10 Money Habits of People who are Always Broke

Published by Thomas on

Do you ever wonder why rich people only seem to become richer and poor people only seem to become poorer despite all the possibilities and abundancies this world has to offer?

It’s not because rich people always get lucky and poor people don’t.

Even though a lot of poor people like to think so.

The difference often lies in habits. Rich people often have what I’d like to call rich habits and a lot of broke people on the other hand have what I’d like to call broke habits.

Now.. in this world there are millions of people who live on the verge of poverty and are genuinely broke. People who are born in poverty and born in circumstances that severely limit their opportunities. However, there are also people who are born in a situation with limitless opportunities but share one thing with people who live in poverty. They are always broke as well..

In every social circle there is always that one guy or girl who is always broke.

That guy who has a decent job but frequently asks you to borrow him money because it’s his girlfriend’s birthday and he can’t buy a gift. Or that girl who goes out for drinks with you and always asks you to pick up the bill because she’s short on cash and promises to pay you back later.

In this article we’ll zoom in to ten money habits of people who are always broke. Money habits that you should become aware of if you feel like they sound a little too familiar to you. So what are broke people habits?

Broke people have tons of unused subscriptions

Subscription services like Netflix and Spotify have a price model that is built on you paying a small sum of money every month. Because the payments are made every month people are often unaware of the amount of money they pay for them each year.

On a yearly basis this small amount of money quickly turns into a considerably larger amount. Having service subscriptions is not an issue as long as you can afford it and the usage is proportionate to what you pay for them.

I know several people who are always broke but have a gazillion service subscriptions they hardly use.

They got a Netflix subscription, hbo, Hulu, Spotify Premium, Amazon Prime, a dozen magazine subscriptions, Playstation Plus, a subscription to the local gym and many more.

They hardly use their subscriptions but don’t bother canceling them because “it’s only a few dollars each month right”. Because the monthly amounts are low they fail to see that they throw away over a thousand dollars each year on things they don’t or hardly use.

Broke people don’t track their expenses

Tracking your expenses is the key to keeping your expenses on the same level. The problem with expenses is that they creep in as long as you have money left to spend and you don’t track them.

If you’re not careful, without realizing it, you start buying less groceries on discount, you start eating out more and you start buying more luxury items.

Broke people have a tendency to not track their expenses. They just spend and spend and spend until their bank account is empty. Instead of tracking what they spend they turn on their Facebook and starting throwing jokingly quotes around like:

“Most people have money left at the end of their month, I have month left at the end of my money”

Tracking your expenses is very valuable if you wan't to stop being broke.

Broke people try to save at the end of the month

There are two kinds of people. People who save at the beginning of the month and people who save at the end of the month.

Or as many people in the industry like to call it “people who pay themselves first and people who pay themselves last”. Paying yourself first is a recipe for success, the latter is a recipe for disaster.

What I do is I save a fixed amount of money at the beginning of every month. I distribute a fixed amount of money over my savings and investments. If my earnings increase I increase the amount of money I save with the raise minus a bit of money to correct for inflation.

By saving at the beginning of the month you enable yourself to save a fixed amount of money every month. You also enable yourself to maintain a stable quality of life. A quality of life that I find comfortable. A quality of life that gives me joy, comfort and everything else I need to enjoy life.

There’s plenty of research that shows that increasing your quality of life by spending more money on luxuries doesn’t lead to greater happiness. Yet this increase in lavish spending is what happens when you stop tracking your expenses and let lifestyle inflation creep in.

It’s simple. Saving by the end of the month is a recipe for disaster. It’s like giving yourself a guilt free pass to spend it all before you get the opportunity to save a single penny whatsoever.

Broke people spend money without considering value

When purchasing things, wealthy people assess whether their purchase will be worth their money. Even if they could buy the whole company that produces a product. On one side there is money and at the other side there is value. The question is fairly simple…

"Is what I’m about to pay worth the money it costs?"

Money is a limited resource and so are automatically the things you can buy with money. When you spend five dollars on ice cream you can’t spend that same five dollars on coffee. Which purchases bring you value depends on your personal preferences.

People who are always broke are hardly familiar with this concept. They spend and spend and spend until they are out of money and never once ask their selves if the way they spend their money brings them the most value.

They purchase things just because “money has to roll” or because others purchase the same things.

Broke people don’t correct the cashier

You know this situation? You’re shopping somewhere and see a product with a 40% off tag. You decide that you wouldn’t buy the product for full price but 40% off seems reasonable. (value versus money remember)

You take the product with you and arrive at the cashier. She scans the product and a second later you see its full price without the discount popping up on the cashiers screen. You tell the cashier that the product is 40% off, she checks with a coworker, apologizes and then gives you the discount you deserve.

Perpetually broke people however, often don’t even bother telling the cashier that the product is 40% off. They find that it makes them look cheap towards the cashier and possible other customers in line.

They just open their wallet, pay the full price and leave the store. They rather overpay for a product than ask for the discount they deserve. After all, asking for a discount is embarrassing.

Broke people buy things on credit and lease

One thing you will very often see broke people do is purchasing products on credit or leasing products.

Perpetually broke people often have no buffer for emergencies like a broken car. They spend all their money until shit hits the fan. Their car breaks down and they have no money for repairs nor for a new car.

Instead of learning from this mistake and building an emergency fund they find a more creative and different solution. They buy a new car on credit or lease one.

By doing this, they immediately have a new car without having to make a big cash payment. When they lease a car they even got future repairs and maintenance covered. Their short term problem is solved but is done so by trading it for a bigger long term problem.

The monthly payments are a huge financial burden to them and their finances for years to come. Due to the payments they are hardly able to save any money. When the next emergency arises they face the exact same problem again. Something breaks down and they have no emergency fund. They have no other choice to engage in another creative financial solution like leasing or buying something on credit.

Leasing stuff or buying something on credit doesn’t only apply to cars. Nowadays you can buy almost anything on credit or lease it.

For businesses it’s a very lucrative proposition. You can lease beds, washing machines, phones, home cinema sets, a boiler and so on. It’s a market that almost seems tailored to the behaviors and needs of perpetually broke people. It’s the ideal solution for people who are always broke.

One is able to reap the benefits of big purchases without needing a lot of cash for it. What people often don’t realize is that their tendency to lease everything is a huge burden on their cashflow which causes them to remain broke until eternity.

Broke people go shopping without a list

Whether it’s grocery shopping or shopping for clothes. I always make a list of what I need. Having a list simply prevents me from buying a big bunch of crap that I don’t need. There is only so much food I can eat and only one set of clothes I can wear at the same time.

Perpetually broke people have a tendency to go shopping without a list. They need food for one day and come home with enough food for an orphanage. Half of it ends up spoiling and they throw it away, or even worse, they think throwing it away is a waste of money so they eat it all and end up gaining weight.

In the first case, someone spends money on something that ends up in the trash. In the second case, someone spends money just to gain weight. Which on itself results in more money needing to be spent on weight loss shakes, detox crap and gym memberships they don't end up canceling afterwards.

This doesn’t only apply to groceries but to any type of shopping. Shopping without a list is a recipe for overspending on things you don’t need.

Broke people hang out with other broke people

One bad habit of broke people is continually hanging out with other broke people. People attract like-minded people.

Perpetually broke people spend a lot of time with other people who are broke. They have the same views on life and the same broke ass habits. Because of this, a lot of perpetually broke people never learn any better habits than the bad habits they have now.

As they are always surrounded by like-minded people, their limited views on how to manage money are never challenged but rather reinforced.

Broke people compare their lives with others

One of the main factors that causes people to be perpetually broke is their tendency to compare their lives with others. They see life as a hunt for social status and material possessions as a display thereof.

They continually compare their material possessions with those of others around them. Their neighbor buys a new car so they want a new car as well. Their cousin bought a new grill so they want a new grill as well. Preferably one with at least five burners. Because their cousin only has four burners.

The hunt for social status is what makes the relationship between broke people and luxurious brands so strong.

It is also what makes leasing and buying things on credit so immensely popular.

It provides people with the opportunity to own something they would never be able to pay cash for. It is also the perfect explanation why perpetually broke people never bother to assess whether they find a purchase worth it. They do have a sense of value but that sense isn’t derived from their intrinsic values. Their sense of value is derived from the society and their social circles.

If you continually compare your life with others you will never be satisfied.

You’ll never have enough money to satisfy your hunt for social status. Someone out there will always have something you have, but then bigger and more expensive. Whether it’s a car, a home, a jacuzzi or a boat. You simply can’t have the biggest of everything in your social circle.

Broke habits and financial freedom

If you continually engage in broke ass habits, the odds that you will one day reach financial freedom are not very high.

If you aspire financial freedom it’s best to be aware of these broke habits and how to avoid them.

Of all the broke habits I listed above there are some with minor effects on your financial situation but also some that are able to completely cripple your financial situation. Not taking a shopping list and having tons of subscriptions is harmful but it is also a problem that can be fixed easily.

Buying products on credit or leasing them is however not so difficult to solve. These activities often lead to contracts that force you to pay for them for years to come.

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