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Why Am I Broke? [2021 Guide to Stop Being Broke]

By Forrest | Last Updated: November 19, 2021

If you're wondering, “Why am I broke??” but aren't sure what to do about it – there are likely several reasons.

If saving money is challenging for you, consider if any of these are possible causes for why you may be broke.

In this post, I'll explore how to find out why you're broke, ways to save money, and much more. Let's get started!

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Why Am I Broke – 7 Common Reasons

Below are some of the most common reasons you're broke. If you're always broke and struggling to keep money in your bank account, it could be one of these reasons.

Why Am I Broke

You Spend More Than You Make

One of the most common reasons you’re always broke is because you spend money frivolously.

If your current spending is more than your income – this is a big sign of financial trouble.

The main culprits of this are vehicles, entertainment, clothing, and mortgage or rent.

These expenses can cause you to be broke if you spend too much and don’t have the income to support them. If you have trouble spending money on necessities – but spend a lot of money on other frivolous items – this could be why you're always broke.

You Don't Have an Emergency Fund

Emergencies happen. It’s only a matter of time.

Having an emergency fund to keep your bank account balance in good condition is vital if you want to reach financial freedom.

How much money do you need for an emergency fund?

It’s wise to start with just $500 or $1,000. Over time, many personal finance experts recommend this number to become around 6 months of your normal living expenses.

For example, if you normally spend $3,000 per month, you’d want your emergency fund to reach around $18,000.

Emergency funds are established for emergencies. Duh.

But many people make the mistake of using their emergency fund for expenses that aren’t really emergencies.

For example, if you have to replace the roof on your home, you might think this is an emergency, but it’s not. These expenses should be a part of your budget and normal savings.

Items like and unexpected hospital bill, job loss, or other unexpected costs are what your emergency fund is for.

Your Income is Too Low

Sometimes your income just can’t support your expenses.

Living on a minimum wage salary can be extremely difficult and borderline impossible for the average American household.

If your annual salary is under $25,000 this can make it difficult to stop being broke and living paycheck to paycheck.

If your current position doesn’t pay well, it might be time to start searching for a new one or sharpening your skills to pursue a new career path.

However, just because your income is low doesn't mean you should give up and keep digging a larger hole. Try to do the best you can with your income to avoid a more difficult situation.

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You Have Large Amounts of Debt

Debt can cripple your ability to become rich and reach your financial goals.

It can be easy to lose track of how much debt you have. Between a credit card, student loans, and possibly a car payment – this can make you always broke and hard to get ahead with your personal finances.

Depending on how much money you have in debt, there are a few different strategies you can use to stop being broke.

My favorite method is the debt avalanche method. This method suggests that you pay off debts with the highest interest rates first, no matter the amount of balances on your other accounts.

Another method, also known as the snowball method, suggests you should pay off your debt with the lowest total amount first, then make your way to the next, and the next.

With the debt avalanche method, you’ll save more money, reduce late fees, and boost your credit score faster.

You Haven't Invested for the Future

Investing is a great way to get out of feeling broke and have a huge impact on your finances.

Rich people are known for using their investments to make more money and build passive income.

You might think you need to be rich to invest, but that’s certainly not the case.

With platforms like Acorns, anyone can invest with as little as $5.

Plus, when you use the link below, you’ll get $10 completely free!

If you want to start making money while you sleep – investing is a great idea.

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You Have the Wrong Mindset

In today's society, there's a lot of emphasis to keep up with others. You've probably heard of the phrase “keeping up with the Joneses” and that's certainly true for many people.

Poor people is always try to look wealthy and rich to others while drowning in credit card debt.

If this is you, it's time for a shift in your mindset. Instead of trying to be like others, try to not compare yourself to others.

This way of thinking will help you to be more content with your life and what you have.

You Prioritize “Things”

Purchasing a new car can be very tempting, especially if you're having any car troubles at all. But this isn't always a wise decision.

Instead, opt to purchase a used vehicle or take public transit to lower your expenses.

You can find a good deal on a used car to save over 50% off of the price of a new car.

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How to Stop Being Broke

Once you've identified why you're broke it's time to start creating a plan to start saving money and stop feeling constantly broke. Keep more of your own money in your checking account with these tips.

Use Truebill to Lower Payments

Truebill is a great way to have your bills negotiated for you. If you're always broke consider trying Truebill to help you save money and lower your utility bills.

Truebill helps you take back control of your finances and start budgeting with ease. Register below to get started!
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Use Survey Sites for Free Money

Making more money is one part of money management. There are many survey sites you can use to grow your income and make extra money each month.

Most of these sites offers a welcome bonus that's literal free money. If you're always broke, give these a try!

InboxDollars

InboxDollars offers a variety of ways to get paid and make extra money in your free time. You can earn up to $25 per survey you complete and you'll get $5 completely free just for creating a new account.

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Disclosure: This link is an affiliate link, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

Survey Junkie

Survey Junkie is a great platform to take online surveys and paid focus groups. With Survey Junkie you can earn up to $50 per survey and up to $150 per focus group.

Be sure to confirm your email when registering so you don't miss out on the high paying surveys.

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Swagbucks

Swagbucks is a simple way to make money online and stop being constantly broke.

With Swagbucks you can earn money and boost your pay by taking surveys, watching videos, playing games, and more.

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Register for Ibotta to Save Money Instantly

With Ibotta you can get paid to shop in store or online. While this might sound too good to be true, it's not.

You can start making money on your trip to the grocery store each week.

While the amount you make might not be 6 figures, it's possible to save thousands of dollars throughout the year.

With Ibotta you can get a free $20 just for registering and completing your profile. Plus, you can get paid for grocery shopping and more! Register below!
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Side Hustle to Stop Being Broke

Start a Side Hustle to Earn Extra Cash

Starting a side hustle is my favorite way to stop being broke.

There are literally thousands of side hustles you can do to earn money on the side in addition to your full time job.

For example, you might consider flipping domains, starting a blog, or driving for Doordash to make extra cash.

Starting a side hustle can enhance your life by reducing money stress. The amount of money you make can be tremendous.

Some side hustles can even become your full time job and be life changing.

You can be your own boss and enjoy the flexibility of choosing when, where, and how much you earn. All you need is a mode of transportation and a smartphone to start making money. It’s that simple. Sign up below!
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Register for a Bank Account with No Fees

Most people don't think twice about their bank account and the benefits it offers.

Some bank accounts and savings accounts offer benefits that can help you stop being a broke person.

For example, with Aspiration Bank you can get an instant $150 bonus when you open a new account. Register below to get started!

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Open a High Yield Savings Account

Opening a high yield savings account is an easy way to make money without working.

A traditional savings account pays much less than these accounts and they’re completely free to open.

My favorite account is through CIT Bank. You can earn 10 times more in interest than other accounts, so why not open your account? It’s completely free and has no fees.

Say goodbye to .1% APRs and say hello to .4% APRs with a CIT Bank Savings Account. Open your account below to start growing your money!
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Create a Budget to Lower Spending

Budgeting is one of the most effective ways to lower your monthly spending and save money fast.

Depending on your spending habits it can be difficult to stop spending money and start saving.

If you're always broke and having money problems – budgeting is a great option.

To start budgeting, you'll want to write down both your monthly take home pay and a list of your total monthly expenses. These should include your basic living expenses as well as other costs like home maintenance, entertainment, and gym memberships.

Zero based budgeting means that you should have zero dollars left over at the end of the month.

Next, you'll want to take a look at your monthly expenses and reduce any you're spending too much on. If you're spending too much on takeout try cooking for yourself, and if you're spending too much on clothes consider shopping for more affordable options.

You'll want to allocate a certain dollar amount to each category each month. For example, you might set your entertainment budget to $200 per month. These should be the total funds you use on all spending throughout the month on entertainment.

With budgeting it can take a few months to get a better idea of your spending habits and how you manage your money. Try to setup recurring meetings to reevaluate your budget so you can stay on track.

Check out the video below for more help budgeting!

Find a New Job to Make Good Money

Finding a new job is one of the most effective ways to make more money. Many people are afraid to change jobs for this reason or that it may be difficult to find one.

The truth is, there are many companies looking for skilled employees and you'll likely find several jobs you're interested in.

You can also find new opportunities on job search websites like Indeed, Monster ,and LinkedIn.

Use these websites to search new jobs that you're interested in and start applying.

Be sure to consider all of the benefits of the position outside of just the salary. Sometimes a position might have stronger retirement offerings or health insurance benefits than others.

Work Weekends or Overtime

Does your current position offer extra hours you can work?

You can always ask your boss if they have any available hours you can work over the weekend, weekdays, or even on nights. This is a great way to earn more money without changing jobs.

Sometimes this might be for additional pay as well too, so consider asking about that opportunity as well. Even if it's an extra $1 per hour it can add up to a lot over the month.

Ask Family and Friends for Money

Do you know anyone who’s willing to give you a loan or even just lend you money?

Getting a loan from family or friends is one of the most effective ways to stop being broke. You can pay back the loan as you save money from your budgeting for example.

Before you consider asking a family or friend for money you should be certain that they are willing to give it to you and know their expectations.

Using Credit Cards to Gain Rewards Points

Credit cards can be very dangerous if they're not used correctly, but in the right situation they can actually save you money. You can use credit cards in place of debit cards when you shop and earn points, cash back, or airline miles just for buying what you would normally buy.

If you're trying to stop being broke and want to use a credit card I recommend you stick to ones with low interest rates and no annual fees.

Eliminate Debt

Most poor people will stay broke because of debt. Credit cards, car payments, personal loans, and student loans can all wreak havoc on your finances.

Remember, just because your credit card has money available doesn't mean you have to spend it.

If you don't have enough money to pay down your debt, try start focusing on putting together a plan to avoid interest payments, late fees, and a hit to your credit score.

Even if it's just paying an extra $25 a month towards your debts, this can change your life in a few years. Because the interest can start to stack up against you, these extra payments can be extremely useful.

If you don't have enough money to pay extra towards your debt, consider using money from a side gig.

Related: How to Save $10,000 in a Year

Invest Extra Money

Investing your next paycheck is a great way to enhance your life and make enough money to live off of.

Rich people understand the importance of investing and take it seriously.

You may not be able to make a ton of money at first, but over time you'll see nice returns on your investments.

There are many investment options available that range from mutual funds, stocks, and real estate.

Some of my favorite investing platforms include:

  • Acorns – make money investing in stocks
  • Fundrise – make money with real estate
  • Masterworks – make money investing in art
  • Stash – invest in mutual funds and index funds

Utilize Retirement Accounts

If you want a better life in your later years, utilizing retirement accounts is essential. There is only so much money you can save for retirement without investing – so it's important to take advantage of these accounts.

As you reach the later years of your life, these retirement accounts can help to pay your fixed and variable expenses with no active income.

Avoid Fees

Credit card and bank account fees can become costly.

For example, most credit cards will enforce a $25+ late fee. If you have revolving credit cards, it's important to know the due dates of your credit cards.

By making the minimum payment you can avoid paying these fees, which will reduce your monthly expenses.

Create Budget to Stop Being Broke

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Creative Ways to Save Money

Below are some creative ways you can save money and stop feeling broke.

Live Cheaply

Because your housing costs are usually one of your most costly living expenses, reducing these costs can be a blessing for your budget and bank account.

To cut these costs consider living at your parents house, downsizing your home, or possibly adding roommates to your household.

Even if you make good money, reducing your housing costs is a great way to stop being constantly broke according to many personal finance experts.

Related: Cheapest Ways to Live

Have No Spend Days

Spending money is extremely easy with credit cards and debit cards. Try to plan no spend days in which you don't spend any money for a single day.

This can be easier said than done. You'll need to think about your life and any expenses you have upcoming to avoid spending money.

Use Thrift Stores

Clothing, furniture, and other items can be expensive if you purchase them at your local retailer. Instead of swiping your credit cards to purchase items, visit your local thrift stores to keep more money in your checking account.

Use Coupons

Coupons are an easy way to save money on your grocery shopping. If you can't use coupons, try to purchase items that are on sale or that offer quantity discounts.

Physical coupons are not the only way to save cash. Digital coupons also save you money and time.

In addition to coupons, using loyalty discounts and your grocery store's rewards cards can also help you save money.

Automate Your Finances

Automating your finances can help you save a lot of time and money. If you have a difficult time with habitually using credit cards, automate your finances so that money is taken out of your checking account and transferred to your savings account each month.

Buy Generic

When you visit the grocery store and shop, try switching to generic products to save extra cash.

Generic items can save you as much as 30% off the price of name brand items. Items like peanut butter, paper towels, and ketchup offer great generic alternatives.

Related: 50+ Frugal Living Tips

Final Thoughts on Why Am I Broke

There are many reasons you could be broke. From high amounts of credit card debt and student loans to not making enough money to pay your bills – being broke is more common than you think.

If you want to get ahead financially, you're going to need to make a plan to reach your goals and know that it won't happen overnight.

By budgeting your money and lowering your monthly expenses, you're sure to have more money in your bank account and stop being broke.

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Forrest is a personal finance, entrepreneurship, and investing enthusiast dedicated to helping others obtain life long wealth. He owns several different blogs and is also passionate about health and fitness.