#ArgelAnswers Why are People BROKE?

Broke vs. Poor

BROKE is temporary, POOR is eternal. ~Robert Kiyosaki

Before delving into the reasons why people are BROKE, let’s first determine the difference between being POOR and being BROKE.

To put it simply, being poor is a state of mind.

It’s all about the mindset. When we start to accept and surrender to our present circumstances, that’s when we become poor.
 
That’s why it’s very important to start with WHY you are doing what you’re doing.
 
Who do you wake up for?
 
Why are you working hard?
 
Being broke, however, is something that is temporary once we accept that our current setbacks are just setting us up for our comeback!
 
Being broke is not just because of one or two reasons, it might be a combination of lots of ineffective money habits that are running our behaviors.
 
More of like a snowball effect that keeps getting bigger and bigger.
 
But there’s good news!
 
Once we become more aware of what the problem is, it’s now easier to address it and stop it from snowballing.
 
If you need help, send me a message!
 
Here are the Top 15 Reasons Why People are Broke:
  1. People are BROKE because they don’t set goals
    • Setting goals for something that is 5, 10, 15, and even 20 years down the road is an essential part of Personal Finance that most people neglect. Having these goals keep you focused and resilient from short-term expenses. Make sure that with every major purchase or expense that you are incurring, ask yourself if it takes you closer to or further from your financial goals.
  2. People are BROKE because they blame others
    • Broke people do not take responsibility for their mistakes. They blame their circumstances, their friends, their family, and not blame themselves.
  3. People are BROKE because they blame others
    • Instead of owning up to what they have done, aside from blaming other people, they make excuses. They make good and believable excuses! 
  4. People are BROKE because they abuse and misuse their Credit Cards
    • Broke people just pay the MINIMUM amount due. They have more than one card and those cards are loaded with consumer debt. 0% installments, paying for 24 months and piling up things they don’t need.
  5. People are BROKE because they don’t have a Spending Plan (Budget)
    • One of the reasons broke people overspend is because they don’t have a spending plan (budget). They just wing it. They spend what’s in their wallet. They spend what they get from their paychecks. They then feel bad about it and repeat that process when they get their next paycheck. It’s an endless cycle.
  6. People are broke because they can’t build their savings
    • As an effect to not having a spending plan, they also don’t have a savings plan. They focus on spending and most of the time have little (and most of the time nothing!) to save.
  7. People are broke because they try to impress others
    • That’s why their credit cards are full of needless purchases and debt. They impress others with the latest clothes, shoes, jewelry, gadgets, anything that can give them the feeling of being “in”. Partly because of the effect of Social Media and falling for the comparison trap. It’s an bottomless pit of getting self-worth from fleeting things and from other people.
  8. People are broke because they make impulse purchases
    • Still related to consumerism, credit cards, and a lack of goals, people stay broke because of impulse purchases. They are very driven by emotions and are not aware of the patterns of behavior that they fall into. If not called out or noticed, this will be the story of their financial lives.
  9. People are broke because they have poor spending habits
    • Their spending habit is controlled by this formula: Income minus Expenses equals Savings this formula guarantees measly or even zero savings. Here’s the single most important formula to turn this around: Income – Savings (or investments) equals Expenses which means that we should save and invest first before spending!
  10. People are broke because they don’t invest on themselves
    • Broke people stay broke because they stopped learning when they graduated from school! Life is a process of continuous learning and improvement. That’s why we should always learn something new. Remember that if you’re not growing, you’re dying! There is no plateau.
  11. People are broke because they don’t organize their finances
    • “What you don’t measure or track, you can’t improve.” Where does your income go? Are you aware of the purchases you made last week? Last month? Last year? In order to start improving your cash flow, it’s time to start tracking where it comes from and where it goes.
  12. People are broke because they spend more than they earn
    • What’s worse than spending all your income? Spending MORE than your income! How does this happen? Debt. Getting in debt and continuously getting in debt is a one way street to financial disaster. Broke people have a lot of debt and they don’t even plan to stay out of it.
  13. People are broke because they own stuff that they can‘t afford
    • That new car? New house? New “investment”? Those are all bought on debt. These “stuff” don’t make sense in their cash flow. It makes sense on their sense of pride and sense of being “accomplished” or their sense of being popular with their friends or social media. Even the flights that they booked and hotels they stayed in, all on debt that they can’t afford or debt that would keep them grinding on their jobs that they hate.
  14. People are broke because they don’t know how to invest
    • What they call “investments” are their houses, their cars, their jewelry, and their bank savings accounts. All of which take money out of their pockets instead of put money in their pockets. These people also get scammed easily with “get rich quick” schemes that their broke friends tell them about.
  15. People are broke because they don’t protect their income
    • Broke people feel that they are immortal. They feel that they won’t get sick or ill. They put off investing on life insurance, health insurance, and disability insurance because they are young and healthy today. They don’t know that being young and healthy is exactly the best time for them to get protected.

What do you think are the other reasons why people are broke (and stay broke)?

Did you feel that you experienced one or more of these reasons personally?

If you think you or someone you know needs a financial coach/financial plan, contact me today and let’s talk!

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When he is not busy watching cooking shows or playing 1st person shooting games, Argel consistently invests in the stock market, and in crowdfunding opportunities. He tinkers with his websites and reads a lot of books. He also helps Pinoys create, manage, grow and protect their wealth as a licensed financial adviser. Get in touch with him by sending an email to contact@argeltiburcio.com