The statistics don’t lie. Almost 80 percent of Americans live paycheck-to-paycheck and have little or no money saved for emergencies. It is sad to say it but the truth after all. And the big question is why? As a financial coach, I want to share with you 12 reasons that explain why, in my experience, most people are broke.
But before I go over the list, I have to say that for some of us being broke is a byproduct of entitlement. We work hard and like to reward ourselves with beautiful things, even though they cost a lot more than what we make in an entire week.
For others, it is all about a lack of financial education. Most of us are never taught how to handle money properly, so we pick up ideas from the media. That’s how we decide that spending on expensive cars, shoes, and purses is a good investment. And in other cases, we can blame it on the financial industry, for enticing consumers with alleged credit opportunities that turn into debt traps.
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12 Reasons Most People Are Broke
So, when looking at why most people are broke, the list of reasons can be endless, but let’s look at the following twelve:
- They do not budget
- Live paycheck to paycheck
- Do not have an emergency fund
- Use credit cards to supplement income and pay for everyday expenses like groceries, gas or eating out
- Finance furniture purchases because they can’t afford to pay cash
- Believe they will always have a car payment
- Lease cars because the monthly payment is “cheaper” than the purchase payment
- Recur to debt to cover a medical emergency or a layoff
- Buy things they cannot afford to keep up with friends’ lifestyles
- Live beyond their means
- Are addicted to instant gratification
- Can’t be content with what they have
If any or most items on the list describe your financial situation, don’t freak out! I used to be there! You are no different than most people in the United States. The statistics I am about to show you are proof that most people are broke and can’t afford the lifestyle of their choice.
The Scary Statistics
A 2017 survey by CareerBuilder, 78 percent of Americans
Also, a 2019 analysis of household debt and credit by the Federal Reserve Bank of New York, showed that household debt continues to reach record highs. Americans owe $13.67 trillion in mortgages, cars, student loans, high heels, pickup trucks, cat litter, and a whole lot more stuff.
That is a $124 billion (0.9%) increase from the fourth quarter of 2018.
Most People Are Broke And Increasingly Getting More Debt
In other words, regardless of appearances, half of the people around us live a lifestyle they can’t afford. The cars they drive, the homes, the clothes, and the places they visit on vacation, all of that is being financed by credit cards and loans.
It’s Time For a Reality Check
Having nice things makes us feel good. That is true until reality sinks in. You get home, open your mailbox, and find -in horror-, the dreaded monthly stack of bills. There are enough to deal with a game of poker!
There are credit card bills, student loan statements, and car payment notices among a bunch of junk mail. As you open the many envelopes you wonder, how can you get rid of the debt? As much instant gratification, joy, and a sense of power as debt can buy us, living on credit is not the path to financial stability. Living in debt can also create a lot of stress and anxiety, and a vicious cycle that can be hard to break.
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Avoid The Credit Trap
We live in a consumerist society. We are culturally brainwashed to have what we want when we want it. No credit? No problem! That common saying in advertising can’t be further from the truth. Borrowing money without having a good understanding of how credit works can get us in real trouble.
But sadly, pretty much anyone older than 18 can apply for, and most likely will be issued, a credit card. We have been made believe that credit is our way to wealth and buy everything on credit because we have bought into the lie that having the stuff that we want now, is our way to happiness.
But it really isn’t. Debt creates the illusion of financial prosperity, until life -in the form of a layoff, unemployment or sickness-, bursts our bubble.
How To Stop Being Broke
To secure your financial future, you must commit to practicing as many of these 10 good money habits:
- Get on a budget
- Start saving money
- Stop living beyond your means
- Quit getting in debt
- Get rid of your car payment
- Stop comparing yourself to others
- Rehab from your instant gratification addiction
- Be grateful and appreciate what you have
- Stop acting on impulse
- Learn about how to thrive financially debt-free
In Conclusion: 12 Reasons Most People Are Broke
What would happen if you got laid off at work? Do you have enough saved to survive unemployment for a few months? What if you had a medical emergency and couldn’t go back to work? These are real questions that we don’t think about when purchasing cars, houses, and furniture that we can’t afford.
Next time that you are tempted to compare yourself to your neighbors or your coworkers remember this. 80 percent of those around you are living a lifestyle they cannot really afford. They may drive a nice car and post pictures of their latest international vacation on social media, but chances are, they are broke.
Stop being like everybody else. Instead, I encourage you to take the first step today to start your money transformation. If you are not living on a budget that is where you should start. If you don’t know how to do a budget, don’t stress. I have you covered! I have created a step-by-step budgeting guide that you can download for free.
Only you can change your financial situation. Remember the 12 reasons most people are broke that I outlined above, and start practicing good money habits. With time, work, and patience, you will see the difference in your bank account.
As always, if you have any questions or comments for your financial coach, please make sure to drop me a line a the bottom of this post.
Related Articles To Why Most People Are Broke
- How to Save Money and Stop Living Paycheck-to-Paycheck
- The Debt Snowball Method
- Get Your Money Life Together
- Surviving Unemployment: Seven Money Lessons I learned after the 2008 Recession.
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