PPI calculator to see how much this service might have cost you, if you happen to have had it tacked on to a loan or other financial agreement.
#3 Investment is Hard
Investment can be unaffordable and difficult to learn about. There are a lot of reasons that people don’t invest, but new services make it easy to overcome them. Betterment reviews are easy to find because, with Betterment, automatic drafts can be set up, making retirement savings and investment easy and affordable.
#4 Budgets Don’t Make Themselves
A budget takes intention to set up and follow. It’s like going to the gym: a lot of people set out to do it, only to find that they can’t keep up with it. It’s important to take a careful look at how much money you bring in, how much you spend every month, and how much you should spend in order to maximize debt reduction, savings, and investment allocations.
#5 Consistency is Hard
It’s easy to make good money decisions for an hour or a day, but it’s tough to keep it up for weeks, months, and years. The best way to achieve consistency is to truly understand your problems, goals, and recovery tactics. If you have a strong plan, based on a good understanding of what you need to do to quit being broke, you’ll be much more likely to achieve your goals.
By making changes in all five of these categories, you’ll be much more likely to go from broke to relatively financially secure. It may take months, it may takes years. But when you start to notice the difference, it’ll be a lot easier to maintain your efforts. So start now, stick to it, and you should start feeling better about your money before you know it.
