If you ever find yourself asking “why am I broke?” then odds are you’re falling into one of the 10 pitfalls discussed below. Fix a couple of these and you will be able to find a little extra wiggle room in your budget at the end of each month.
You have a job but your paychecks never seem to stretch as far as you think they should and ends never quite seem to meet. You know you should be saving more and spending less, yet you never manage to do either. You’re hoping your financial fortunes will somehow turn around. In the meantime, the debts keep piling up. Sound familiar?
Instead of waiting for your situation to magically improve, it’s time to take a hard look at all the things you’re doing that are contributing to your financial troubles. That’s right: It might actually be your own fault that you have no money.
A few will probably look very familiar to you. Follow this advice for fixing your finances and you should be able to dig yourself out of your hole.
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#1: You Slave Away for a Paycheck
Other than working for commissions or investment banking, where you can leverage company assessts, if you really want to get ahead in life you have to own your own business. I am not saying that you need to quit your job immediately. You need to have the right mindset in order to start your own successful business without quitting your job, or having to put up a lot of money.
At some point, if you want to be wealthy you have to get your own business. Otherwise you will continue to spend all your time making someone else rich.
#2: You Painfully Ignore the Power of Interest
So you were young and dumb and maxed out a credit card because you were desperate. This is not an uncommon occurrence. But that singular decision can have a lasting impact.
Sure missing a payment lowers your credit score, making it harder to get a car loan or that mortgage you’ve been hoping for…everyone knows that.
But that’s not the only the only problem — it’s the crushing interest payments that you didn’t take into consideration. If you send in just the monthly minimum (2% of the balance) on a credit card with a $5,000 balance and 15% interest rate, it will take 32 years to get rid the debt, and you will pay nearly $8,000 in interest on the original $5,000 balance.
#3: Car Poor
What keeps most people from financial freedom? What keeps people from having a solid retirement fund? What keeps Americans poor? It’s not lattes and impulse buys, it’s way too often car payments.
$500/month, invested at an 8% interest rate, over an entire typical adult lifetime, would be over $2 million, but people would rather have a nice car than money. And I get it, you want a nice car, but there are ways to save and wait until you can actually afford a nice car. If you have to finance it, you can’t afford it.
A good rule of thumb is to pay no more than 5x your monthly salary for a vehicle. Figure out that amount, and save first, then buy once you have the money. The idea is to make car payments to yourself in an interest-bearing account, instead of making car payments to a company and paying interest.
If you can break free of the mindset that says “you should care what other people think” or “you deserve a nice car,” you’ll be one step closer to financial freedom!
#4: Unsuccessful People Try to Reinvent the Wheel
Poor people always try to come up with something spectacular and new to make their fortune. This is the biggest trap you face as you work toward your goals. Instead of something new, what you need is a proven system, one that you know works and will help you gain success.
Warren Buffet once said, “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
What is the system that you have in place? Are you trying to reinvent the wheel or do you have one that is proven?
#5: Controlled by Fear
Fear is a natural component of the business world. If the path to success were clear-cut and infallible, then everyone would be wealthy. Because it isn’t, everyone must deal with situations that make them anxious. There are three different ways to process and manage fear: The first two options will destroy your chances for a successful and healthy life, while the third gives you the mindset you need to use fear to your advantage.
1) Some people pretend that fear does not exist. The people who manage fear through ignoring it end up in a life filled with poverty and misery. By ignoring fear, you let it control you because you neither acknowledge it nor learn how to deal with it. Unacknowledged fear renders you impotent in your efforts to reach your goals, and this is the most disempowered state for wealth and success.
2) Other people act in spite of fear. This way of dealing with fear allows you to achieve certain goals despite being afraid; however, it leads you to anxiety. Yes, you will have wealth, but you will constantly be afraid of taking the wrong step. These people are hung up on worries like “What if I fail?” and “What if I don’t hit my goal?” This results in a situation where you second-guess every decision and live in fear of failure.
3) Successful people embrace fear and let it motivate them. These people achieve their goals and do so by acknowledging their fear without letting it ruin their enjoyment of their success.