8 Factors That Could Keep You Broke Forever


If you are perpetually penniless, you may feel that's just the hand you've been dealt when it comes to money.

The truth is, no one has to live their life permanently broke. And many people don't simply end up in the red due to poor luck. If you want to reach true financial security, you'll need to take a good, hard look at your money habits and identify the culprits of your struggling finances.

Here are some reasons you could stay broke forever.

1. You would rather look rich than be rich

One thing that keeps many people broke is spending money — and even taking on debt — to look like they are doing well. You want to drive a nice car and live in a nice house so that everyone will think you're successful, even though maintaining appearances is keeping you broke. It's an easy trap to fall into, and it's a vicious cycle to try and break free from.

Instead of spending your time worrying what your neighbors and friends on Facebook think, focus your energy on getting back on your feet. If you stop spending money to look rich, you can actually be rich someday. (See also: 4 Money Lessons You Can Learn From the Joneses)

2. You are not keeping track

You may feel that since you don't have any money, there's no point in keeping track of it. The reality is, no matter how much money you make, you need a budget. Operating without one can keep you in the red. If you don't have a way to oversee and manage your spending so that you have more money coming in than going out, you will be broke forever.

Start a budget today so you can understand how much money you have to work with and what you're spending it on. Use your findings to make more mindful choices about your expenses and spending habits. While you're at it, be sure to add a column for "savings," too. (See also: Stop Using These 5 Excuses Not to Budget)

3. You wait to start investing

When you are broke, you don't feel you have any "extra" money to send to nonessential things like investing. But investing is an essential. Instead of waiting until your finances get better to take a dip into the markets, you should really be making an effort ASAP. The longer you wait to invest, the longer it will take you to build wealth and reach financial independence.

You don't need to be wealthy to start. Invest now with whatever money you can come up with. Even a few dollars per day can make a huge difference. (See also: How Just $5 a Day Can Improve Your Financial Future)

4. You don't have a plan for getting ahead

If you are broke, something needs to change to make you un-broke. Making a real change requires more than simply hoping that things will change. You need to form a plan, followed by action to execute your plan and meet your goals. If you don't have a plan to improve your financial situation, you will never get ahead.

There's no reason to overwhelm yourself. Start small; plan on paying off your smallest credit card using the debt snowball method, and take steps to make it happen. You'd be surprised how great it will feel to achieve even a small financial goal, and you'll be inspired to tackle the next one.

5. You have given up

When your financial outlook is bleak, it's easy to get discouraged. But if you accept the state of being broke as your permanent reality and stop working to change things, you will probably stay broke.

Find inspiration from people who have managed to pull themselves out of bad financial situations. Read blogs, subscribe to newsletters, and listen to podcasts about debt repayment. Hearing about other people's success will inspire you to achieve your own financial freedom. (See also: How One Inspiring Couple Paid Off $48,000 in 2.5 Years)

6. You are addicted to debt

No money? No problem! You can still get almost anything you want just by swiping your card and signing your name on the dotted line. Does this sound familiar? If so, those credit card payments may be keeping you broke. If you continue using credit instead of money you actually have to buy things, interest payments will bury you. You will never get ahead financially.

Change your focus from accumulating things to accumulating wealth. Start by paying down your credit card accounts and resolving to make new purchases with cash. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

7. Lifestyle inflation is eating up your raises

Your annual raise can easily evaporate due to lifestyle inflation. Those extra dollars in your paycheck disappear from your account only to go toward more TV channels, a bigger house or apartment, a nicer car, a lavish vacation, and better food. The problem here is that once you upgrade your lifestyle, you don't want to go back. Your newer, "nicer" things become your new normal. But if your expenses keep ratcheting up as fast (or faster) than your income, you'll stay broke forever.

The key to battling lifestyle inflation is to recognize what is happening and prevent those little upgrades from sneaking in. If you get a pay raise, don't automatically set off on an online shopping spree; instead, send the extra dollars into an emergency fund, retirement account, or toward debt repayment. You'll be glad you did. (See also: How One Nice Thing Can Ruin Your Whole Budget)

8. You are piling up deferred expenses

I once lived in an old farmhouse that I was fixing up. I had a long list of upgrades and repairs that I needed to do as soon as I got some money. Eventually, I realized that those deferred expenses were keeping me broke — so I sold the farm. Your list of deferred expenses may look different from mine — maybe it's never-ending home improvement projects, or things you are waiting to buy for your hobby — but they are keeping your money tied up nonetheless.

Take a hard look at the deferred expenses that are standing in line waiting to take your money. Can you eliminate the root cause of these expenses and free up future dollars? Doing so just may be your ticket to financial freedom. (See also: The 10 Commandments of Reaching Financial Freedom)

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