Being broke can feel like a never-ending cycle of stress and frustration. The constant worry about bills, unexpected expenses, and never having enough to get ahead can be overwhelming. Many of us find ourselves trapped in this financial rut, not because we lack the desire or ambition to improve our situation, but because we’ve been conditioned to believe certain lies that keep us from taking the necessary steps toward financial stability. These misconceptions are deeply ingrained in our minds and culture, leading us to make poor financial choices that perpetuate our struggles. It’s time to challenge these beliefs and reframe our approach to money.
We’ll uncover several common misconceptions that keep people broke and offer practical strategies to help you break the cycle and build a secure financial future. By understanding and rejecting these falsehoods, you can take control of your finances, make informed decisions, and set yourself on a path to financial freedom. Whether it’s the belief that budgeting restricts your lifestyle, the myth that you’ll always have debt, or the notion that making sacrifices isn’t worth it, we’ll explore the truth behind these lies and provide actionable advice to help you overcome them. Together, we’ll learn how to manage our money more effectively, prioritize our spending, and ultimately achieve the financial freedom we all want.
Lies People Believe That Keep Them Broke
Lie 1: “I’ll start saving once I make more money.”
It’s a common misconception that saving money is something that can wait until you’re earning a higher income. However, this mentality often leads to perpetually delaying your savings goals, which can leave you vulnerable to financial emergencies. No matter your current income level, it’s essential to start saving now.
I highly recommended the strategy to kickstart your savings by quickly saving up $1,000, as a starter emergency fund if you’re in debt. This initial emergency fund acts as a buffer against most small emergencies, such as car repairs, medical bills, or unexpected home expenses. Having this fund in place can prevent you from going into debt when these situations arise, allowing you to handle them with cash rather than relying on credit cards or loans.
Lie 2: “I can always pay it off later.”
Procrastination is a major enemy of financial freedom. Delaying bill payments or necessary savings allows financial stress to accumulate, making it more difficult to improve your situation over time. Interest on outstanding balances compounds, meaning that the longer you wait to pay off debt, the more you’ll end up paying in the long run. This can create a vicious cycle where you’re constantly playing catch-up, struggling to cover both your current expenses and the mounting interest on past debts. Instead of postponing payments, create a plan to pay it off as soon as possible.
To tackle debt quickly, aim for paying off all non-mortgage debt within one to three years. Use the debt snowball method by listing all your debts from smallest to largest, paying off the smallest debt first while making minimum payments on the others, and then moving to the next smallest debt with the freed-up funds. This approach not only helps reduce the number of creditors quickly but also builds momentum and motivation as you see your debts disappearing one by one. By committing to this plan and aggressively paying down your debts, you can regain control of your finances, reduce stress, and position yourself for a more stable and prosperous financial future.
Lie 3: “Everyone is broke, so it’s normal.”
If there’s one sure way to be broke, being in this complacent mindset is it. While it’s true that many people face financial challenges, it’s not a situation you should accept without striving to improve. Focus on your financial health and work towards stability, regardless of societal norms.
Normalizing financial struggle is like accepting a leaky boat as your permanent mode of transportation. Just because many people around you are also bailing water doesn’t mean you should settle for a life of constant sinking. Sure, it might seem like everyone is barely staying afloat, but that doesn’t mean you have to resign yourself to the same fate. Imagine a world where instead of constantly plugging holes, you work towards getting a sturdier, more reliable boat. The first step is recognizing that while being broke might be common, it doesn’t have to be your normal.
Lie 4: “I deserve to treat myself.”
The phrase “I deserve” can lead us into dangerous territory, especially when it comes to our finances. This mindset often justifies unnecessary and impulsive spending, which can derail our financial goals and lead to debt accumulation. While it’s important to reward oneself occasionally, frequent indulgences can quickly become a financial burden. From a biblical perspective, this mentality can be seen as a form of self-indulgence that detracts from the principles of stewardship and contentment. Proverbs 21:20 states, “The wise store up choice food and olive oil, but fools gulp theirs down.” By frequently telling ourselves we deserve every luxury or convenience, we risk prioritizing short-term gratification over long-term stability and wisdom.
Lie 5: “A budget restricts your lifestyle.”
Many people believe that having a budget will limit their freedom and enjoyment of life, picturing it as a restrictive tool that cuts out all the fun. However, this misconception overlooks the true purpose and benefits of budgeting. A budget is not about depriving yourself of pleasures or imposing harsh restrictions. Instead, it’s a strategic plan that helps you manage your money wisely, ensuring that your spending aligns with your values and goals. Yes, you might find yourself cutting back on unnecessary expenses, but this is a positive step towards financial health and freedom.
Think of a budget as a shopping list for your finances. Just as you plan your grocery shopping to avoid impulse buys and ensure you get everything you need, a budget helps you plan your spending so you can make the most of your money. It provides clarity and control, allowing you to allocate funds for essentials, savings, and even some discretionary spending. With a budget, you’re not restricting your lifestyle; you’re optimizing it. You’re making intentional decisions about where your money goes, which can actually enhance your lifestyle by reducing financial stress and enabling you to afford the things you truly value. Embracing a budget allows you to live within your means while still enjoying life’s pleasures and working towards your financial goals.
Lie 6: “Only one spouse needs to handle the household finances.”
This is an insidious lie that rips marriages apart. Believing that only one spouse needs to manage the household finances can lead to misunderstandings, resentment, and financial mismanagement. While it’s practical for one spouse to take the lead in updating the budget each month, it’s essential for both spouses to be actively involved in the process. Financial decisions affect the entire household, and having both partners engaged ensures that everyone’s needs and priorities are considered. This collaborative approach fosters better communication, shared responsibility, and a stronger partnership in marriage overall. It also prevents any single spouse from feeling overwhelmed or solely accountable for the family’s financial situation.
To achieve this balance, it’s beneficial for the spouse not updating the budget to review it before the new month begins. Even making one small change or suggestion can create a sense of ownership and involvement. This could be as simple as reallocating funds for a planned purchase or suggesting a minor adjustment to the savings plan. When both partners have input, they are more likely to support and adhere to the budget, reducing financial stress and promoting a unified approach to achieving their financial goals. By working together, couples can create a more stable and harmonious financial future.
Lie 7: “I need to use my credit card for the rewards.”
Are your toes red and throbbing right now? I know it steps on a lot of people’s toes to tell them using a credit card to earn points is holding them back from being more financially successful. Credit card companies have long enticed consumers with the allure of rewards points, cashback, and other perks. While these benefits can seem like a great deal, they often lead consumers to spend more money than they otherwise would.
The psychological impact of earning points for purchases creates a justification for unnecessary spending, fostering a cycle of overconsumption. This behavior can significantly hinder financial progress, as individuals prioritize earning rewards over essential financial practices such as budgeting and saving. Avoid being a part of the lucrative system banks use to make more money and instead, cut up those credit cards – you’ll thank me later.
Lie 8: “I need a new car/house now.”
Experiencing “house fever” or the urgent need for a new car due to looming repair bills can lead to significant financial strain if not handled wisely. Major purchases like cars and houses require careful planning and thorough assessment of your financial situation to avoid overwhelming debt and long-term instability. It’s crucial to differentiate between needs and wants; maintaining and repairing your current vehicle or renting and saving for a larger down payment are often more cost-effective alternatives.
I advise people to ensure you’re debt-free and have a fully-funded emergency fund before making major purchases like a car or a house. This means having three to six months’ worth of expenses saved up and being clear of non-mortgage debt. By doing so, you’re in a stronger position to handle the financial responsibilities that come with owning a new-to-you car or home.
Lie 9: “You’ll always have debt.”
Believing that you’ll always have debt can be a disheartening and self-defeating mindset that keeps you trapped in a cycle of financial stress. This belief often stems from seeing debt as an inevitable part of life, reinforced by societal norms and the prevalence of consumer debt. However, this doesn’t have to be your reality. With the right plan and commitment, you can break free from the shackles of debt. The first step is changing your mindset and realizing that a debt-free life is not only possible but also immensely rewarding. By taking control of your finances, you can pave the way to financial freedom and peace of mind.
Following a structured plan, such as the one I teach, makes getting out of consumer debt achievable. Start by creating a budget to understand your income and expenses, gather a $1,000 starter emergency fund, then prioritize debt repayment using the debt snowball approach. After all consumer debt is paid off, focus on building an emergency fund to prevent future debt accumulation. With discipline, determination, and a solid plan, you can eliminate consumer debt and stay debt-free, opening up opportunities for saving, investing, and enjoying a financially secure future.
Lie 10: “My financial situation will improve on its own.”
Believing that your financial situation will improve on its own is a passive approach that can keep you trapped in a cycle of financial instability. It’s easy to hope that future income increases, unexpected windfalls, or sheer luck will resolve your money issues, but this mindset ignores the proactive steps necessary for real financial improvement. Without deliberate actions like budgeting, saving, and paying down debt, financial problems often worsen over time. As Proverbs 21:5 teaches, “The plans of the diligent lead to profit as surely as haste leads to poverty.” This wisdom underscores the importance of proactive and strategic planning in achieving financial stability. Taking control of your finances requires effort, discipline, and sometimes difficult choices, but the results are well worth it.
To break free from financial stagnation, start by setting clear, achievable goals and creating a detailed plan to reach them. This should include developing a budget to track and control spending, establishing an emergency fund, and systematically paying down debt. After saving an initial $1,000 emergency fund, focus on paying off all non-mortgage debt using the debt snowball method, and then build a more substantial emergency fund. By taking these steps, you actively work towards improving your financial situation rather than leaving it to chance.
Reject the lies holding you back.
Breaking free from debt and choosing to no longer live broke is a challenging but achievable goal. By recognizing and rejecting the lies that keep us in debt, we can take control of our financial futures. Start by making the commitment to get on a true and tested plan for managing your personal finances. Remember, every step you take towards financial responsibility brings you closer to financial freedom.
We’re here to support you on your journey. Maybe you have some major financial decisions coming up such as deciding whether to purchase a newer home or car, or not. Maybe you and your spouse can’t seem to get on the same page when it comes to your finances and you don’t see how it’s ever going to change. A coach like me can help you navigate your personal finances from the day to day strategies to major life decisions. If you have any questions or need additional resources, don’t hesitate to reach out.