A common problem among American adults is that they do not know how to manage their money. Even when making incomes above their means, they still seem to find themselves living paycheck-to-paycheck. Do you find yourself with the same problem? It raises the question: why are you always so broke?
1. You Feel Powerless
When stuck in big debt and the bills keep coming, your stress levels feel like too much. You may think an easy out is just to ignore your problems – wrong! Avoiding the problem is going to make matters worse. Take some time to organize your debt. Pay your minimums each month and put away any excess funds to the lowest debt balance on your list. Once your lowest debt is gone, use those payments as momentum to continue to knock the debt off your list by moving to your next lowest debt, and so on. This is powerful; you are now seeing that you can get out of debt by sticking to a plan.
2. You Don’t Pay Yourself First
This is simple, put money into your savings before you pay your other monthly expenses. If you haven’t already, create a budget so you know exactly where your money is going. Then treat saving as a bill itself and soon you won’t miss the money taken out. This money can be used for emergencies, purchasing a future home, or saving for retirement.
3. You’re Not Making Savings A Priority
When you’re not paying yourself first, your behavior needs to change in order to gain financial control. According to USA Today, 62% of Americans have less than $1,000 in savings and 34% of Americans don’t have a dime in their savings accounts. Without any savings to fall back on, an unexpected expense could be risking financial disaster. Instead of trying to have it all, make it a priority put some money aside for the future. Then budget for one “want” at a time, so the rest goes to building your future and creating a safety net.
4. You’re Always One Step Behind
Are you sticking to a budget? Keep track of your expenses, know when bills come out and deposits come into your account. Doing so can make sure you’re prepared for the expenses coming from your account and help you avoid the extra fees associated with overdrafting.
5. Living In Unaffordable Housing
CNN Money reports a total of 21.3 million Americans are spending 30% or more of their paycheck to cover the rent – a record high! When you spend so much of your paycheck on rent it forces other essentials like food, clothing, and health care to take the backseat. Plus, it makes it harder to achieve long-term financial security. Spending too much on rent or a mortgage is a big reason why people struggle; it might be wise to consider moving to a smaller place.
The root cause of being broke: spending more than you make. Stop it! Live within your means and work to earn more so you can have more breathing room for the future.
Related Post: Saving for Retirement While Paying Down Debt
