This is why you are broke

If you have at least $400 to cover unexpected expenses, then, you are financially better off than the average person. It’s known that most people do a bad job at managing their finances, as there are fewer people who have a good relationship with their money. The idea of having a good relationship with your money has nothing to do with your salary. It doesn’t mean you have to be ultra-wealthy or earn a high income. Instead, it means you step up, and make better choices and decisions regularly around your income. 

What are the reasons most people are broke?

Read till the end so you can be sure you are not making this mistake that will keep you broke forever.

Clear financial goals

Every decision you make with money will start with your financial goals. How are you ever going to increase your income, pay off debts, or work less if you have no direction? Whenever you set goals, you establish a destination for your future, it applies to your finances too. It will help you make certain decisions to accomplish those goals. The goal of being debt-free in the next three years is a concise one. The reason is that you can start executing plans to help you get there.

read also: what is the truth about saving money that you don’t know

Therefore, if you don’t want to be broke, you have to come up with a goal that tables the exact position you want to be in financially. And when figuring it out, it should be as concise as knowing if saving $10000 every day will help or not. Any of the goals you hope to accomplish should all have a defined finish line.

Prepare for emergency

Since quite a good number of people wouldn’t have $400 available to cover emergencies, it can be a problem. The thing is $400 isn’t a really big amount of money as it seems, and unexpected emergencies are uncommon too. So, you’ll be setting yourself up for disaster if you do not prepare for financial emergencies. Not having these put in place will make you fall into huge debts. Once you get into debt, funding an emergency account becomes a problem as a result of the exorbitant rates you have to pay to cover your debts. Debt moves y the closer to being broke for a long time.


One of the reasons people become broke is because they are not living on a budget. Without tracking your income and expenses it’s impossible to know how much money you spend. You will know how important this is if you’ve ever gotten your paycheck, made a few purchases, and seemingly have nothing left. Budgeting can be uncomfortable but it’s a powerful exercise, especially for those trying to control their finances. It’s may not be a great idea for you to pinch away in your younger age so you can live lavishly during retirement. But it’s important to strike the balance between having a good time now and thinking ahead too. You need to make smart investment decisions so you can have fun now and still cater to the future.

They have expensive habits

Those who are broke have expensive habits, which keeps them away from getting ahead. They buy foods that are unhealthy for their bodies but wouldn’t save that money so they can invest in them instead. It could be buying cigarettes or eating fast and processed foods. Avoiding these expenses can make a lot of difference.

They have bad debt

Not all debt is created equally, there are generally two forms, good debt and a bad one. Good debt is the money you borrow to help you make more money example a mortgage on a rental property. While bad debt is the money you borrow and spend on depreciating assets example cars, clothes, vacations, etc. Those who are broke certainly have bad debts by spending money bit to impress people. The experience or feeling over these purchases is short-lived while bringing financial setbacks.

read also: a debt-free life is the best life ever

They don’t pay themselves first

Apart from making responsible spending decisions, you must know you won’t be able to build the financial bank of your dreams through savings alone. Therefore, pay yourself first by taking a portion of your earnings and making it work for you over a long period. Direct them towards investment portfolios and do this automatically so you don’t get to miss the money. If you allow it to sit in your account, you’ll spend it on things that have no appreciating value.


Ultimately, the reason people are broke is that they make poor financial decisions with their money. They do so in many areas, there could be exceptions, but a large percentage is true. The good news is that there is a way everyone can improve their financial standings to a comfortable position.
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