5 Habits That Will Keep You Broke

5 Habits That Will Keep You Broke

As many struggle with being broke, they often overlook the primary money habits that can make or break their finances. Financial wellness isn’t simply about earning more money. It also includes managing what you already have wisely.

Many are constantly chasing the dream of financial peace, striving to escape the grip of living paycheck to paycheck. However, the elusive goal of financial stability often seems just out of reach. While many focus on increasing income, they overlook how their daily habits impact their financial health. Certain routine behaviors, though they may seem insignificant, can, over time, inhibit your ability to accumulate wealth.

This blog post aims to shed light on these detrimental money habits, giving you a clearer understanding of the behaviors you need to change to set yourself on the path toward financial prosperity.

Five bad money habits that keep you broke:

  1. Not saving or investing part of your income.
  2. High reliance on credit and accruing unnecessary debt.
  3. Failing to budget or track spending.
  4. Living beyond your means (lifestyle inflation).
  5. Neglecting to invest in your own education and skills development.

1. Not Saving or Investing Part of Your Income

In a world of constant expenses and endless consumer desires, it can be easy to fall into the trap of spending every cent you earn. However, this practice will likely leave you without a safety net for unexpected expenses or retirement. Financial advisors typically recommend saving at least 15% of your income after you have an emergency fund in place of three to six months of expenses.

Beyond saving, investing is a powerful way to grow your wealth. High-interest savings accounts and stocks can earn more money over time than a standard savings account. It’s not about having large sums to start investing; it’s about starting early and consistently with what you have, even if it’s a small amount. Once you start paying yourself first and putting some money away, you will stop being broke as you have a financial cushion beyond your next paycheck.

2. High Reliance on Credit and Accruing Unnecessary Debt

Credit cards and loans offer the allure of buying now and paying later. But a high reliance on credit can lead to a spiral of debt that is hard to escape. Accruing unnecessary debt means that a significant portion of your income goes towards paying off these debts, leaving less for saving and investing.

High-interest rates can make it especially difficult to pay off the balance, leading to a cycle of debt. It’s important to use credit wisely and sparingly. Limiting yourself to essential purchases you can afford to pay off promptly can help maintain good credit without accumulating excessive debt. Having big car payments, house payments, and credit card payments will keep you broke.

3. Failing to Budget or Track Spending

Without a clear plan, your money can quickly disappear, leaving you wondering where it all went. This is where budgeting and tracking spending come in. These practices clearly show your income, expenses, and where your money goes.

Without a budget, it’s easy to overspend on non-essential items, neglect saving or investing, and ultimately remain broke. Various budgeting methods and tools can help manage finances, from simple pen and paper to sophisticated finance apps. Choose one that suits your lifestyle and stick to it.

4. Living Beyond Your Means (Lifestyle Inflation)

As your income increases, it’s tempting to upgrade your lifestyle—a bigger house, new car, expensive vacations—the list goes on. This is known as lifestyle inflation. While enjoying your hard-earned money is not wrong, living beyond your means can quickly lead to financial difficulties.

The key is balancing your upgraded lifestyle with your financial goals. Be mindful of your expenses, and don’t let your desires dictate your spending. Continue saving and investing, no matter how much you earn. Your future self will thank you.

5. Neglecting to Invest in Your Own Education and Skills Development

Last but not least, one habit that can keep you broke is neglecting to invest in your education and skills development. In an ever-changing world, continuous learning and adaptation are vital to maintaining or increasing earning potential.

This doesn’t necessarily mean formal education. Various forms of learning—online courses, books, seminars, and workshops—can increase your knowledge and skills. Consider also developing soft skills such as communication, leadership, accounting, marketing, and emotional intelligence, which are highly valued in the job market.

Personal Finances are more about Self-control than Math

Personal finance is often considered a straightforward matter of numbers: income, savings, investments, and expenses. However, at its core, personal finance is not just about math; it’s significantly tied to your behaviors, self-control, and psychological understanding.

Firstly, consider self-control. The instant gratification of purchasing a shiny new gadget or indulging in a luxurious vacation can often overshadow the long-term satisfaction of financial stability and growth. It takes a lot of self-control to resist these temptations and prioritize saving, investing, or paying off debt. Moreover, sticking to a budget – a fundamental aspect of personal finance – requires a discipline to restrict spending within certain limits, regardless of how much you earn.

Next, let’s delve into the psychological aspects. Our financial decisions are often influenced by our attitudes and beliefs about money, shaped by various factors, including our upbringing, experiences, and societal norms. Some people might view money as a security source, leading them to save or invest more. Others might see it as a means to express their identity or status, causing them to spend more on luxury goods or experiences.

Moreover, cognitive biases can also impact our financial decisions. For example, the “present bias” makes us focus on immediate rewards at the expense of long-term benefits. This could lead to overspending now and saving less for the future. Similarly, the “optimism bias” might make us underestimate the likelihood of experiencing financial setbacks, resulting in inadequate emergency funds or insurance coverage.

Finally, it’s worth noting that earning power does play a role in personal finance, but it’s not the whole picture. A higher income can undoubtedly make it easier to save and invest. Still, without self-control and a sound psychological approach to money management, even those with high earnings can find themselves broke and needing that next paycheck to pay bills.

So while math provides the framework for personal finance – helping us plan, track, and assess our financial situation – our behavior, driven by self-control and psychology, determines whether we can effectively manage our money and achieve our financial goals.

Key Takeaways

  • Earmarking a portion of your income for savings and investments is crucial to build a financial cushion.
  • Avoid dependency on credit and unnecessary borrowing, which can lead to a vicious cycle of debt.
  • Establish and maintain a personal budget to oversee your income and expenditures effectively.
  • Resist the pull of lifestyle inflation; always strive to live within or below your means, even as your income grows.
  • Prioritize continuous learning and personal growth to boost your income potential over time.
  • Personal finance requires significant self-control to resist the lure of instant gratification and prioritize long-term financial stability.
  • Sticking to a budget, a cornerstone of personal finance, necessitates discipline to limit spending, regardless of income level.
  • Attitudes and beliefs about money, shaped by personal experiences and societal norms, profoundly influence our financial behaviors and decisions.
  • Cognitive biases, such as present bias and optimism bias, can negatively impact financial decision-making and long-term financial health.
  • While earning power does play a role in personal finance, without self-control and sound psychological strategies, even high earners can face financial distress.
  • Math provides the structure for personal finance, but our behaviors, dictated by self-control and psychology, ultimately determine our financial outcomes.


Financial stability demands more than earning a good income; it requires practical money management principles. This includes routinely setting aside money for savings and investments, cautious use of credit, meticulous monitoring of your spending, living within your income level, and constantly improving your skill set. Ignoring these principles can keep you in a perpetual state of financial distress. Remember, it’s not always about how much you earn but how you manage what you earn that determines your financial health. By cultivating these healthy financial habits, you’ll set yourself on a path toward long-lasting financial prosperity.

You can take control of your financial future by recognizing and changing these habits. It won’t happen overnight, but with determination and discipline, it’s possible to achieve financial peace and break the cycle of living paycheck to paycheck.