Did you know that over 600 million people around the world live in extreme poverty and survive on less than $1.90 a day? Shocking right? What’s worse is that in the world we live in today, it has become more and more expensive to be broke and what I want to do now is share with you seven prime examples of how this is the case!
Number 1: Carrying Debt Comes With Interest Charges
Debts left unpaid for long periods of time build up interest charges that become massive bills that have to be paid. But many people think, a little bit of debt won’t hurt, will it? That’s how it starts. You make a small purchase on your credit card and then before you know it, you’re thousands of dollars in debt. You pay a price for the debt you create and that price comes in the form of interest. The higher the interest rate, the more you’ll end up paying for your debt and the longer it takes you to pay off your debts and the higher your debt load, the more interest you’ll pay.
Furthermore, it’s easy and often fun to get into debt, but it can be painfully difficult to get back out. For a broke person, it can take just a few months to create tens of thousands of dollars of debt, but it may take years to pay off that debt. Everyone who pays off their debt does it a different way. Some people pay off their lowest balances first while others tackle the ones with the highest interest rates attached. If you’re struggling and need a starting point for your debt-reduction strategy, then start by putting more money towards paying off your debt regardless of their respective balances and interest rates. The more money you put toward paying off your debt, the faster you can pay it off for good. Moreover, if you don’t already have one, then create a monthly budget to better manage your money. Seeing all your expenses detailed in a budget can also help you figure out how you can cut out some expenses and put that freed up cash towards debt repayment. However, the best way to ensure you sidestep debt troubles in the first place is to avoid taking on debt, even if you aren’t quite financially successful just yet!
Number 2: You’re Susceptible to Get-Rich-Quick Schemes
Broke people are easy prey for scammers, because when they’re desperate and need to get out of a bad financial situation, most of them opt for get-rich-quick schemes in the hopes they can turn the tables on their financial woes. Sadly, there are so many false promises online trying to offer you great returns on a “small” investment in a short period of time and broke individuals often succumb to them in an attempt to pay their bills or spark some financial momentum.
To the untrained eye, it would seem like the opportunity of a lifetime, but sadly, they don’t usually pan out in the way you would hope them to. The majority of these quick tactics lead to huge losses which for a broke person, isn’t something they can afford. Here’s something you should keep in mind: if something sounds too good to be true, it probably is. In fact, even a good deal can turn bad when you’re not aware of the details.
Overall, too many people are looking for a quick and easy way out of poverty and are trying to get rich quickly. It may be through investing in a hot stock, via a new job or a revolutionary business idea, too many broke people chase the idea that they can come into extraordinary wealth overnight. Sadly, it doesn’t work this way, you have to put in a lot of hard work to become rich. Not to mention, for most people, their path to riches will take decades so you must also hone your patience if you want to become wealthy which is the exact opposite of using get-rich quick schemes to find financial prosperity.
Number 3: You Have Limited Options for Education
Being broke leaves you with limited choices in a lot of things which in some cases can push you further away from living your best money life. This typically happens as a result of not having the required qualifications needed to get a high paying job or be able to advance in the current job you possess. As you already know, formal education can be ridiculously expensive and if you don’t have the money to cover the costs to upgrade your skills then sadly you can be left behind.
For example, maybe there is a seminar you can take that would teach you a new skill that you could use to increase your income exponentially but because you’re currently facing financial troubles, the cost of this event is just too prohibitive. This is just one example of how being broke can be expensive in the cost of the opportunities broke people give up each and every day.
Luckily, there are ways to increase your skillset these days without having a ton of money on hand. You can reliably learn new skills through cost-effective platforms like Udemy, Skillshare or even by watching free tutorials on YouTube. However, for as long as you let your bleak financial position limit your education, you will continue to face this expensive cost of being broke.
Number 4: You Can’t Afford to Invest
Investing is scary because you never know how your investments are going to pan out and there’s always a chance that you’ll lose the money you invest. However, investing is the best way to stop being broke and can really change your financial future.
Sadly, most broke people don’t have the time or the capital for investing because they are busy settling one expense or another with any funds they come in contact with. It’s like the saying, broke people don’t have time for investing, because they are busy trying to not be broke. The problem with this situation is that you can never gain financial momentum if you don’t have your money working for you.
Moreover, if you wait for the perfect moment to begin investing, you’ll never do it. Today is the best time to begin building wealth and it is important for you to understand that saving money will not make you rich. In order to become wealthy, you need to put your money to work, and that means consistent investing over a long period of time.
In fact, do you know the difference between broke people and wealthy people? Broke people pay interest, while wealthy people earn interest. So, essentially, if you don’t want to be broke anymore, find ways to free up time to learn how to invest and free up capital to invest with and by doing so you can take your first steps on your path to a better financial life!
Number 5: You Must Do Everything Yourself
When you’re broke, of course you want to do everything you can to save a buck. This means only buying things that are on sale, minimizing your entertainment costs and of course doing all of your own house and professional work. Unfortunately, this comes with a hefty cost that most people overlook.
You see, most broke people incur a hefty opportunity cost because they have to do everything themselves. However, the rich know that not all tasks are created equal and as a result they only perform tasks that are of high value to them, whether that’s based on enjoyment or actual income those activities yield. For instance, they may value time with their family at $100 an hour or can earn $200 working with a client. In these cases, it doesn’t make sense to spend an hour mowing their lawn when they can pay $30 for someone else to do it. Therefore, as a broke individual, you are constantly incurring this opportunity cost by doing everything yourself and are hamstringing your financial progress as a result.
Number 6: You’re At The Whim Of Landlords
Owning a home is difficult, and landlords take advantage of that! We all know how expensive it is to own a home. Besides needing a bank balance the size of Asia, you also need to jump through hoops to prove that your income is steady and you’re a secure, financially stable person. This is hard enough for middle class people, let alone broke people.
The alternative to buying a home is renting and researchers recently came across a frightening fact affecting poor people in America. They confirm that “American landlords derive more profit from renters in low-income neighbourhoods.” Also, they add that landlords exploit the poor and have “staggeringly high profit margins.” To conclude their findings, they confirm that “the poor, and especially the minority poor, experience the highest rates of housing exploitation”. In essence, when you are broke, you’re at the whim of someone else’s financial prosperity which is why being broke can be more expensive than you would initially anticipate.
Number 7: You Can’t Afford To Take Risks In Your Career
For most people, the thought of getting a new job is exciting because it signals opportunities to learn new skills, expand your network, and build your resume. But change can also be intimidating. If you’re scared of getting a new job, you’re not alone. New-job anxiety is common, but in some cases, the job you hold currently may be holding you back from living a more prosperous life.
Now, I get it, job search fear is a real thing for many people but you can’t let it crush your career. If you find you’re having a hard time getting your wheels in motion to start your job search, it might be time to confront your fears. After all, time doesn’t move in reverse. Especially, if you’re like most people who work a job they lack a love for, it’s time to move on. Ask yourself, why spend so much time feeling unfulfilled, unchallenged, underpaid, and unappreciated?
As true as all of these are, taking the risk to move to a higher paying job or a better career isn’t something everyone is capable of doing, especially broke people. Why? Because it requires you to take risks that may affect your financial stability and there are no guarantees with the new career you decide to pursue. More so, the risks bring with it elements to making a career transition, some of which are, putting yourself out there, being exposed to potential rejection, and trying something new that may not work out in exactly the way you envisioned.
Furthermore, changing your mind and getting it wrong leads to more of a funny thing called “counterfactual thinking.” That’s a big, fancy word to describe what happens when you beat yourself up for getting something wrong. Maybe it should be called “If Only I Hadn’t…” Syndrome.
In this context, it’s when you’re thinking about leaving your job and your gut tells you to stick it out, but you don’t listen. You switch anyway. Suddenly, a month later, you learn one of your co-workers got the promotion you were gunning for. Instant depression! You begin to think: “If only I hadn’t left my job, that would have been me”.
This feeling is normal but statistics show that you’re more likely to find success at a new job. When you visualize what a successful career looks like, you can objectively look at the options in front of you. All of a sudden, some choices look a lot more beneficial and others a lot less.
Once you’ve defined what success actually looks like, you may still not know what the right choice is, again, have no fear as research has shown that you are more likely to succeed at a new job. Oh, and if you only want more money… plenty of research also suggests you should be changing jobs frequently!
In summation, being broke and staying broke is not an enviable position to be in but the good news is any financial situation can be improved if you put your mind to it!