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Why Americans Are Broke & How to Set Yourself Apart

Top 5 Financial Mistakes to avoid

Now before I get started I want to clarify something. I’m not talking about people living in poverty or individuals/families who simply cannot save because they barely earn enough to cover basic needs; I’m talking about middle class individuals/families. People who earn plenty of money but make decision that ultimately leave them broke. Let me give you a few statistics that will open your eyes to just how broke most Americans are:

  • The average household credit card debt is $16,000! This means there are about 50% of people with credit card debt higher than this.
  • 67% of Americans don’t have $1,000 saved for emergencies
  • According to Charles Schwab the average 60 yr old 401k balance is $152,700. This means you would need to live off $8,381 per year. (assuming a 30 yr retirement)

To me, these statistics are mindboggling and it makes me wonder how we got here. So I’ve listed off my Top 5 reason why Americans are broke.

  1. Lack of Education on How Money Works

It is impossible to accumulate anything without the tools to attain it nor keep it. Have you ever tried fishing with your bare hands? Financial literacy is not taught to us in grammar school, high school, nor college. And for most of us it’s not taught in our homes, not because our parents are selfish, but perhaps because they don’t know either! So we work day in and day out for money but then have absolutely no idea how to manage it to make it work for us.

  1. Living Beyond Your Means

Living beyond our means is probably the most common ways Americans become broke and stay broke. Just because we can “afford” something does not mean that we should buy it. This becomes a never-ending cycle because with every increase in pay, we increase our expenses (perhaps even more than our increased income). Then we find ourselves blaming our financial situation on a lack of income when obviously that is not the cause. Remember it’s not how much you make, but how much you keep that determines your wealth.

  1. Keeping Up With The Joneses

This is perhaps the most unnoticed reason why Americans are broke. Not unnoticed by the financial industry but unnoticed by those doing it themselves. Not you eh? Okay well have you every bought something and your first words are “I can’t wait till they see me in this”. Not you? Well how about when your neighbor pulled up in a brand new car so you just “coincidentally” bought a new car a few weeks later. The most dangerous aspect of keeping up with the Joneses is what’s called the “Diderot effect”. This is when one purchase leads to another purchase. Example; when you purchase a new outfit but now you must purchase new shoes to match the outfit, and maybe a purse while you’re at it.

  1. Failing to Pay Yourself First

Paying yourself first is a key financial habit for building wealth. The problem is most people do the exact opposite. They pay their bills, buy things they “need”, then buy more things they want, then save what’s left….if there is anything left. This often leads to no savings and even the accumulation of credit card debt.

  1. Don’t Have A Financial Plan

“It is impossible to go the right way if you don’t know where you’re going”. Trying to guide your financial life without a plan in order is nearly impossible and will often lead you in the wrong direction.

  • 45% of Americans don’t think they make enough money to need a financial plan
  • 25% of American don’t know how to get a financial plan

So now that you understand why so many Americans are broke, how do you set your self apart? Simple! Do the opposite of what the masses are doing!

  1. Seek Financial Education
    1. Listen to one financial podcast a day. I recommend “The Dough Roller Podcast”
    2. Download my free Financial Literacy Web-course
  2. Live Within Your Means
    1. Spend less than you make and save the rest
  3. Ignore the Jonenes
    1. They are probably broke anyway
  4. Pay Yourself First
    1. Save first!
    2. Pay bills
    3. What is left is yours to spend
  5. Get a Financial Plan
    1. Hire a financial planner, you can’t afford not to have one! You can schedule a FREE session with me here.
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