Being broke is a very subjective thing and everyone’s reasons and circumstances are not the same. There are a variety of reasons a person can be broke and some reasons are not their fault at all {judge decisions, company decisions, policy changes, etc.}. For the sake of keeping things simple, I am only going to talk about a few reasons a person can be broke in a general sense to help teach you some methods. For specific needs, I recommend booking a session with me. Hopefully, after reading today’s post, you will be able to help yourself out of this funk.
A simple Google search reveals the top reasons a person can be broke. But how do these reasons relate to you? What exactly can YOU do to remove being broke from your life? Let’s start off by looking at a few items from the list on Google and then I’ll explain how you can apply what I like to call ¨F.A.T.E¨ to get out of a broke lifestyle.
Reasons You Are Broke
1. You have no goals
2. Lack of emergency savings
3. You have no budget plan
4. Living beyond your means and overspending [Ubers, delivery, Haircuts & Beauty, etc.]
5. Not investing
6. Too much debt
7. No Financial Literacy/Education
8. Little or no Savings
9. Financial Stress
10. No Retirement Planning
11. Income Problems/You need to earn more
12. Paying high fees and interest rates
13. Ignoring your debt and having poor management
So how can we fix these problems? Well first, we need to understand the emotions you are having that relate to being broke. The most common emotions associated with being broke are: depression, stress, sickness/illness, greed, stupidity, hopelessness [e.g. your insurance company won’t cover the claims they should], laziness, low self-confidence/esteem, defeated, fear/scared/cowardly.
Ask yourself these questions to understand your reasoning behind being broke:
What are my feelings about these things?
What are my spending habits?
What is my personality type? Am I sociable, which means I spend more money on people than I should? Do I have healthy boundaries when it comes to respecting myself around others?
Why do I do what I do and why do I feel the way I feel?
Now that we have identified your feelings, let’s talk about the plan to become right: F.A.T.E.
F: Find the problem. What is causing you to be broke?
A: Accept the problem: Understanding why you’ve felt this way about the problem. It’s about realizing that your emotions towards this problem haven’t actually helped you fix the problem. Once you've accepted the problem and you are done dealing with this problem for so long, you are now ready to remove this problem from your life for good.
T: Treatment plan. This is a plan designed for your specific needs to remove the problem from your life.
E: Execute the plan. It is most important to put the plan into action. You MUST follow through.
Let’s look at some case study examples to help you identify how you can use F.A.T.E. in your own situation.
Example 1:
Courtney, 35, is a single mother of 2. She, as well as the father of her children, are having income troubles. Her job has been contemplating laying-off employees. She would love to earn more money to support herself and her children but she hasn’t had the time to search for a new job that fits her needs. She is receiving help from the government and child support but if we’re being honest, it isn’t enough in this inflated economy to survive on without a job.
F: The problem is that she has financial stress and income issues.
A: The problem is real but adding stress and worry will only cloud her judgment in decision making. She should accept the reality she can’t change, change her mindset and be ready to make a plan.
T: The plan is to know if the threat of losing her job is real, find a new job, and find living assistance.
E: Execute. She should ask her boss about her future at the company to know exactly where she stands. If she doesn’t need to worry her only challenge for her life is finding a better job. If she is at risk of losing her job, then she needs to start looking for a new job through temp agencies, recruiters, word of mouth or doing a part-time job. She can have a part-time job based on her skills and hobbies or something she can do with her kids [e.g. house-sitting or petting sitting, cleaning service, teaching online, coaching school teams, bookkeeper, community/recreation center work, etc.
Example 2:
Juan, 28, is a single bachelor with a full-time job, savings and a budget plan. However, he doesn’t have any retirement plan investments. His employer is matching his contributions each month which means free money for him. Juan doesn’t feel like it’s important or a problem that his money is sitting idly in a retirement account. While it’s true that his contributions are increasing solely on the contributions from his employer, it’s also true that he is not doing anything to increase his retirement money. He is treating it like a traditional savings account instead of earning approx. 4% or more each year by investing them into ETFs or Mutual Funds.
F: Problem is inaction. He doesn’t have education, understanding or interest in doing more.
A: Juan should know and accept that he has done nothing to change this situation. His inaction will result in lower returns in his retirement and he should accept that as a future possibility.
T: Learn about investing into your retirement plan first. After he has learned, have a retirement amount goal, design a plan and choose the best stocks to start with for his retirement account [A financial advisor or certified coach can give you more information].
E: Set up automation to invest his contributions automatically each month into the funds he has chosen. Review it every month to make sure everything is where he needs to be according to his retirement amount goal.
After seeing examples using F.A.T.E., I hope you will be able to use this guide to help you understand your habits that keep you broke and overcome them.
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