Top 3 Reasons People Go Broke
Hi Everyone - Welcome to my first V-log. I'm excited to talk about this topic and it's the inspiration for starting my V-log journey. Before I get started I'd like to say:
If your broke because you having no money coming in this video is not for you!
If your broke because your getting robbed on the street this video is not for you!
If your broke and don't wanna to do anything about it this video is not for you!
But, If you got money coming in, you have no idea why, and you want to do something about it this video is for you!
What I want to discuss here is not just why people go broke from a surface level. But talk about it in-terms of the underlying root causes, and provide some suggestions. My first reason and most obvious reason is due to lack of financial education. Second Reason is the employee mindset. Which is okay, but at work. The third is reason I believe is the desire for instant gratification.
Starting with my first point. The education system generally does not teach much about personal finance. So once people become adults and their responsible for making their own financial decisions they don’t have the baseline knowledge to do so effectively. Or if people are learning about finance it’s in an academic way rather than in a streetwise practical way. This leaves people essentially lambs for slaughter once they get out into the real world.
My personal experience like so many was getting my first credit card in 1st year university not understanding how much interest I was paying, by not paying the full balance by the due date.
You can’t be shy when it comes to your money. If you don’t understand something ask, and that was my mistake. For others I see them making the mistake of deferring other people to take charge.
like friends or financial experts aka bankers or financial advisers.
Somehow they feel they are not capable. Though in reality they are more than capable.
This is a mistake because your good friend today may not be your good friend tomorrow.
And Experts are generally there to sell you a financial products rather than look out for your best interest.
Ultimately, you never want to be in a position of getting taken advantage of.
Therefore, You need a base level of financial education. It’s not optional but mandatory. If you want to be successful. It’s not about how much money you make, but rather how you manage the money that you do. Taking the time might seem like a drag, but once you get this behind you and you start making better decisions, and have more money in your pocket you’ll start to enjoy learning.
A few books that helped me were: Rich Dad Poor Dad (Robert Kiyosaki), The Wealthy Barber (David Chilton), Financial Freedom without Sacrifice (Talbot Stevens). Links are provided below.
My second reason is the desire for instant gratification. You have the money accessible and you see something enticing like clothing, electronics, or even larger item like a car or house. And then decide to make a knee jerk decision without rigorous enough thought to both short term and long term financial consequences. The issue is magnified by the availability of credit that allows people to extend themselves to purchase items with money they don’t have right now, causing them to overspend.
My suggestion is to make a plan and really work your plan. You need to make a monthly, quarterly, and annual budget for your money. Write it down and then on a monthly, quarterly, and annual basis check in to make sure that your sticking to it. By taking this approach it helps prevent you from making impulse purchases that would over extend you. If you have more than 2 credit cards you might wanna think about cutting back. It can also help you allocate your funds to the things that you really want most; rather than what you want right now. Like that next vacation perhaps, rather than sweet. :-)
They are all kinds of financial tools available to help automate these process. Some banks have online tools, and there are also some software you can purchase. Personally I use Microsoft excel.
Third Reason I would categorize as the employee mindset. This is not meant in a derogatory sort of way. What I mean is that they don’t have that ownership mentally over their own finances.
They work 9/5 at a job and they bring that kind of mentality to their financial life.
I really saw this working in finance for several large companies. I was surrounded by people who were smart and did a good job handling the companies money. But when they came to managing their own money they didn’t exercise that same level of care. Don’t make this mistake. It's nobodies responsibility but yours!
When it comes to your money you’re the boss the CEO of your financial destiny. You must be the leader and you can’t be a back seat driver. It can be tempting to turn your brain after a long day of work, but it’s something that you literally can’t afford to do. If you don’t understand something you do the research; you ask and you learn. If you go to your neighborhood financial institution and they give you some advice trust but verify. If you buy a bad financial product there are not refunds, just saying. :-)
Ultimately you’ll need to rely on others to some extent when making financial decisions whether it be financial advisers, lawyers, real estate agents, car salesman, etc. etc. But think of yourself as the boss man or woman for your financial affairs. The CEO of a company might know the Ins and Outs of all his employees, but he or she should know enough to make the right decisions.
In conclusion if you don’t want to go broke. Take the time to learn, set a budget on paper and stick to it, and lastly take a CEO mentality over your finances.
Do this consistently and you should have no problem doing well in this area of your life with time and perseverance! In the future I'll be going for in depth with each of these topics!
If you enjoyed the video, please like and subscribe!!! Over and Out!