Constantly Broke? You're Not Alone.

Do you find yourself constantly broke? You're making either a decent income but living from paycheck to paycheck. Well, you're not alone.

Some financial struggles are beyond your control, such as illness, an unforeseen workplace accident, or a job loss due to a pandemic. But most financial problems result from poor financial habits. And here are a few that are especially damaging:

1. Failure to Build an Emergency Fund.

Cars break down, people get laid off, and roofs need repairing; unexpected financial emergencies happen! Many people use credit cards or lines of credit to pay for emergencies. This is a dangerous practice.

Solution: Create a savings account the equivalent of up to six months' income to pay for unexpected financial costs.

2. Excessive spending.

Are you a compulsive shopper? Picking up that extra pair of shoes you spotted while window shopping during your lunch break. Are you inclined to update your electronic equipment each time a new model is released?

Maybe you like the finer things in life. This is okay if you have a healthy bank balance and don't have to get into debt to maintain your lifestyle.

The more you spend, the less you have to save. It's that simple. Excessive spending can lead to debt. 

Do you regularly eat out? Even fast food is more expensive than a decent meal at home. Meals at home tend to be healthier, too.

Solution: Make a list of needs and wants. Meet your needs first. Wait till you have created sufficient savings before starting to meet your wants.

To stop eating out, cook a little extra each time you prepare meals, and freeze them. That way, you have food on hand and won't be tempted to eat out for convenience.

3. Getting over your head in debt.

You are digging yourself out of the debt pile that will become insurmountable if you cannot pay off your monthly revolving debt. Missing your debt payments can lead to financial ruin. Persistent debt is a significant obstacle to financial health and stability.

Be careful with debt. If you have to use credit to purchase something, especially something non-essential, likely, you can't afford it.

Did you know that credit card companies earn more money from late fees than from interest? People with low credit scores pay higher interest on loans and mortgages.

Overdraft fees are often about 21%. Do you find yourself regularly slipping into overdraft? Interest-free loans (buy now, pay later) have substantial interest penalties if you don't pay them off on time.

Solution. Pay off all revolving debt such as credit cards and lines of credit each month. Ensure you make your payments to your loans and mortgages regularly. 

Use ATMs that don't require a fee. Negotiate the interest you're paying on loans and other credit.

4. A failure to save money.

You may have never saved a dime if you constantly live from paycheck to paycheck. You would not be able to handle any financial emergencies such as a job loss or illness. Some people plan to spend their next paycheck even before they get it. You probably don't believe you can afford to save if you've never done so before.

Solution:

Open a high-interest savings account and have a certain percentage of your income. Automate by having a portion of your pay automatically deducted from each paycheck.

5. You have no idea what's coming in and what's going out.

Do you know exactly what your income and expenses are? Have you lost track of automatic payments made from your bank account? Such as the gym membership you may have canceled a year ago. 

Are you aware of your bank fees or the interest on your credit card? 

Do you know precisely what's leftover at the end of each month?

Most people do not keep to a budget. That is fine as long as you know where your money is going. And it aligns with your financial goals.

6. Tapping into your savings, investment, and retirement accounts prematurely.

There may be times that dipping into your savings or other accounts is justified; be sure it's for a good reason.

Cashing out part of your 401(k) for a fun family trip or to buy a new car doesn't qualify as a good reason. By constantly dipping into your savings, you will lose the power of your savings compounding.

Solution: Do not dip into your savings accounts to achieve your long-term goals. Create separate savings account for short-term financial goals like a car or travel.

7. No budget.

Budgets set financial limits, and economic boundaries help to prevent monetary challenges. Everyone needs a budget.

Solution: Create a realistic budget and limit how much you can spend each month. When creating a budget, look at bank and credit card statements for the last six months.

Look at the expenses you can eliminate - that second cup of coffee. Cancel subscriptions. Don't be discouraged if you find it challenging to keep to your budget initially. Just stick with it.

Bringing it all together.

Do you have a good income but live from paycheck to paycheck? You may be guilty of some of these habits listed.

Good financial discipline ensures you can deal with unforeseen circumstances such as job loss or illness.

With good habits, most financial challenges can be handled. Ensure that your financial habits are helping you achieve your financial goals, whether it be to pay off debt or save for a new house.