Lauren Cobello » Budgeting » Budget Tips and Tricks » 13 Lies Making You Broke
If you’ve ever asked yourself, “Why am I broke all the time?” or “Why do I feel broke?” or “How come I never have money?” Sometimes it’s perception, and sometimes it’s reality. But in any case, we all know that our culture lies to us daily. We’ve gotten used to it. Just watch any advertisement.
“Take this pill, you’ll lose weight.”
“Save 15% on your car insurance.”
“This cream will make your wrinkles disappear!”
Those lies are so blatant. Most of see them coming from a mile away and have wised up not to fall for them… or to at least take the claims with a grain of salt. But then there are these other lies… the ones that seem to have become ingrained in our culture.
“If everyone is thinking alike, then someone isn’t thinking.” – General George S. Patton
Their claims are much more subtle. Marketers have been more clever with these. They’ve played the long game and let these lies take hold without actually coming out and explicitly telling them. And they’re happy to have us play along. Just like General George S. Patton said, if everyone thinks and accepts the same thing, then no one is really thinking it through.
Many of these lies prey on our desires to be wealthy. But is wealth what we really want? More and more I am convinced that true wealth is not what we are looking for at all. Instead, we are lied to and told that if we FEEL wealthy, then that’s basically the same thing. But having wealth and feeling wealthy are 2 vastly different things. Feeling wealthy will have the opposite effect.
And then there are also lies that come from our own insecurities. Many of these financial insecurities come from believing and acting on the aforementioned lies in the preceding paragraphs. And we need to learn how to overcome them.
Because they’re making us broke. No matter what the numbers in your bank account are, if you’ve been asking, “Why am I broke?” Here are…
If I had to pick one single monthly cost that is wreaking havoc on Americans’ finances and making you broke, it is the car payment. It is KILLING us. The average car payment on a new car is almost $500 a month. I’m convinced that car payments are the biggest thief of middle-class wealth in America.
Almost everyone I know has at least one car payment. I was there too… I made car payments from 2006 through about 2011. Never again.
Look… I get that you need a car. You gotta get to work. But if you’re making car payments, I can guarantee that the car you financed is too expensive for your budget. You may feel wealthy driving it around, but it’s making you broke.
Make your current vehicle the LAST vehicle that you finance. Then save up cash and buy a used car. It will take time, but your future will thank you.
In 1973, the average size of a new home was 1,525 square feet. In 2015, it was 2,687. That’s a dramatic increase, folks. And if you look at these stats per family member, it’s even more dramatic given today’s smaller family size.
The average living space per person in 1973 was 507 square feet… in 2015, 971. That’s right, almost double.
You don’t need a bigger house and the accompanying bigger mortgage payment. You might just need less stuff. And please stop calling that house you’re in right now a “starter home“. It doesn’t have to be.
Smaller house = more wealth.
I believed this lie for way too long. Having barely enough money to pay bills and feed my family (sometimes not enough), what is the point in budgeting?
If you don’t get a plan for your money, then you will never get out of that situation. Not budgeting – even when you in dire financial straits – is a recipe for perpetual poverty.
Here’s one reason why – when your income does eventually increase, you will be so used to having no income leftover that your spending will simply increase accordingly, and you won’t even realize it. And you will remain broke.
Here are 5 essential tips on how to budget when you don’t make enough money.
Investing simply means taking some of what you have now, and instead of consuming it, putting it to use to make your future better. That’s it. It doesn’t mean that you have to hire a broker and watch the stock ticker on CNBC all day long.
This could be investing in an IRA, investing in your kids through a 529 account, or investing in yourself through an online course. Even if you’re in the process of paying down debt, that is a form of investing since decreasing debt is increasing your net worth.
And with regard to setting up investment accounts, it’s easier than ever today. Setting up an IRA with Betterment is SO easy. super low fees, and there’s no minimum. you can literally start with $5.
Click here to get started with Betterment.
I might get hate emails on this one… but it needs to be said. There is a massive wealth transfer occurring in this country from broke, debt-shackled families to the massive empire that is Walt Disney World. Their marketing is amazing, and parents have bought into the hype hook, line, and sinker.
Your kids do not need to experience Disney World. Sure it’s magical, they will have a blast, and you love seeing their faces light up upon seeing Mickey Mouse. But you’ve got to count the cost here. It might be the most expensive vacation that you can take.
If you’re in debt up to your eyeballs, going to Disney is a great way to keep you there.
Growing up, imagine if you had all of the world’s knowledge at your fingertips at all times. It would have sounded like science fiction, right? But with smartphones, that’s our world today.
And if you have kids (especially kids over the age of 11 or 12), most of their friends probably have smartphones. Now look – I’m not going to get into a discussion of whether or not adolescents should have smartphones and access to social media, I’m just gonna carefully point out that they do not NEED them.
Shelling out $500+ per kid every couple years just so that they can have an up-to-date gadget isn’t the best use of money. Either make them pay for it or give them an old-school flip phone.
These days, there is so much pressure on moms. On any given day, my Facebook, Instagram, and Pinterest feeds will show me dozens of pictures of 100% raw, organic, cage-free, GMO-free meals that other moms have prepared for their families.
You know exactly what I’m talking about.
Don’t let it get to you. You can feed your kids and family a very healthy diet without spending $5 per pound on chicken breast at Whole Foods. You have so many options.
Firstly, many foods really have no benefit to having the label organic. Secondly, you have other options besides grocery stores. Look into buying local meat. Each year, we buy a half of a cow from a local farm, and the price works out to be less than $4 a pound after being butchered.
Lastly – check out ALDI. They’ve got a huge and growing selection of organic foods. Being pressured to shop at the most expensive grocery stores to buy the best organic food might be keeping you poor.
I remember this time in 2008… Mark and I were broke, and it was our own fault (you can read the detail of our story in my book, The Recovering Spender). We thought – if only Mark could get a raise, a new job, something – THEN we would be okay.
In early 2008, he did get a new job. And his salary increased from $60,000 a year to $70,000 a year. Of course, an extra $10,000 a year would make the difference, right?
We were so accustomed to spending every single dollar we took home, that it didn’t make the difference in our budget that we thought it would.
Making more money is great. But if your spending habits don’t change too, then you will still be broke.
Right now, time is on your side. And by that, I mean, you can use the power of compound interest to your advantage. Allow me to put a little bit of math on you…
Let’s assume that at age 30, Dawn decides to invest $500 a month for 25 years. She then stops at age 55, and waits 10 years. At age 65, Dawn will have just over $800,000!
But Stephanie waited. At age 40, she decided to make the same investment and contribute $500 a month for 25 years. At age 65 she only has $407,000.
Do you see the power of compound interest? The same exact investment, but the one who started 10 years earlier ends up with almost DOUBLE the amount as the procrastinating investor. You cannot wait to start saving for retirement. It is making future you poor. Bump up your 401k contributions. Or open a Roth IRA.
Again – don’t be intimidated. Companies like Betterment make it so easy to start.
I get it. Money is tight. And you aren’t sure if there’s gonna be anything left over after you pay the bills.
But guess what? No matter how bad you have it, someone else has it much worse. What you might consider a small amount of money is a very large sum of many in many parts of the world.
Giving isn’t just good for the recipient. Giving is good for YOU. Giving makes you wealthy in ways that matter so much more than finances. And whether you believe in God or some kind of a higher power, I truly believe that those who are generous have more opportunity and wealth given to them.
If you believe that you can’t afford to give, then that is keeping you poor.
There are two ways of looking at the world.
Some believe (whether they admit it or not) that all available money in the economy is a pie, and each person is allotted a small slice. If you have a job, that’s your slice. Your paycheck is what you get, and you’ve got to make your budget and all of your living expenses fit within those confines.
Others don’t see the world this way. Money and finances are more fluid… and if you want to make more money, you can go out and DO IT. You are not allotted just a small slice of the pie. Take as much as you want! And that doesn’t mean you are taking from someone else; the pie can simply get bigger.
There are so many ways to make extra money. You can switch careers later in life, you can work side jobs, or you can start a business. Sometimes those side jobs and little businesses making money from home end up completely replacing your normal paycheck. I’m living proof of it, and I know so many others with the same story.
Your current paycheck is NOT the only money available to you. You are NOT stuck. Limiting yourself and your potential is keeping you poor.
You feel underpaid, under-appreciated, and overworked. And then you are passed up for that promotion. Oh, and that guy who got the promotion that you felt you deserved? Do you want to know something about him? I bet you $100 that he doesn’t hate his job. I bet he might actually enjoy it.
The number one self-sabotaging career mistake is to hate your job. Gossip, a bad attitude, and a sense of entitlement are the results. And trust me, even if you think you are doing a good job keeping it to yourself, it’s not a secret.
But this is something that you can change. Only you have control over your attitude at work.
But your job might not be a good fit or your superiors are awful (let’s face it… some jobs really do suck – this one might not be a lie all the time). But if that’s the case, then why are you still there? Develop an exit strategy and find a better fit. You’ll be happier, and probably make much more money in the long run.
This lie made me broke 8 years ago.
Many believe that their home is their most valuable asset. I disagree. It’s more of a liability.
Unless you buy and sell homes for a living, a home should not be treated as an investment; it should simply be treated as the place that you live. If you view it as an investment, it might just set you up for the poor house.
Historically, the value of residential real estate has provided a return right at the rate of inflation. But it’s been much more volatile. Remember the early-mid 2000’s when everyone was going crazy buying expensive homes because it was a great investment in addition to a place to live? Didn’t end so well, did it?
The stock market has fluctuations too… but it’s a different animal altogether when it’s your dwelling place. If your home suddenly loses 20% of it’s value and puts you underwater, you’re stuck. Physically stuck… as in, you can’t move. You can either ride it out and wait for the value to increase, or lock in the loss and sell your home (but you might have to come up with a bunch of cash).
If your 401k portfolio loses 20% of it’s value, it sucks, but it doesn’t really affect your living situation.
Purchasing a home as an investment instead of a dwelling usually results in bad choices. You will likely buy a more expensive house than you need, you won’t have much of a down payment, and you are putting yourself through unnecessary risk.
As I said in #2, smaller house = more wealth.
Any more I should add to the list? Or maybe there’s some you disagree with. Do any of these resonate with and speak to your “Why am I broke” question? Let’s discuss in the comments!