Do you find yourself asking “Why am I broke?” Are you left at the end of the month wondering where all your money went? Does it feel like you’re trapped in a never-ending cycle of mounting debt?
Don’t worry, you aren’t alone.
At one time or another we’ve all had to ask ourselves “Why am I always broke?”
Maybe you’ve got a good job, and can’t understand why you struggle to make ends meet.
Maybe you’re working two or three jobs just trying to make end meet.
But you still need to ask why you’re broke at the end of the month.
For most of us, the hardest part about answering that question is being honest with ourselves. When I finally sat down and decided it was time to figure out where my money was going, I didn’t like the answer.
Do you want to know what I had to tell myself when I asked why I was broke?
“Because you’re being stupid with your money!”
Yes, I actually stood up and said this out loud.
My girlfriend came into the room wondering what was wrong.
I guess I said it a little louder than I should have.
I had a decent job, compared to my fixed expenses. With the money I was making I should have easily been able to pay the rent, keep food on the table, and have a little left over at the end of the month.
But somehow I kept falling further and further into debt.
Does this sound familiar?
I’m not suggesting that you’re stupid. Or even that you’re being stupid with your money. I’m simply pointing out that sometimes the reason we’re broke is staring us right in the face, but we don’t want to admit to it.
Unfortunately, if we ever hope to break the cycle of working just to be broke at the end of the month, we have to face some hard truths and be ready to admit that it just might be our own fault that we’re broke.
You Aren’t Alone
Don’t think for a minute that you’re the only one facing this problem. You aren’t.
Don’t think it’s just because your job doesn’t pay enough. That could be part of it, but not the whole answer.
“Yeah right! If I made better money I’d be set!”
Sure you would. I’ve said this, too.
But it’s not necessarily true.
Don’t believe me?
How many times have you heard of professional athletes with multi-million dollar contracts filing for bankruptcy?
How about A-list actors or musicians getting their houses and cars repossessed?
That happens too.
How much money you earn isn’t the biggest factor in whether or not you’re broke. What you do with that money is.
Maybe you’re struggling, but you’re getting by, right? That means you’re making enough to pay for the things you need.
If you take the time to sit down and take a real, honest look at what you make and what you spend, you just might find you’re doing better than you thought.
Try It Yourself
Are you ready to make a change? Do you want to take control of your finances? Can you be brutally honest with yourself and admit that, just maybe, you play a role in being broke?
It’s not easy. I’ll warn you of that right now. It’s very hard to look at yourself in the mirror and say “You damn idiot! What were you thinking?”
But sometimes that’s exactly what we need.
Let’s face it, no one else is going to do it for us.
So what do you have to do?
Figure out exactly how much you make, how much you do spend, and how much you should spend.
Yes, there is probably a big difference between the two.
The first part is the easiest. Especially if your paycheck is the same every week. If it’s not, it’s only a little more difficult. Gather up your check stubs for the last six months to a year and add them up. Then divide to get an average monthly income.
Need help with averages? Not everyone likes math, I get it.
If you have check stubs for six months, add up everything you were paid, then divide by six.
Have a year’s worth? Add it up and divide by twelve.
Now you know how much you make every month. This is the amount you have available to pay for your rent or mortgage, car, groceries, utilities, and all the other necessities of day-to-day life.
Is it enough?
I don’t know.
What is your rent or mortgage payment?
How much is your car payment?
What do you pay for electricity?
How much do you spend on groceries?
Add it all up and see what you get.
Some of those items you’ll need to find averages for. Your electric bill might be higher if you run A/C in the summer than it is in the winter. Your heating bill will be high in the winter and non-existent in the summer. Your grocery bill will likely change from week to week.
If you keep bills and receipts, go back and add them up to get averages. If you don’t, start. Keep track for at least 2-3 months on how much you pay for groceries, gas for the car, little extras at the convenience store.
After you have a good idea of what you spend every month, subtract it from how much you make.
What did you end up with?
A positive number? Good. You’ve got extra money.
Nothing? At least you aren’t spending more than you earn.
A negative number? You’re spending way too much, and need to figure out where. ASAP!
If you’re reading this article, I’m going to guess that you didn’t come up with a positive number. If you did get a positive number and still wonder why you’re broke, were you honest with yourself about what you spend? Did you figure everything? Buying the occasional soda, coffee or candy bar can add up and eat through that “extra money” pretty fast if you don’t realize you’re doing it.
Make sure you get everything, and be honest about it. The only ones you hurt by not being honest are yourself and your family.
So, why did you get a low or negative number?
For the same reason that those athletes, actors and musicians I mentioned earlier are losing their houses and filing for bankruptcy:
Living beyond your means.
I don’t care if you make $300 a week, or $30,000 a week. If you spend more than you earn, you will always be broke.
Living Beyond Your Means
You may be wondering how anyone making $300 a week can possibly hope to survive. Maybe you’re one of those people. I know I was.
There was a time when I was working 40 hours a week for $14 an hour. That’s $560 a week. But after taxes and insurance I only took home about $320. That averages to $1,386 a month. My rent was $675. I had no car payment because I paid $1,000 for a used car. Groceries cost about $300 a month for my family. Electric was about $60 a month. Heat averaged out to about $100 a month over the year. I worked close to home, so gas for the car was only about $50 a month. Internet was $40 a month (this was a while ago!). Then I had to pay for vehicle insurance and registration for a total of $1,000, or around $84 a month averaged out.
That’s a total of $1,309 in expenses every month. I should have had at least $75 left over, even bringing home just over $300 a week. And that doesn’t figure in the occasional overtime I was able to work.
But I never had money left over at the end of the month.
As a matter of fact, by the end of the month I found that I had to start putting the groceries for the last week of the month on my credit card. Then next month I had to pay at least the minimum on the credit card, then put another week and a half of groceries on the card.
And the never-ending-cycle of debt piling up began.
But how did it happen if I was making more than I was spending?
Like I said, it was hard to admit, but I finally realized I was being stupid with my money.
I should have had about $75 left over every month. That’s enough to take the family out once a month for a treat. Or even twice if that treat is a pizza dinner. And I did that.
So that accounts for the $75 and not having any leftover. Why was I going into debt?
Because when I stopped for gas for the car I grabbed sodas and juices for me and the family. Maybe a snack if we were coming back from longer trips, like a day at the beach.
When I had to run to the store just to grab a gallon of milk and a loaf of bread I didn’t consider the $5 to be that big a deal.
I never considered setting money aside for Christmas or birthdays.
Well, those things add up!
And after a while even the little things that seem so insignificant can lead to living beyond your means.
Living beyond your means doesn’t mean living in a mansion and driving a Ferrari when all you can really afford is a 2-bedroom apartment and a used Toyota.
It simply means spending more than you make. Even if it’s only a couple dollars.
Because next month you need to pay that couple dollars back, which sets you back twice as much. The month after you have to pay that back, which sets you back four times as much. By the next month you’re behind eight times that original couple bucks.
It’s a snowball effect. The debt keeps growing, and it seems like there’s no way to stop it.
But there is.
Create A Personal Budget Plan
You’ve probably heard people talking about budgeting, and how it’s a great idea.
But it seems so hard!
Well, guess what. If you followed along with the advice in this article and added up your income and expenses, you’ve already done the legwork for the first part of creating your budget.
All you really need to do at this point is take a hard look at where your money is going, and sort those expenses into three categories:
The needs are the necessities like rent or mortgage, groceries, and electric.
The wants are the nice-to-have things, like cable TV and weekly trips to your favorite restaurant.
The extras are simply that: Extra. These are expenses that you can easily cut out every month to help get yourself out of debt and start saving.
You can cut out, or at least cut down on the items in the wants category. Yes, cable and eating out are nice, but you don’t need them. Instead of eating out once a week, go out once a month. Instant savings!
When you’re done sorting your expenses and making as many cuts as you can, you should have a little surplus cash each month. You’ll use a portion of that to start paying down debts faster, and the rest to start a little savings account.
This is just a quick overview of creating a budget plan. For a more in-depth look, read this article:
You may even be interested in making more money to get out of debt, but can’t fit another job into your schedule.
For some ideas to make money from home in your spare time, take a look at the following articles:
- Work From Home On The Computer
- Work From Home And Earn Extra Cash
- Create A Blog To Make Money
- Online Passive Income – Affiliate Marketing
- Earn Extra Money At Home
- What Is Affiliate Marketing About?
Are you looking for ways to hang on to some of your “Wants” and “Extras” without paying too much? You probably can. There are ways to save money on almost everything if you look hard enough.
For some great ways to save, read this article:
Stop Asking “Why Am I Broke?”
Getting your finances on track isn’t difficult. The hardest part about it is being honest with yourself.
Take an honest look at where your money is going, and then be honest with yourself about what you can do without.
You will never have to ask why you’re broke again if you take the time to align your spending with your income.
Remember, living beyond your means doesn’t have to be extravagant. Even a couple dollars can cascade and turn into massive debt. Every month that you spend more than you make, you create debt that needs to be paid off the next month, creating an even bigger gap between earnings and expenses.
You are the master of your own financial future. Only you can make the decision to better your situation, or let it continue to get worse.
You’ll find a lot of information here that will help you improve your situation. There are ideas on budgeting, making extra money on the side, starting a business, working online, and saving money. Read your way through this site, and make your financial life what you want it to be.
Read these articles to get started:
- Personal Budget Plans
- Creating A Personal Budget Plan
- Work From Home At Home
- Home Based Business Ideas With Low Startup Costs
- Household Money Saving Tips
Any one of these articles can help you improve your finances. Take ideas from all of them and you could really make a big difference.
Thanks for reading,