So this post is going to be a bit of tough love. If you keep saying, “I make good money why am I always broke,” it is time to make some changes in your financial life.
Either your spending is completely out of control, or your debt is out of control. If you are tired of always being broke, either issue is a big deal.
Like I said – TOUGH LOVE!
The other day, I heard a speaker say that the difference between being poor and constantly broke was that the poor person didn’t have the money, the broke person was mismanaging their money.The difference between being poor and constantly broke is that the poor person doesn't have the money, the broke person is mismanaging their money.Click To Tweet
Money mismanagement is the biggest reason you make good money and yet are still constantly broke.
If you aren’t managing your money, then it is managing you.
So how do you get out of the “constantly broke” trap?
Editors Note: If you already have a handle on these 5 tips, I highly recommend downloading my Free Personal Financial Plan Template.
If you want to stop saying “I make good money why am I always broke“, then you need to take the following steps:
1. Determine where you are spending your money
You can’t begin to manage your money unless you know where you are spending your money. I’ve done all kinds of budgeting systems over the years, but when it comes down to it, simple is best.
You have to track every dollar that you spend.
I know it is a huge hassle, but start simple by writing down all of your daily expenses. Once you start adding up your daily expenses, I can guarantee that you are going to be surprised at how much money you are wasting on basics.
You are going to be constantly broke when you are spending money and can’t remember when and how much you spent. The quickest way to stop being broke is to know where you are spending your money.
I love these basic personal tracking forms if you need a push to get started.
2. Set up a budget
I know, I know – everyone hates budgeting. Seriously though, it is surprisingly simple once you get started.
Check out these posts for additional information on how to set up a budget:
- Budget by Percentage: Create a Minimalist Budget
- How to Budget if you have an Irregular Income
- How the Two Unbreakable Rules of Budgeting Will Change Your Life
If you want to keep things super simple, then I recommend checking out YNAB. It is literally the easiest way of budgeting online. They do all of the work for you.
3. Start aggressively paying off your debt
Take a few minutes to add up your debt and then add up your monthly debt payments. I bet the number is going to shock you. I know it shocked us and started us on our path the financial freedom. We were paying $4,175 each month towards debt payments.
Once you have the monthly number take a look at how much of your monthly payment is going towards interest. For us, that means we were paying $1,975 monthly on interest. That is the number that is really going to get your blood boiling and hopefully help you change your spending habits.
Debt is seriously the worst thing in the world when you are always broke.
It just sits there and adds up and before long you are in more and more trouble.
To stop saying, why am I always broke and start your debt reduction journey check out these posts:
- Tired of Debt? How We Paid Off $293,000 in Debt in Five Years
- How To Start Your Debt Reduction Journey
- How to Pay Off Debt When You Have No Money
4. Stop Spending Money
This step is hard, I get it! But you can’t get ahead financially unless you are going to limit your spending. So let’s keep it super simple – STOP SPENDING MONEY. You are always broke because you are over spending!
You’ve got to dig deep and really review your spending patterns.
- What is causing you to overspend?
- Where are you spending your money?
- How much money are you wasting on a daily, weekly or monthly basis?
- Where can you cut costs
Part of reducing your spending involves changing your mindset. You have to learn to simplify your life and stop trying to keep up with the Jones. If you are used to spending a form of recreation, you’ve got to switch things around in your mind and find ways of changing your attitude towards money.
One of the best things I did to reduce my spending was make a game out of saving money. I know it sounds dorky, but I turned finding good deals into an art form. Saving money and finding the best deal became a form of entertainment.
The first thing you have to do is determine what your true wants and needs are. It is way to easy to convince yourself that things you want are really needs and then rationalize spending money. If this is something you struggle with check out this post: Want or Need: How to Control Your Spending Habits
If you just need general money saving tips then these post are a great place to start
- 14 Money Saving Tips to Lower Your Grocery Bill
- 6 Ways to Save Money On Your Current Bills
- How to Find and Eliminate Spending Leaks In Your Budget
5. Start An emergency fund asap.
An emergency fund is your protection against Murphy’s Law. Something is going to go wrong and you will experience a financial hardship. If you have funds set aside to cushion the blow you are going to have a much easier time dealing with all of the junk that happens in your life.
Ideally, you will have a 3-6 month emergency fund, but at minimum work towards $1,000. Just put a little bit aside every day and you’ll be shocked at how quickly the money will accumulate.
- Are you Prepared for an Emergency? 5 Tips to Help Start Your Emergency Fund
- How Our Emergency Fund Saved Us $1,500
- 4 Questions to Ask Before Using Your Emergency Fund
I’ve become a huge fan of DIGIT. I seriously think it is one of the easiest ways to set up an emergency fund. If you have struggled to save money in the past you need to check it out. Read my review here: How to Automate your savings plan in 5 minutes.
Even if you think you are completely broke, I recommend signing up for DIGIT. You’ll be pleasantly surprised to look up a few months from now and actually see the beginning of an emergency fund. If you only do one take away from this post, this is the takeaway I want you to do.
Stop Saying, I make good money why am I always broke
I know it sounds crazy, but becoming a personal finance expert really isn’t that hard. If you follow these five steps, you will quickly stop asking where your money went, you will know exactly where it went and have a plan on how to keep more of it under your control.
I know it sounds ultra cheesy, but seriously, you can do this! Don’t continue to constantly be broke. Just take the first step on the list and then the next and the next.
Start small and I can guarantee you’ll be changing your financial habits quicker than you ever thought possible.
PS. Don’t forget to download my Free Personal Financial Plan Template.
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