if you have at least four hundred dollars saved to cover an unexpected emergency you're already financially better off than one-third of americans according to the federal reserve it's well known that most people do a poor job of managing their finances and there are seemingly few people that are responsible with their money having a good relationship with money doesn't necessarily mean being ultra wealthy or earning a high income either this just means that you make responsible choices aren't making careless decisions on a regular basis and are comfortable with your income and expenses what are some of
the most common reasons that people are broke and how can you avoid them take a look so you can be sure you're not making these mistakes that could keep you broke forever my name is chris and i help teach people about money personal finance and investing if you're interested in improving your financial future make sure to subscribe to the channel and hit the like button if this video is helpful they don't have clear financial goals financial goals are the starting point for every decision you'll make with money how are you going to increase your income
pay off debt or work less if you have no direction when you set financial goals you're establishing a destination for your future which will then allow you to make decisions that will help you achieve them for example becoming debt free within the next three years is a clear concise goal that you can use to execute a plan that will help you get there want to double your income next year what are some things you can begin doing today that will help you realize it if you don't want to be broke the very first thing you
should do is come up with a goal of exactly where you'd like to be financially and when you'd like to be there whether you want to save ten thousand dollars pay cash for a new car or buy a new house these goals all have a defined finish line they don't prepare for emergencies since one third of people don't have four hundred dollars available to cover an emergency this can be a clear problem unexpected expenses are common and four hundred dollars isn't exactly a large amount of money when it comes to this type of thing according
to aaa the average repair cost on a car is around five to six hundred dollars if you don't find a way to prepare for financial emergencies you're setting yourself up for disaster what if you lose your job what if you're in need of dental work when you're not prepared for a common 400 unexpected expense you'll be forced to fund them in other ways such as going into credit card debt then it will not only be a struggle to save an emergency fund it will be a struggle to pay off the debt when you're being charged
exorbitantly high interest rates they don't budget one of the main reasons people remain broke is that they don't live on a budget according to u.s bank only about 41 percent of americans stick to a budget the problem is that without tracking your income and expenses it's nearly impossible to know how much money you spend on various categories if you've ever gotten paid made a few purchases and seemingly have nothing left over making you question where all the money went you'll know why this is so important budgeting may have a negative connotation partially because the thought
of putting your income and all expenses on a spreadsheet can be uncomfortable however doing this can be a powerful exercise especially for those who are trying to take control of their finances they don't think about the future one of the most common excuses people have about their poor financial situation is that they want to spend money and enjoy life today not save until they're too old to enjoy their money it's understandable that some people don't want to pinch every penny until their 50s 60s or even 70s it really doesn't make sense to sacrifice your younger
years planning for a potentially lavish retirement however it's important to strike the right balance of thinking ahead and having a good time presently you want to invest for your future while making smart decisions that will also allow you to enjoy your life while you're young most people would agree that the right balance would include making decisions that will benefit you in the future and spending money that allows you to have fun now they have expensive habits rich people aren't the only ones that have expensive habits there are many expensive habits that poor people have which
is one thing keeping them from getting ahead smoking is just one example of an expensive habit that costs more money than people realize if a smoker is smoking one pack of cigarettes per day at seven dollars per pack that's over two hundred dollars per month now how many smokers would claim that they're not able to invest 200 per month for their future because they don't have enough money another expensive habit is eating out regularly this isn't just grabbing a bite out a few times per month this is eating out on a regular basis sometimes more
than eating at home people think nothing of spending fifty dollars on a meal out but then turn around and claim that they have no money fifty dollars here and there isn't a big deal but if you're living paycheck to paycheck avoiding an expense like this on a regular basis say two three or four times per week can make a difference they have bad debt not all debt is created equal there are generally two forms of debt good debt which is money you borrow that helps you make money this would be something like a mortgage on
a rental property second there's bad debt which is what most commonly comes to mind this is money borrowed to purchase depreciating assets these are things like cars clothes vacations and most items that are bought with credit cards when using bad debt not only are you being charged interest instead of earning it the items are depreciating and have little to no residual value furthermore debt allows people to make purchases they can't afford and don't have the money for for example someone wants to purchase a new car so they choose to finance it because they can't afford
to pay cash they're now paying interest to the lender the car is depreciating at a rapid rate and it was out of their budget in the first place meaning it's too much car for them as the saying goes rich people earn interest poor people pay it they spend money to impress people as dave ramsey says most people buy things they don't need with money they don't have to impress people they don't like he goes on to say nothing will make you go broke faster than trying to impress others as silly as this sounds this thinking
and behavior is common and it happens all the time many people make purchases to show off to others because they feel like if they look rich those people will be envious and impressed by their success the thing is you might feel a sense of satisfaction when making a large purchase to look good but that feeling will be short-lived that purchase can set you back for the long term long after that initial impression to those people this is a losing battle and the financial setback for this false sense of fulfillment usually isn't worth it they don't
pay themselves first aside from making responsible spending decisions paying yourself first is one of the easiest ways to improve your finances that most poor people don't do when trying to get ahead it's important to understand that it's nearly impossible to build wealth by saving money alone you need to consistently put your money to work over a long period of time taking a portion of each paycheck and directing it towards investments is an easy and painless way to invest automatically this way you're less likely to miss the money and you don't need to make the decision
to invest on a regular basis if that money sits in your account burning a hole in your pocket you'll feel wealthier than you are and it could eventually be spent on various items most of which you can't even remember what they were when faced with the option of whether or not to invest every week you're much less likely to choose to invest the reason most people are broke is because they make poor financial decisions with their money not just in some areas but usually in many there are obviously exceptions to this but if you analyze
the behavior of the average broke person you would find this to be true the good news is that it's possible for just about everyone to improve their situation to a point where they're comfortable
