3 Reasons You’re Broke – And How You Can Change It

Far too many of us are familiar with the uncomfortable and downright awful feeling of being broke. When you’re in this position, you have to make tough choices about where you money goes: cell phone bill or going out with friends, groceries or credit card bill, rent or utilities. It seems like a vicious cycle – and it is – but it’s also one that you CAN break. I’m not saying it’s easy or that you’ll be in a better financial position in a week. To get un-broke, it takes some serious self-reflection, and some serious action too. As I see it, here are the 3 main reasons why people get into dire financial straits.

1. You’re blowing your income on frivolous and unnecessary stuff. Do you really need that new jacket when you’ve already got 3 others? Or what about that mani/pedi, or that new cell phone when your old one was working just fine? So many people get wrapped up in “stuff” and having the latest or the most of something. They work to keep up with fashion and technology trends, or they take the “me time” philosophy to the extreme, treating themselves to whatever they want. And this, my friends, is how so many people end up broke and/or in extreme debt. The very idea that you “need” something is usually a joke. You don’t need it, you want it, and you refuse to tell yourself no.

So how do you counter this? It’s simple. Just stop buying unnecessary things. I know this is easier said than done, and to be honest, you’re probably going to have to do some major soul-searching to break the habit, not to mention the crazy self-control you’re going to have to start practicing. But I promise it can be done. It’s tough, but if you can change your habits, you will start to see a difference in your finances very quickly.

1. You’re not maximizing your income. Are you making as much money as you could be? Surprisingly, a lot of us aren’t. For a society that is driven by making money, few of us actually reach our true income potential. The reasons for this are varied. Life gets in the way, our schedules get crazy, there are family obligations that take up our time, we become complacent where we’re at, we don’t think to ask for it, or we don’t want to extend ourselves that extra mile.

Whatever the case, there are tons of options for increasing your income. Really, there are. Ask for a raise, for starters. If you’re an asset to your employer, your request will likely be granted. You could also take on a second job, you could ask for extra hours from your current job, you can do little sides jobs like moving furniture or bartending. Think about what you’re good at and how you can use that talent or skill to your financial advantage. You might be surprised at the opportunities that come up.

1. You’re not making your money work for you. Where is all your money going? Is any of it being used to make more money? If not, then you’re missing out on some sweet payoffs. Once you’ve stopped frivolous spending and developed some passive streams of income (see 1 & 2 above), it’s time to put your dollars to work. When most people hear this, they think “stock market.” And they’re right, that is one way to do it, and it works very well for a lot of people. However, there are many options for putting your cash to work. You can start on a smaller scale by opening a high yield savings account, or using a credit card that offers rewards that you’ll actually use. You can also invest it, which is what I recommend. Investing in stocks and mutual funds are all right, but real estate is where it’s at. Property investment brings a brand new asset class to your portfolio, diversifying it and helping ensure that you stay on top. Plus, when done right, the ROI on real estate can be huge.

Being broke sucks. But it doesn’t have to be a permanent condition. You have the power to change it. Think about the things listed above and how they might apply to your life, then use them to pull yourself out of your bad financial position. With some planning and effort, you can do it!