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Why Being Broke Is Costing You A Fortune

What does a Lamborghini, a mansion and being broke have in common? Did you figure it out? The answer is that they all cost you a fortune. Now, I’m sure it’s obvious that the first two items come with a hefty price tag but you may be scratching your head about the third. Well, I hate to break it to you but yes being broke is a lot more expensive than people think and here’s why.

First off, let’s analyze the day to day lifestyle of someone who is broke. Chances are, they wake up early, commute to a job they hate, work for 8 hours, commute to a second job, work some more and then finally they come home late at night and do it all again the next day. Now, perhaps this chain of events seems preposterous to you and if this is the case then I am going to guess that’s because you aren’t broke and have never known what it’s like to not even have two pennies to rub together. If this is the case then I’m happy for you but sadly there are a ton of people who go through this hellish cycle every day and the worst part is that in the end, they have nothing to show for all the hours of work they put in!

At this point, you already have a taste of the less than ideal many financially destitute people experience every single day but sadly this is just the tip of the iceberg when it comes to the expense they pay every single day. Speaking of those expenses that they are paying every day due to their subpar financial position, let’s get into some of those now!


First off, it’s rather common to see people who struggle financially finding themselves in a fair amount of debt. Data from the latest Federal Reserve’s Survey of Consumer Finances report found that the average credit card debt of a US family was just over $6,000. Now, this may or may not sound like a lot of debt to be carrying but it can snowball into a ton of extra expense if you aren’t able to tackle it given your lack of access to cash.

For instance, if you had a credit card balance of $6,000 at 18% and only paid the minimum $200 payment every month, it would take you 41 months or almost 3.5 years to pay it off. Not to mention besides repaying the initial $6,000, you’d also end up handing over $2,000 in interest payments as well!

Now of course not everyone who is broke is in debt but you can imagine that if you are always one missed paycheck away from having to rely on your credit card then at some point or another misfortune will come your way and falling into debt will be an inevitability. Therefore, amongst all the other ways that being broke is costing you a fortune, debt is up there in terms of the costs that it can incur!

Quick Wins

Next, let’s talk about the mental state that many people fall into when they are lacking enough money to live. As I mentioned earlier, the day to day lifestyle of someone who is broke is not the most exciting. Trading every waking minute for a low wage or simply doing something you dislike is not the way to live if you ask me. Now, don’t get me wrong, there are a ton of high-income earners who are just as broke and unhappy with their jobs as their low-income counterparts. The difference is with a few saving tips and some discipline, they can rather easily escape their financial issues while low-earners will have a much harder time. When placed in this dire financial and mental state, it makes sense that people who are financially destitute will want to get out of this horrible situation and fast! So what do they do? They try to find quick solutions to their problems. For example, they buy that 3AM infomercial teaching you how to become a real estate millionaire with zero money down. Or perhaps they get on the latest crypto hype train that they read about during their only 10 minute bathroom break they get all shift.

Now, you’re smart enough to know that taking this quick-win path is a recipe for disaster. Unfortunately, those who are broke have handed over one of the key elements required to generate real wealth in their life. What is that element? The ability to play the long-game. If you study those who become financially successful, you will notice that they all put in a ton of time before any results come to fruition. For example, it took Jeff Bezos over 20 years to build up Amazon to the behemoth it is today, it didn’t just become one of the biggest companies on Earth overnight. On a more relatable level, you probably didn’t complete your college degree in a day. It took years of sitting through boring lectures, cramming for exams and paying inflated tuition costs but you stuck it out and now get to enjoy a paycheck hitting your bank account every two weeks.

Whether it’s setting up your career or building a business that doesn’t let your employees use the washroom, building something of value takes time and unfortunately, broke people don’t have the time it takes to wait and as such incur the cost of failure and further financial struggle when they try and take the quick way out!

While I would love to say that those are all the costs you will incur if you end up living a life of financial despair, unfortunately the list goes on. If you think broke people are deficient in money, wait until you realize how deficient they are in time!


In most cases, being broke is a by-product of two factors coming together. The first is a low-income. I’m sure you’re well aware of how expensive it is to even breathe these days let alone trying to cope with the rise in costs of some of the pillars of our day to day lives like food, clothing, housing and transportation to name a few. While prices are getting ridiculous, there are people who earn very little that can get by, however when the second element is thrown in the mix, this is where issues start to arise. The second element is poor money management and this is the death knell in most broke people’s lives. Chances are, due to their low-income, they are already toeing the line between black and red but a few bad habits can easily lead them into further financial despair.

So how do these individuals start to dig themselves out of these less than ideal financial states? You guessed it, they work non-stop. It’s not uncommon for low-earners to be working 80 hour weeks because when you’re stringing your income together one $7.25 hour at a time, it’s going to take a lot of working hours to cover your core expenses every month. Then, when you add in that line of credit and credit card you have to pay off, you can see how for a lot of people it may just be more time efficient to sleep at work since you’re there all the time anyways!

Therefore, if you ask me, when you’re broke, you’re paying the high cost of having free time. Free time that could be better spent exercising, taking your partner out on a date or playing with your kids. Time is by far our most valuable resource and unfortunately when you’re broke, for you, that valuable resource will likely be very scarce.

Opportunity Cost

As we move into some of the more intangible costs of being broke, there are two in particular that are rather pernicious and the first is opportunity cost. If you’re unfamiliar, opportunity cost is the benefit given up when another alternative is chosen. For example, use your money to buy an XBOX and you’ve given up the benefits you would have received if you would have bought a PlayStation instead. At a high level, this is what opportunity cost is all about and sadly, most broke people are incurring a lot more of it than they even know. While we could talk for days about what you give up when being broke, there are two costs in particular that need to be addressed.

The first opportunity cost you incur when you’re broke relates to investing. As I mentioned earlier, it’s not uncommon to see financially destitute individuals falling into debt.

Unfortunately, each one of those debt repayments is money that could have been used in a host of different ways with investing being one of the alternate options. Let me share an example to illustrate this opportunity cost in action.

Let’s say that we use the prior example where someone is paying $200 a month for 4 years to pay off their $6,000 credit card balance. When all is said and done, they end up handing over a total of $8,000 in payments when interest costs are factoring in. It sucked but they got it done. Now, what if that money was invested instead? Investing $200 a month at 7% yields over $11,000 in a four year timespan. Now, let me ask you this. Would you rather have zero dollars (the result of finally paying off your debt) or $11,000? I think the answer is obvious! The second opportunity cost that broke people incur relates to time and education. When you’re working 100 hours a week, you have given up primary agency of your time.

Unfortunately, given that you’re in a perpetual low-wage earning cycle, it leaves no time to acquire your true ticket to a better financial life: more education. Now, when I say “education” I don’t necessarily mean getting a degree. What I mean is that in order to free up more time you have to make your time more valuable to the open market. This is why doctors can work two days a week and be well-off financially. When they are working, they are earning enough to keep themselves financially afloat while also enjoying not being tied to a desk (or in this case their stethoscope!).

Therefore, the other opportunity cost that broke people incur is the cost of all the future income that they could have earned if they had access to the time needed to upgrade their knowledge and skills to earn more money.

Lack of Autonomy

Finally, let’s talk about doing what you want, when you want. Very few people have the luxury of total time freedom as most of us are somewhat beholden to others whether that’s an employer, a demanding spouse or perhaps a parent in need. While as an adult it’s reasonable to expect that not all of your time will be yours, when you find yourself in financial despair, suddenly that control over your time goes out the window.

In a recent study of many high-net worth individuals, researchers set out to determine how rich individuals generated the most enjoyment out of their time worked. The study showed that most of these people were working similar amounts of time every week but their happiness hinged on one aspect in particular: their level of autonomy. Those who had control over their working arrangement and the content of their work were notably happier than those who lacked control over these same elements.

Unfortunately, when you are broke, the word autonomy is foreign to you. From being told when to be at work, to which neighborhoods you can live in to the type of car you can drive, when you have no money, you have no choice. Given that autonomy is such an integral factor in our overall happiness, it’s no surprise then that being broke is a one-way ticket to mental struggle and despair.

Therefore, while no one chooses to be broke, the reality is that many people are and unfortunately, these individuals are incurring more costs than they probably realize. However, if you’re not broke, let this be a reminder of why you want to continue to improve your financial habits and practices so that you can sidestep these hefty costs in your own life!

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