We think we have a good handle on our finances, and yet at the end of the month we are broke, or maybe even before the next paycheck we have already spent all of our money. Then we spend the days until the next infusion of cash in stress, doom and gloom. What happened? According to our calculations, we should have money left over…money for savings…money to pay the bills…money for those purchases we prioritized. Yet the money seems to simply vanish. Who stole it? Actually we did. We fell victim to the lies that rob us of our money.
Let’s take a look at eight of the most common lies that keep us broke.
- There is not enough money to budget. Wrong. Even if you barely make enough money to pay the bills and buy groceries you still need to get a handle on your financial situation. It is the only way to improve your financial life. The lie that you do not need to budget because your income is small keeps you trapped in a situation where you will always be broke. Even if your budget is a zero sum balance, make one. Make it realistic, check it often and stick to it. When extra money arrives, from income, a bonus, or a side gig, use it to attack your financial priorities—reducing debt, saving for retirement or for a major purchase.
- There is not enough money to invest. You don’t have to be a whiz kid on Wall Street to invest. Investments can be small. Investing simply means putting the money aside toward something that will benefit you in the future, rather than spending it today on something you probably do not need. For example, take a course and invest in yourself. Learn something that will help you qualify for a better job or secure a better position where you are employed. Put whatever amount of money you can into a retirement savings account such as an IRA, or if you have children, open a 529 account and invest in their future. You can make simple, small investments, without the need for a broker or investment specialist.
- I have to buy my kids the latest—(fill in the blank). No, you do not. Your kids will wear you down with the persistent asking and whining, but keep in mind that at the end of the day, what your kids need the most is love and attention. The battle is difficult, for sure. You are not fighting only against the desires of your children but also against the influence of their friends and a marketing giant that seeps into every aspect of your child’s life with a constant message of “you need this…” Start early and model for your children that the pathway to happiness is not through the acquisition of material things. They need stuff that functions, but they do not need to trade up every six months to the newest mobile device.
- It’s not that much money. It depends upon how money times you spend money on those “little things.” For instance, maybe your coffee house offers a reasonable price for your favorite breakfast drink. However, if you stop there every day that “small” amount of money can become a significant amount of money. Day to day, it seems inconsequential, but at the end of the month you could be looking at a total of $100 for that “small” expense.
- I can afford it. Maybe your bank account actually has a balance. This is a time to celebrate, but not by running to the nearest shopping mall or favorite online retailer. Instead, celebrate that you have money available to pay down that bill, or to add a little more to your savings or other investment accounts. Look at your budget and remind yourself of your financial goals. Use whatever money you still have leftover at the end of the month toward one of those goals. Put your money to work for you.
- Hey I deserve to treat myself, after all life is short. Living paycheck to paycheck does not mean you must reside in a cave and absolve from all the world has to offer. It means carefully planning how you are going to move out from the situation and become financially free. If you have an attitude that life is short and you should treat yourself to all the luxuries the world has to offer, then in a way your life will indeed be short, because you will be constantly broke and never be in a place of serenity and happiness. Set financial goals for yourself and when you achieve a small victory, give yourself a small reward. Just make sure the reward does not increase your debt or take away from the financial goal you just achieved.
- My financial situation is never going to improve. There are two ways of looking at the world: (1) this is my allotment and I have to live with it or (2) this is what I have now, but I am not stuck with it—I can make my allotment bigger. If you want to stop being broke all the time, go with the second outlook. Assess yourself: what are your talents, what are your skills, how much extra time do you have in your day, etc. Look for channels to increase your income—a second job, freelancing, starting a small business on the side—the idea being to remain positive, expand your horizons and not to let your current financial situation trap you in despair or poverty.
- I need to buy a home, paying rent is pouring money down the drain. It depends. Remember the phrase “house poor”? You may have a nice home that you own, but you cannot afford to pay the bills, buy groceries, furnish the place or handle any unexpected expenses. You are broke all the time. The decision to purchase a home should be made on a number of factors. Is it a good real estate market? Are you planning to stay in the area for a period of time long enough to at least recoup your investment? Is your employment situation stable? Can you afford the mortgage, maintenance, and your other bills, plus handle any emergencies that arise? Renting is not necessarily a waste of your money. In fact, depending upon circumstances, it could be financially prudent to rent, especially if purchasing a home means that you will be broke all the time.