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10 Reasons You’re Flat Broke (and What You can Do to Fix it) - Quicken Loans Zing BlogIf your bank account looks like one of those western movies where the tumbleweed drifts by, you may have a money problem. Before you throw your hands up and accept that this is your lot in life, consider this: Spending your hard-earned money wisely isn’t for the faint of heart. In fact, more than half of Americans are struggling with this discipline, living paycheck to paycheck with no savings to speak of. That’s right. Your average American is one flat tire or one sick cat away from catastrophe. It’s time to take a hard look at the decisions that got you here, as well as the way you’re going to abandon this sinking financial ship for something better. Let’s take some time to recognize the reasons you’re broke, as well as ways to develop strong financial habits.

You Don’t Know Your Money

If I asked you about your finances, including your debts, your savings and your assets, would you be able to come up with an answer? Better question – would you be satisfied with that answer? Knowing your money is an important first step to saving. You’ve got to understand how much you’re making and how much you’re spending, and the only way to do that is to create a budget. It doesn’t matter if you’re making minimum wage or sporting a six-figure salary; if you don’t know your money, you won’t be saving much. And statistically, a measly 32% of our fellow Americans are keeping track of their expenses every month.

This mainly comes down to the fact that budgeting is, without question, one of the least sexy things to do. With the exception of me and few other masochistic money crunchers, no one gets their jollies from building a budget. We like spending money and we like the idea of saving money, but we don’t want to take the time to see the way our finances are being used. Furthermore, it’s downright scary. Budgeting requires us to recognize our debts (our college-graduate audience just gulped) and make a plan for the future. This is the first and most important lesson you must learn if you plan to pad your wallet with more than lint.

Not good with numbers and spreadsheets you say? Congratulations, you no longer have to be. Welcome to the future. We now have free, automatic budgeting tools that are available at our fingertips. Mint.com is my personal favorite. It allows you to set up mobile alerts so you remain true to your budget, and it helps you track your financial goals.


You’re Not Talking about Money

We don’t like it when people ask us about our money. Our culture has an overall problem with this, thinking it a social faux pas to openly discuss finances. In fact, 44% of Americans say that talking about personal finances is the most challenging type of conversation. Seriously – we’re more comfortable chatting it up about death and politics than we are about money. And this doesn’t just pertain to conversations with strangers; we don’t like talking to our spouses or significant others, either. And when we’re not communicating about our money, we tend to run out of it. This, in turn, stresses everybody out. According to a survey by SunTrust Bank, money is the leading cause of anxiety in relationships. It’s also one of the leading causes of divorce. Money talks are an imperative part of our relationships, so we need to learn how to have them.

Accountability is one of the best ways to cut through the stress and set financial goals. It’s essential that you and your spouse are talking when it comes to these decisions. Take a page out of Dave Ramsey’s playbook and set up a time to budget each and every month. Together. Be aware of your money and talk about your mutual needs and desires.

No spouse? No problem. If you and your business partner, friend, child, neighbor, stranger – whatever – set financial goals for each other, you’ll be able to hold each other accountable. An accountabili-buddy forces you to actively speak about your money. And when we talk about it, we’re more likely to act on it.

You Don’t Have Mad Skills

With all the talk we’re hearing about student loan debt topping $1 trillion, a lot of people are wondering if getting a degree is worth the trouble. But according to David Leonhardt in an article from The New York Times, “Yes, college is worth it … For all the struggles that many young college graduates face, a four-year degree has probably never been more valuable.”

He’s referring to the fact that college graduates, on average, “made 98% more an hour … than people without a degree.” In other words, if you’re flat broke, it may be partially due to the fact that you don’t have a college education. Going back to school will typically allow you to make more money in the long run.

Even if college isn’t your thing, there are several high-paying skills you can acquire. One of my favorite financial writers, Mr. Money Moustache, has an excellent article about higher-paying careers that don’t necessarily require a traditional college education.

You shouldn’t run toward a career simply because of the salary, but you need to consider the money you need to make and how your job is going to make that happen.

You’re Not Saving or Investing

Your money doesn’t belong under your bed. It needs to be set aside and gaining interest. Many financial advisors suggest that you prepare an emergency fund for a rainy day (3–6 months of living costs). However, finance guru Ramit Sethi (you should really check out his blog) suggests that simply telling yourself to put an emergency fund together rarely works because it “produces little behavioral change.” Instead, he argues, you should be automating your account so a specific amount goes from your checking to your savings account every month. This forces you to start saving money. And who needs good financial habits if your bank is doing them for you?

Another trap that the broke and beautiful fall into is leaving all of their money in savings and checking accounts. The problem with this is that these accounts accrue incredibly low interest. Your savings account isn’t going to earn much more than 1% interest (and that’s on the high end). Instead, you need to be looking at opportunities to invest. Whether you’re looking at investing in the stock market (which is still a good option) or jumping into the real estate game, looking for opportunities outside of savings accounts is essential. If you’re planning correctly, the interest you gain from these investments should be your main source of income during retirement.

You’re Glued to the Tube

This one’s more of a public service announcement. Quit watching so much television! Right now, Americans are watching an average of five hours of television per day. That means, throughout a single week, you’re spending 35 hours watching the tube. That’s more than a whole day. You’re only spending 5.5 days living and the rest of your week caught up in a fictional world.

Thomas Corley, author of “Rich Habits,” found that 77% of those struggling financially “spend an hour or more a day watching TV,” and 74% are “spending more than an hour on the Internet” for recreational purposes.

So get off the couch and get your mind working. The television is where your finances go to die.

You Tried Keeping Up with the Joneses

If you want to start saving, you need to ignore the Joneses. This may seem like incredibly obvious advice, but for most of us, looking over at the neighbor’s yard or the coworker’s cubicle creates a pretty big temptation. Financial columnist Knight Kiplinger explains that “the biggest barrier to becoming rich is living like you’re rich before you are.”

Keeping up with the Joneses causes all kinds of financial follies. It’s likely one of the largest triggers for those impulse buys we accidentally make. The best way to ignore the Joneses is to cling to your budget. If Mr. Jones goes out and buys a new car or a new house, and you also want a new car and a new house, you first have to consult the budget. And if the budget says no (due to being used for other commitments and goals), then you’re out of luck. It’s much easier to get yourself under control when you can blame the budget. Find out what house you can afford with a mortgage that is right for you.

You’re Playing the Lottery

The fact that we need to write about this one is just depressing. But Americans spend more on the lottery than, well, just about all other forms of entertainment. This includes sports tickets, books, video games, movie tickets and music. We spent $70.15 billion playing the lottery last year.

First of all, it’s incredibly unlikely that you’re going to win. According to our statistician friends at the Huffington Post, the “probability of winning the jackpot is 1 in 175,223,510.” That’s a difficult number for us to wrap our heads around, but the fact is that you’re statistically unlikely to ever win the lottery.

But, of course, people will always argue with this information, responding with the age-old “well, someone has to win” logic. Don’t get caught up in this trap. Yes, that’s technically true, but for every person that wins, there are millions and millions of losers.

Low-income households (incomes under $13,000), on average, spend $645 each and every year on lottery tickets. That comes out to be 9% of their annual income. If, instead, they took that money and invested it (considering a 7% interest rate) every year for 40 years, they’d walk away with $147,436.77. That breaks down to over eleven years of their current annual salary.

Instead of the lottery, save or invest that money. It may not seem as pleasurable at the moment, but your future self will thank you. In the words of Dave Ramsey, “Live like no one else, so later you can live like no one else.”

You’re Carrying High-Interest Debt

There are two different kinds of debt: good debt and bad debt. If you’re trying to decide if your debt is evil or benign, just check out the interest attached to it. Good debt usually refers to student loans and mortgages because these are low-interest debts. Another attribute of good debt is that the purchase gains value over time. For instance, by paying for college now, you’ll be able to get a higher paying job later. Therefore, good debt also includes small business loans and loans used to purchase real estate. Sure, there will always be a risk involved with this kind of debt, but it can potentially help you financially down the road.

The other kind of debt – the bad debt – is largely made up of credit cards and car loans. Playing with credit cards is a dangerous, albeit necessary game. Credit cards are a great way to build your credit score, but if you’re going to use them, you should pay them off at the end of the month. All of it. No exceptions. There are a many advantages to credit cards, but only if you use them correctly. Make sure you’ve studied up on correct credit card behaviors before making the plunge.

Car loans on the other hand, are just ridiculous. That’s not a popular viewpoint, I’ll admit, but hear me out. New cars are incredibly expensive, and the second you pull off the lot, the “new” vehicle is dropping in value. Holding debt on property that’s plummeting in value is never a good idea. Save up and purchase your car in cash. Remember, you don’t have to keep up with the Joneses.

You’re Paying for Bad Habits: The Costly Three

Before you buy your next pack of smokes, consider how much you’re spending on these “necessities” each year. If you’re puffing away at a pack each day, you’re spending upwards of $5,000 a year. That’s the cost of a new (used) car!

Also take some time to consider the cost of your alcohol consumption. The average American has four drinks a week. If you’re having these drinks from the comfort of your home, you’re probably not paying too much. But if you go out and purchase these drinks, it’s going to cost you over a grand a year. And what if purchasing and consuming alcohol is more of a passion than a hobby? Four drinks isn’t really that much. If you’re getting more drinks each week, this number will skyrocket. This calculator will help you look at the real cost of your drinking.

Eating out is the last, but certainly not the least, of the costly three. The average American family spends $225 each month eating at restaurants, fast food establishments and perhaps the occasional pub. That adds up $2,668 a year. Take a moment to think about that, and then step slowly away from the chicken nugget.

On top of all these things, don’t forget about medical bills! Poor habits are not just expensive on the surface. They’ll follow you around for years. Yeah, if you feel broke now, just wait until you have to visit the doctor.

You’re Whining Instead of Winning

More than all of these things, putting cash in your bank starts with the right attitude. Pouting shouldn’t be your first reaction to an empty wallet. If you spend all of your time blaming others for your circumstances, you’ll never see the opportunity to start saving money. Yes, some people are born with more privilege than others, and some people just have terrible luck. Whining about your position isn’t going to change it. Instead, use that energy to make a plan or to tweak your current lifestyle. Simple changes can make big results when you’re trying to save money.

This Post Has 51 Comments

  1. It is no longer true about college graduates earning more. Ask Mike Rowe. Construction workers, welders, diesel mechanics, and other service jobs are desperately needed, and are frequently lest costly for training. College grads have hundreds of thousands in loans to pay off, while construction workers are getting into the workforce earlier and saving more sooner.

    1. Hi Michelle:

      Not every job requires a college education. That’s for sure. There are several highly paid jobs in the skilled trades. I like Dirty Jobs, too. And no one likes college debt, but the math still tends to work out in favor of getting a college degree for many people. In every state in the country, college grads get paid more than those without a college degree according to a recent article by Business Insider, generally by a very wide margin. Obviously, there is no one-size-fits-all proposition, but that degree still matters more often than not. We do appreciate you sharing your perspective!

  2. This article sort of “hit home”. My boyfriend of fewer than two years has lost two jobs and has no savings. He is one of those paycheck to paycheck people you speak of. When he’s out of work, the burden falls on me and frankly, I’m starting to resent the fact that he was not more financially responsible before we met. I know what you’re thinking and no, I wasn’t aware of that until after we had started to date. So now, no job, no money to fall back on until he secures a new job and to your point, way more than 5 hours a day in front of the TV set!!!!

    1. That sounds like a difficult situation, Mildred! It’s good for all couples to have a frank discussion about finances when they get serious, and it’s never too late. Good communication may help the two of you find a way to get back on the right path. Good luck!

  3. My reason for asking for a loan is not because I’m broke or overspend. I dive a 2005 model car. I got hit owing $16,000 on taxes this past year because of Market Place tax credit. Got retirement money and paid taxes on it but forgot to add to total income for the year. I have it set up on payments but I know they charge interest and thought maybe a loan to pay it off would be better. I am not flat broke!

    1. Hi Martha:

      I want to go ahead and clarify something. You’re not receiving this blog post because you applied for any particular loan. The reason for receiving the blog post is because one way or another you were put into the subscriber list for our Zing email. You may have done this by putting your email in a subscription box on our website or in the process of entering one of our sweepstakes or contests. In our welcome emails, we try to provide content for people in a wide variety of situations. We don’t make judgments around the financial health of our readers. If someone is in a situation where they’re struggling, we hope that some of the strategies in this post help. That was the only intention. Thank you for your feedback, and have a great night!

  4. There is not a single useful way to save money on this page. Especially so, the advice about investing or saving. What if there is nothing to invest or to save?

    You may have as well just use one advice – MAKE MORE MONEY. Great, let’s see what I can do about that…

    1. Hi Eugene:

      We write these articles for a wide variety of people in a wide variety of situations. While these tips may not work for you at the moment, there may be beneficial savings and investment strategies that you can use in the future. Everyone is unique and we’re well aware of the fact that not every article will help everyone. We do intend to try to help as many people as we can to better their situation whether that’s through a loan or just financial tips like these. I

  5. Very good financial advice for those who have such discipline. Most of us already understand that we must spend less than we earn to stay out of debt, and I believe that many of us do in earnest try to spend less than we earn, however unexpected expenses (ex. car or home repairs) almost always undo our savings or put us in more debt.

    Children should be taught about money starting in elementary school and have a basic understanding of how money works before graduating from high school. This early financial education can help future generations from getting into trouble financially.

    1. We agree that for many people unexpected expenses are a huge part of the debt problem in this country. But hopefully these strategies help you get out of debt faster. You’re also 100% right that there’s no substitute for the teaching of financial literacy early and often. Have a great day!

  6. Hi , I agree with you, i make money and I spend it,the life is short , invest your money it’s good idea

  7. Sending out emails to tell people why they’re broke, with reasons that have nothing to do with why they’re broke… is just rude.

    1. Hi Christina:

      This post is part of an email which is sent to all new subscribers. We aren’t saying every person who gets this email is broke or even that it’s due to any of these habits. What we are trying to do is give you the resources to get yourself in better shape if you do find yourself in a financial situation that could be better. Your feedback is absolutely appreciated and we will take it into account in the future. Have a great day!

  8. My issues as follows.. my home is still “under water” since 2008, have been layed off 5 times 4 of the company’s went under.. had to file chapter 7 in 2012 in order to keep from loosing home that I put 20% down in 2006.. I am now retired but my wife has to work part time cause employer doesn’t want to pay for benefits.. haven’t had a cost increase for 2 years but medicare is increasing almost fifty dollars a month.. all of my 401k is gone due to the numerous lay offs.. we spend endless hours working up ways to save money only to be hit with a random IRS tax audit for 2013.. I have learned in all this crap is when you can save the economy still finds a way to eat it up..

    1. Hi Jeffrey:

      I’m very sorry to hear about your situation. There may be options to help you with the fact that you’re underwater on the mortgage at the moment. I would encourage you to check out this article. If at any point you want to talk to one of our Home Loan Experts, you can do so by filling out this form or calling 888-728-4702. Good luck.

      Kevin Graham

      1. Every time I have refinanced my past home I had sent myself back even further. NEVER suggest it to people. It benefits you, not them.

        1. Hi Eugene:

          You’re right that refinancing is not for everyone. I was speaking to this person’s specific situation. If you can lower your interest rate while keeping your mortgage term the same or shorter, you’ll pay less interest over the life of the loan. And sometimes people have a situation where they want to go back to a slightly longer term in order to lower their monthly payment. That’s OK, too. Within the comments section, we’re trying to help individuals like yourself. There’s no one right answer.

  9. 1.) Wages are the same as 1970 while cost of living and worker efficiency has skyrocketed
    2.) President George W Bush handed off a $3 trillion dollar surplus to the ultra rich and big corporations.
    3.) US Corporations have hoarded $3 trillion in offshore investments instead of paying their workers or reinvesting in their businesses
    4.) Wall Street lost everyone’s 401K investments
    5.) US Taxpayers paid $20 Trillion to fix Wall Street’s disaster
    6.) It costs thousands of dollars more to live as a poor person than it costs rich people
    7.) Milton Friedman
    8.) Reagan
    9.) Reagan
    10.) Reagan

  10. I have had three floods in thr last year two 3 monthstil the last one . has cleared my savings account. Will have to start on my ira.

  11. This is all good but I live on a limited income as a single person who gave up smoking 3 years ago and who doesn’t drink nor go out that is a non factor. I have never purchased a new car, and even have a V.A. loan for my home. I still cannot find the money for security. Credit cards are clean. Only 1 in use and at a 0% interest rate with less than 10% used right now so that’s not a problem. Home repairs and improvements, sending kids off to college and worst of all the long wait for receiving V.A. disability is causing a lot of issues. How do you suggest saving when the income isn’t there to put aside because everyday life is taking every bit of the money. I even gave up cable and have only Internet to reduce that cost. I don’t drink coffee so I don’t have the usual expenses of that. No eating out and entertainment is limited to visiting the doctors office for appointments. I understand what you are doing for young people but for us older people this just isn’t workable.

    1. Hi Tina:

      Fixed income living is certainly difficult. It sounds like you’ve taken just about every possible step to try and give yourself some money to put away in the form of savings. You’re right that this article is somewhat geared toward the habits of young people. Frankly, this has given me some inspiration to look into resources for people middle age and up who might want to find different ways of increasing their savings. I would be happy to reach out to you if we do such an article in the future. Beyond that, I can only say I sympathize and wish you luck. Without getting into detail, I know from personal experience that waiting for any kind of government assistance is extremely frustrating. I hope you get what you need soon.

      Kevin Graham

  12. I especially appreciate your points about debt. I don’t believe in debt and have been debt free for many years. Now I want to buy a house and have no credit. So I got two credit cards and I pay them off every month. I have savings and was pleasantly surprised that my credit was good. Weird though, the credit cards almost tricked me into spending more. I have to watch that!

    1. Hi Catherine:

      It sounds like you’re well on your way and have developed some good habits. Yeah, that plastic can be almost too easy. It’s very tempting. I’m glad you figured it out so you can watch though. Good luck!

  13. I enjoyed this article so much I called my daughter, and told her to go to mint.com. My daughter kept up with the Jones, lived in three new houses and I would always ask her are you guys doing ok? I finally found out that they hadn’t made a house payment for over a year. I’m getting ready to have Surgery when she tells me, mom we are losing the house. Lucky I was in a position to help them, I purchased a house for them which is in me and my husbands name.

  14. Money has been my downfall 24/7 ,365 days a year ! Going into dept. is easy , but getting out of dept. takes years ! Trust me ,paying credit dept. off monthly saves you a lot of money !

    1. I read your areticle and was dumbfounded.
      your were very insightful, and it hit home like a bullet. All of the things that you spoke about
      were so prevalent in my life now. I would like to have more info like yours. Help.. lpl.

  15. One quibble with your article: a college degree really isn’t the best bang for one’s buck. My nephew went to trade school for 18 months, has no educational debt, and at the ripe old age of 20 walked into a welding job with heavy machinery manufacturer making 45k and full benefits. Meanwhile, my employer is hiring 30 year old Masters degreed biologiss for 32k. If I were a young person I’d be giving the skilled trades a long hard look over college.

    1. I partially agree with you, Jules. Trade schools can create some amazing financial opportunities. You should take a look at the link to Mr. Money Moustache’s website in the post. That being said, statistically, college graduates are making more money than the people without degrees. The point, though, is that having a useful skill is going to be your launchpad to a higher paycheck.

    2. Someone said that to me 20 years ago when I was starting out in my career – she gave me a hard time that I wasted time and money on college while she just went to trade school and yet we ended up with the same job. Less than a year later, I was her supervisor. Three years later, I was her supervisor’s manager. I’ve since worked my way up to a senior director level with a great paycheck, a company car and stock options while she’s still sitting in the same cube she’s been in for the past 20 years. Never ever think that education is a waste.

  16. This is a great article! As followers of Dave Ramsey’s plan, we are living proof that having a budget and a long term money plan in place actually works. Strive to get rid of ALL debt (and stop making excuses for why you can’t)!

    1. Thank you, Matt! Yes, my wife and I did the Financial Peace classes a few years ago, and they helped us create an excellent financial foundation. You should also check out Ramit Sethi’s book, “I Will Teach You to Be Rich.” Sethi and Ramsey disagree on a couple of things, but it’s beneficial to look at the other side of the spectrum. It’s also an easy read. Thanks again, Matt!

    2. I have tried to do Dave Ramsey’s plan, but always have failed (made excuses….). I’m glad to hear a (nother) success story!

      1. Hi Stefanie:

        One method it doesn’t always work for everyone, but I hope you keep at it and don’t get discouraged.

        Kevin Graham

  17. Great article!

    Just quitting the cigarettes alone will save you thousands of dollars over ten, twenty, thirty, or more years. Add in the medical bills you won’t be paying later by quitting now (and exercising) and it’s even more.

    Cut ‘nickel and dime’ purchases out as much as possible. Daily coffees, bagels, donuts, snacks, candy bars, lunch, beer, etc. will eat up a huge amount of money over ten years. Try multiplying $1-$5 of daily purchases over ten, twenty, or thirty years and see what kind of money you could have saved.

    If you’re paying a cable bill, kill it. There are tons of great shows online for free (or much cheaper) if you already are paying for internet. Look at what you’re paying for mostly lousy TV stations (That you never, ever watch) on your cable times the number of TVs you have times the number of months over twenty years. Ouch.

    There is no reason to subscribe to a newspaper. You are paying for news that comes late which you could have seen for free online. Most newspapers now have an online site anyway. And besides, the majority of the news you read in the paper is worthless and of no use to you whatsoever.

    If possible, and you have one, pay down a little extra principle on your home mortgage each month on top of your monthly mortgage payment. Just make sure there’s no penalty for paying off your mortgage early.

    If you have multiple bills/payments outstanding, write them down in a list, and if possible, tackle the smallest one first by paying a little more towards that bill each month.

    If you can ride a bicycle or bus to work at least once a week, that is around 52 times a year you aren’t driving your car. Huge savings on gas as well as wear and tear on your vehicle. Riding the bike is great exercise too.

    Get in the habit of turning lights and electrical items off and cutting the time in hot showers. This is another huge expense that isn’t easily seen until you look at it from ten to forty years worth of bills. You might even be able to cut the number of showers you take from 7 a week to 5-6 a week. It’s not always necessary to shower every day, especially if you plan on lounging around by yourself on a day off, for example.

    If you can make a garden, do so. It’s fun, gives you a sense of accomplishment, a great learning experience, and you can save money on vegetables/fruits. You may be able to grow some food indoors. YouTube has millions of videos on this. Look at square foot gardening for ideas on how to cram a ton of plants into a small space.

    Used clothes are easy to get and oftentimes pretty good quality, in addition to being much cheaper than new. In my part of the world, we have Salvation Army and Rescue Mission retail centers that offer all kinds of decent used stuff. It’s amazing how many people with ‘money’ shop there. The selection isn’t half bad.

    Try to pay yourself first. If you know how much you get paid every day/week/biweekly and you have online banking (and they don’t penalize you for multiple transfers between accounts over a period of time – see how many you’re allowed per month), see if you can get in a daily or weekly habit of putting money directly into a separate savings account. If you don’t think you can spare anything, try just 1% of your paycheck. After a while, you will be able to move to 2% and 3% and so on. It may take a while but it’s a great way to build wealth and savings incrementally. Promise yourself you won’t touch this money under any circumstances. This is money you can tap after you’re done working someday. The idea is to learn to save money from every paycheck for you FIRST, and try to increase it over time.

    If you can hang your clothes on a clothesline somewhere instead of drying them in the dryer, do it as much as possible. You’ll save a fortune in gas or electric there.

    Go through any monthly credit card statements and bank statements and make absolutely sure you’re not making a monthly payment you were not aware of. It’s incredible how many people have no idea they’re paying for a costly monthly subscription to XYZ service because they didn’t check a box with some purchase they made and got subscribed without their knowledge.

    Just some ideas to save money. If you can use even one of these, you’re getting ahead.

    1. Right on the bottom line. I am retired and living on a fixed income. I budget everything and account for any spending. Always noting what the expenditure was along with amount, in a 3 ring binder. It tracks my spending. I even account for the cash that was used and for what.
      I found up amounts to be deducted, with actual costs in parentheses.
      This helps me keep on track.
      Yes always check bank statements. I’ve found charges that just appear after a trial period was over. Infact, I didn’t know that I signed up for a trial period.
      So Dan keep on.

  18. I like this info. And if we stop living in the future and focus on the now we can wiin. So let’s all help ourselves

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