I’d like to take a moment to be mean. I not going to be a bully-type of mean. Bullies are a special breed of mean — a stupid, slobbery mean. The kind of mean that has little substance and a lot of supremacy. I hate bullies. Several have crossed my path over the years and I’ve done my best to steer clear of their shallow, selfish behavior — even when they pulled out my hair as a kid or tried to get me fired as an adult. So I’m not about to become a tormenting mean bully. I just don’t have that in me.
But I do want to get a little mean with you. A friendly sort of mean. The type of mean where a good friend would take you out for a drink (or coffee) and chat you up in a concerned, caring way. We’re not squawking about an intervention here, but rather, some serious tough love.
Ready? Here goes … and remember I’m buying you that drink (or coffee) by taking the time to tell you the honest to goodness truth. I’ll stop stalling now … gulp!
If you’re broke, please don’t email me to whine about it. I know money sucks when you’re stretched to the limit. I know buying a house is expensive. I know credit cards can be devices of torture masquerading as shiny pieces of plastic pleasure. I know buying quality foods can cost more than buying processed crap. I know that digging oneself out of a pit of dark debt seems insurmountable. I know that school is expensive and paying back that massive student loan is difficult, especially when your degree pays peanuts. I know life is hard. I know being single is expensive. I know being married is expensive. And there’s no doubt that getting divorced can be a drain too. I don’t have kids, but I hear they ain’t cheap either. Yes, working two (maybe even three) jobs is exhausting. I haven’t been all of these things. Maybe you have. But on the surface all these reasons for being broke are just the result of a much bigger problem. So if you’re ready to stop complaining about life’s circumstance, then here’s the remedy — the real reason why you’re broke.
1. You spend good money on crap.
Are you craptastic? Cool, I’m sure the marketers love you since you’re spending your hard-earned money on crap. And you know the crap I’m squawking about. Crap is the stuff that’s cluttering your home and bursting out of your front door. It’s the disposable, upgradeable, and superfluous stuff you buy in a heart-beat because you’re worth it! But crap costs. Crap consumes your space, can initially make you feel good but can lead to feelings of guilt, and can make you broke. Please, learn to identify crap and end the spending spree – you’re worth it. Smile. See Just say NO to crap! for the craptastic details.
2. You don’t have a budget.
I’m dropping the B-word ’cause I know you don’t have a budget, have little clue about your living costs, and don’t track your spending. Yes, starting a budget can be scary and learning about your true financial situation can be a bummer. Get over it. Please. Do the mathy math for once and for all and find your net worth, add up all your debt, track your spending, and build a budget that reflects your real reality — not the la-la land dream-world you prefer to live in. Only when you face the facts by spending the time to manage your money will you stop being broke.
3. You don’t earn enough.
This is a hard one to swallow, so I’m ordering you a second drink. If you can’t balance your budget after cutting the crap from your spending, then you’re probably not earning enough money. Sorry to be the bearer of bad news. Take a sip.
There was a time in my life when I had three jobs — THREE JOBS — to make ends meet. I worked my tail off to earn enough cash to cover the rent, buy better quality food, and pay off my student debt. You want to know How I Paid Off My Student Debt in Six Months? I worked my arse off with a full-time job plus two oddball gigs evenings and weekends! I didn’t own a car, I didn’t wear fancy clothing, and I didn’t wine and dine on the weekends. I was broke, after all. And I worked most minutes of every day to bring home enough dough to dig myself out. The answer here isn’t easy — you’ll have to find a way to make more money. Check out How To Find a Job for some pavement pounding ideas. Love is tough, I know. Smile.
4. You don’t pay off your debt.
If you don’t have a plan to conquer your debt, then you’re going to be broke forever. Do yourself a solid by downloading the Debt Reduction Spreadsheet to dig yourself out, starting today. While you’re at it, set your financial goals and make your Needs and Wants List — only then can you really tackle that mess you put yourself in.
Once you’re in the know, it’s time to look at ways to increase your minimum payments. Paying just the minimum balance is a sure-fire way to keep the debt hanging around your neck like a noose forever, so dig into that debt by paying it off sooner. Don’t believe me? My handy dandy Credit Card Calculator shows you how many years it will take and how much interest you’ll pay by just paying the minimum. Yes, the results will probably make you cry. So deal with it, already.
5. You don’t save.
If you’re up to your eyeballs in debt there’s no doubt that it’s very very hard to save 10 percent of your take-home pay. I hear ya. But saving even a smidgen of your salary for a rainy day or in an emergency fund is a wise way to get started. I’m a big fan of savings and have tapped my own emergency fund when times got tough in Reasons to Build and Love an Emergency Fund. You may not need surgery like I did, but you never know when tough times happen.
Start a savings plan by taking a good hard look at your spending patterns, your subscriptions and services, and find ways to cut back. For example, downgrading your television package — or canceling it completely — adds up to money that could be put into a high interest savings account. The idea is to be consistent and set up automatic deposits into a specific account set aside for emergencies. Get some ideas in 50 Ways to Save $1,000 a Year. It’s not hard to save — you just have to want to do it.
6. You’re clueless about your investments.
Do you know what you’re invested in, or did you let your financial advisor pick a bunch of posh-sounding investments without asking a single question? It’s your money and you have every right to know your Return on Investment (a calculator), How Much Your Mutual Funds Really Cost (a calculator), and How Long Until Your Investments Recover (another calculator). Not asking these questions or knowing the answers is a smart way to loose your shirt in the market. Not fun.
Getting clued-in to investing is not hard, just follow these steps:
STEP ONE: Learn the basics.
- Ram from Canadian Capitalist links to a Free Download of The Elements of Investing by Burton Malkiel and Charles Ellis. This freebie is fabulous for Americans and Canadians, so go and download it now.
- J.D. Roth from Get Rich Slowly wants you to learn How to Read a Mutual Fund Prospectus. The Devil is in the details, people!
STEP TWO: Learn about financial advice.
- Preet Banerjee from Where Does all My Money Go offers these articles for hiring a financial advisor: Do you need a financial advisor?, Financial Advisor Compensation Options, and Investors Using An Advisor Could Probably Be DIY Investors.
STEP THREE: Become a ‘Couch Potato’ investor?
For Americans:
- Scott Burns from the The Dallas Morning News shares his Recipes for Couch Potato Portfolios. They look tasty to me!
For Canadians:
- Dan Bortolotti from the Canadian Couch Potato answers the question: Should You Use Index Funds or ETFs? and offers these Model Portfolios for Canadians.
There, I said it. So no more whining, hating on my blog, or complaining to me about being broke. If something is broken, then go fix it. I’ll raise a glass to that…
Squawkback: I know I missed a bunch — what are some other reasons why people are broke?
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Your Two Cents:
I LOVE your common sense approach to life.
I can tell that as a new parent, the amount of stuff marketed to mothers for BABIES (who, sorry, do not need toys) is appalling. Even worse, most of it will amuse your child or make thing easier for you for about two months tops. We went without most of it but took anything bequeathed to us.
As for baby food. Hello! boil a yam and mash – done!
Now he’s running, his FAVORITE activity is running down the sidewalk with a stick in his hand – sigh – I sound like my grandmother!
Hey Kerry,
Your “mean streak” is too sweet!!!
Now it’s time for me to go get rid of some of that crap (yes…I’m sure I have some of that around…)
Many thanks for the mention, and very nicely said.
I can’t believe people pulled your hair as a kid. I would have stood up for you.
Okay…this made me want to cry, because it’s all true! Thanks for the reality check. I do ALL OF THOSE THINGS!
You’ve reduced me to tears. I hope you’re happy.
Mike
Illness is a big money sucker. Most people don’t have enough emergency funds or insurance to cover the unexpected costs of a major long term illness in the family, even us Canadians.
Thank you. I needed this.
Not taking responsibility by admitting that yes, it is our own darn fault is another biggie. Once you take responsibility, things start looking up, because you can change.
What is this “saved money”?
http://www.youtube.com/watch?v=VL3KuaFvOSc&feature=related
You sound a little like Larry Winget. Well said!
This was my favorite article so far! Keep them coming!!
Amen sistah!
I hate hearing my friends complain to me about how they dont have two nickels to rub together. Meanwhile they have cell phones and cable. We do not. Yes I would like both. I am a stay at home Mom and these are the sacrifices, among others, that I am willing to make.
This is a really great article that I think can help a lot of people! Although, I do have to disagree with you about the use of credit cards. They are definitely wrong for some people, but they help a lot of people earn extra cash or reward themselves in ways they otherwise couldn’t.
I am planning a vacation to Paris very soon for my wife and I with the flights and 4* hotel nights paid for all thanks to credit cards. I couldn’t justify doing this otherwise. We also don’t make a huge income between us either, especially now when she just finished a year of school (adult student) and we just had a baby. I, myself, am on parental leave so we only a very small income and we can still afford to go on an expensive vacation even with such limited finances.
Very nice post! And so true.
I have been loving this Canadian TV show called Til Debt to us Part. The woman on there does some tough love with couples who do all those bad things.
Best article ever! I worked hard to get myself out of a huge amount of debt about 8 years ago and that includes most everything you discussed. But it’s still too easy to make dumb decisions even if you ARE paying cash for them. The goal now is not to get out of debt or even to stay out of debt. That’s a given for me. BUT to make better use of the money I work so hard for. Thanks for the “kick in the pants”. I needed that.
Very well stated. Enjoyed the bullying. Hopefully we can do something about it!
Emailed to me from Nancy:
“Add to the list a husband who spends money and doesn’t give a crap about how much he spends, nor what he spends it on. Won’t write out a budget, and won’t keep track of how much he spends because he doesn’t care. I HATE being in debt, and we’re headed for bankruptcy and he just doesn’t care!!!!!!! It is so frustrating and makes me extremely angry!!! Husbands who don’t give a crap SUCK!”
Thanks for sharing all this information. I don’t have credit cards (I know they are not a good match with me and my spending habits), and since first finding you I have been paying more attention to my money wasters (the crap that really doesn’t need to be bought), and am up to my armpits (figuratively speaking) in tracking where my money goes and what I can do without (cancelled the cell phone….what a huge bill that was!).
Thanks again, your direct honesty and commitment to helping others is refreshing!
Outstanding post and right on the money(so to speak!)
I wish I had the nerve to forward it to the people in my life who need to hear it.
Cheers~
This is a great article! I’ve only been following your blogs for a few months and your website offers practical solutions to day-to-day personal financial problems.
Most people lack the discipline to stop spending. I used to be one of them – especially when I’m feeling blue. I learned since then and became very organized with my budget. I work full-time, I’m taking courses for my professional designation (which I’m paying by the way) and provide for my family. I have good amount of savings as well. Thanks for your blogs – I’m pretty sure they made a big difference to people looking for answers.
7. You are lazy. Personal finance is like everything else in life. You get out what you put in.
Dear Friend ….
Just Hats Off To You !!!!!!!!!!!
You Are Great ……..
I Love Your Creative Mind .
8. You think it’s important to have the things your friends and neighbours have whether you need them or not.
9. You shop for recreation. Get a life. Shop only for what you need.
10. You think old school skills like getting the most for your dollar, cooking from scratch, mending stuff, repurposing etc, are boring and sad.
11. You are not parenting your children, you are being their friend because that’s easier. Step up, parent, say no sometimes, suprisingly, no one will die if you do.
Thanks for the blog, enjoyable as always.
It is a fabulous article. I think I am going to have to link to it so some of my friends who think they are broke can see it. They have so much wealth if they open their eyes and change the way they look at things!
Hmmm…
On the one hand, I am definitely sick of hearing people with two incomes complain.
On the other, uh… there are a lot of us out there who don’t have the options you list. When my husband and I met, I was on disability. My check covered rent and my meds. Barely. He had student loans outstanding because his own medical problems kept him from working regularly. We also had to get him $8,000 in oral surgery. That’s after insurance kicked in, fyi.
After a mere four years, I lucked into something — purely through happenstance — that lets me work full-time from home. My husband is currently unable to work and we don’t know if he ever will.
That said, we paid everything off. With hard work, admittedly not enough denial of things (he has ADD so it can be hard to get him to delay gratification), and a lot of luck, we only owe $6,000 on his student loans yet.
But I just want to remind you that there are plenty of people who don’t have options you list. The area they bought a house in went bad and there are no jobs nearby — they’re lucky to have just the one — or they have medical issues which means they’re unable to work or unable to be as frugal as they like when they do work.
Abigail:
Hopefully Kerry won’t jump on me for putting words in her mouth, but.. While it’s true that everyone has their own special circumstances with which they have to deal that sometimes make it impossible to get ahead, or get ahead easily, it’s also true that the vast majority of people (in my opinion) who are broke are broke for many or all of the reasons Kerry mentions, and many of her “cures” would work for them. But people are very short-sighted. They want their “stuff” *now*, whatever that stuff is, and don’t worry about tomorrow. Or they spend all their money on crap and then complain they have no money. The overriding theme of this post and many of the comments is self-discipline. We live in a world where letting things get out of control is much easier than keeping a grip on things – for that we can thank the industries (banking, credit card, mortgage, housing) that support and encourage personal disaster. The credit card company doesn’t care if you slowly go broke paying their fees and punishments, as long as they get more of your money. Nor the bank, or the builder of the 4500 square foot McMansion. And also, life doesn’t necessarily have to fall in place the way you want. The person who bought a house in an area where the jobs vanished *does* have the option of finding a job elsewhere. They might not *want* to, but that is a different problem.
Self discipline is *hard* – but it is also a key to success. I can’t help but imagine how today’s populace would survive (and how many would not) in a good long 1930s style depression. I imagine there would be a lot of hard lessons learned and the whole “buy now, pay later” theme of our society would change dramatically. And we might have a healthier society for it.
I loved this – thanks!
12. You gamble.
Obviously if you actually have a full-blown gambling habit, then that would be a likely reason for being broke.
But we often gamble on other things – we take our chances and spend our money on a want, gambling that we can save on something else to make up for it, and that there won’t be a financial emergency this month. We gamble every time we aren’t prepared for every possible eventuality, and this can cost a lot of money (think emergency fund, think adequate insurance, think servicing your car before winter).
And of course, we gamble in our financial investments, not to say that noone should take any risk, but it is called risk because any time you gamble, you could lose.
Mean… no, just reality. This is a great post for every adult who has never learned to treat their financial picture with maturity and are stuck in financial adolescence.
I love, love, love your writing style! This is a great article…I will be following you from now on.
Great post with enjoyable humor. Adding on to number 4, it won’t hurt to call the credit card company and ask them for a lower interest rate. It can work.
Well put! I especially like the part about the income…it’s a bunch of bs when people claim they don’t make enough to save. When I was making $31K a year, I got myself out of $16K in debt in under two years. How? Because I walked dogs on my lunch break and after work, to make some extra cash (aside from not spending, budgeting, and the usual suspects).
You didn’t study advanced math or science in high school and decided to study liberal arts in university (if you got there). If you want to make money, work in the money fields.
Love it!
How about adding: You’re trying to keep up with the Joneses (a.k.a. your friends) because you’re affraid to admit you can’t afford it. Newsflash: Maybe they can’t afford it either.
Thanks to Rob Carrick for pointing us to this post.
I tell all my friends that, at the tender age of 50, I have entered my “period of minimization” having left my period of acquisition behind me. The realization that retirement is now looming some 20 years out (thats not a long time!!) means that thinking about and preparing for those post work years is mission critical. Your compelling words will be shared with my teenage children this weekend!!
David.
Great post! found your site via Rob Carrick’s Personal Finance Reader, and will be back regularly!
Was this article supposed to bring me to tears?
I really liked your perspective. Here’s something to add. I’ve reached a point where I have too much stuff therefore my new rule is I can’t buy any new stuff until I sell, donate or otherwise responsibly rid myself of an article of old stuff. Funny thing is once I’ve had to go through the effort of selling somthing on CL, I’m all of a sudden less enthusiastic about buying new stuff. An interesting consequence is I’ve accumulated some cash AND making better choices
The truth hurts sometimes, good post to call some people out! to comment on #6, we recently sat down with some prospective clients and asked them what they were contributing to current investments. they responded, “we pay $600 a month but we’re not sure where it’s going.” I was blown away! Even though it may not be a huge amount, you should still have a handle on where it’s going each month. We were able to redirect that $600 into their own private banking system where they’ll have control, liquidity, and safe, tax free growth for the rest of their lives. not to mention the ability to literally use it as their bank for major purchases.
@Nick: I wonder what you mean by “their own private banking system”?
@Steve: Try selling 2 items for every one you buy. Not only will your house slowly empty out, you’ll end up with more cash!
@Rob, it’s a concept that few people know about, but is amazing for wealth creation and money saving. safe, risk free, inside a vehicle that has been around and consistenly growing for over 150 years!
You can watch a quick video here –> http://www.becomingyourownbank.com/video
Let me know what you think!
@Nick: I bet few people know about it because the website is dead
@Rob, yeah something crazy just happened, should work now, hopefully!
I liked you article. It is always good to go back to basics and review ones finances. Ultimatley it comes down to ones ATTITUDE towards money, creating it and spending it. And there is the other factors too…DENIAL and BLAME. It takes courage and responsibility to be accountable for ones debt or being broke and then to work hard in rebuilding it so not to be broke anymore. I have been there. Thanks also for the many tools you make available. I know they are very valuable and hope many will use them and follow your advise.
I love people I’ve seen elsewhere who complain about how hard it is to make ends meet … by posting in places such as this using high speed Internet. Ummm … first thing to go? There $50 – 70 a month freed up. Cellphone(s) or Crackberries? Toss ‘em. I use a real plugged-in phone and still manage to have a happy, productive life. Oh, and save a pile of cash. I do have a car. But it’s an 18-year-old Mazda. Works fine. So why waste money getting a new one? And I’m willing to drive a little out of my way to find a station charging less for gasoline. I also don’t have a credit card, so I can’t spend more than I have on me. My life hasn’t suffered for it and my bank account is healthy.
Great Article ! I need to anonymously forward this to some family members.
I think a big one missng (jackie mentioned it). Is the blame game, blaming everyone else for why you don’t have money.
You go girlfriend!
Great post…I think everyone needs to read this because most people right now in our society is saving zilch and nada of their paycheques…they think about now now now and me me me and nothing about the future.
Wow.. tell it like it is sister! I love this! I heard you at bloggin Okanagan last weekend, and though unfortunately I had to sneak out before the end (yes, I am the rude girl in the back who just got up and left) I thoroughly enjoyed your point of view! Now I’m looking forward to reading through your post history! Thanks so much for telling it like it is.. my family is trying to live more frugally, and to build a sustainable house frugally, so the timing is great.. I wish I had had the chance to meet you in person – maybe our paths will cross again one day!
All our financial failures are always a combination of all these. I am still learning to survive. Good article
I think the budget point is the best note in your post. Far too many individuals don’t have a monthly budget or even an idea of how much they might go over their income on a monthly or bi-yearly basis.
Really like the website!
When it comes to health care costs, we need to take responsibility. We all have a role to play in helping to control health care costs. Check out the site for ideas.
The cost of health insurance, broadly referred to as health care costs, is one of those things that differs dramatically between the US and Canada. I haven’t lived in Canada for 20 years but I recall just wandering into the doc and handing over my OHIP card. I realize that I paid for that in taxes, but down here on the southern side of the border health care is a for-profit industry that raises rates significantly every year. My monthly health insurance premiums (and I’m not even sick!) cost me more than all my other monthly costs combined. And, despite what I and all my CDN friends thought when I lived in Canada, the total tax burden down here (excepting sales/GST taxes) is about the same as in Canada. When employed I see about 2/3 of my gross salary – exactly as I did in Canada.
That perfectly explains a lot of the people I know. I think it can all be summed up with a general ignorance of their financial situation. Financial ignorance is bliss for them.
Loved this! It’s all very true. I think what most of this comes down to is the inclination to avoid taking responsibility for one’s life. It’s actually entirely possible to live within one’s means, even if you’re making a low income, and still have a great life (I speak from experience.) But if you’re not wanting to face reality, make sacrifices, and determine what you really need/want, nothing in life is going to change for the better.
Sorry to hear you get so many whiny emails!
You’re so harsh! Haha, no it’s actually a really good post. I’m most guilty of spending money on crap and that’s the perfect way of putting it. I’ve slowly been growing out of it and trying to be patient before making big purchases, but there are so many temptations out there.
Nicely said! Great gentle kick to go over these things again, since you can’t become very financially abundant while missing any single one of them. It’s important to do all at once, however you can make that work.
Hi Kerry,
I just discovered your great blog today through a friend and I’m going to post a link to this post on ‘The Real Reason You’re Broke’ on mine. I stopped buying anything new for 12 months on January 1st as both a cost-cutting measure and in response to the obscene amount of pressure to consume. The experiment is going very well over 9 months in, and I’ve learned to appreciate used clothing stores & clothing swaps, as well as save $11,000 in RRSPs, $about $4000 in ‘rainy day fund’ as well as pay off $17,000 in consumer and student loan debt. My wife and I have also recently taken the exciting and much negotiated step of cancelling our Roger’s cable and landline. We don’t have a car either. We are well on our way to living more within our means!
cheers and thanks for such good council,
Tara
http://www.nonewfortara@blogspot.com
For some of us, it’s NOT possible to work 3 jobs. Some of us are living with chronic illnesses or disabilities, but aren’t too disabled to work. It’s insulting to hear that if “only you had the drive you could do it.” Some of us have learnt the hard way that there are limits to what we can endure, and going over those limits just leads to a relapse of the illness. It is better to be working part time and broke than be in a hospital.
About the not buying crap rule……. A year ago my husband & I developed our own guidelines towards crap. We each get an allotted amount of cash each month for our own personal crap purchases. Magazines, music, earrings, candleholders, knick knacks, etc all count as crap. Everything gets tracked and if you spend less, you can carry that amount forward to the next month. Now we really think carefully before any purchases, our house is less full than it would have been otherwise and our wallets a bit fatter.
One of the best posts I’ve read in a long time! You know how to dish out the tough love, but everything you say is right on. Thanks for a good read.
I see it all the time. Financial responsibility needs to be taught in class. I am always surprised to hear the bitchin’ about money as they are planning another trip down south or buying another big screen TV.
Very well said. Some of just need to hear the truth from someone else to get our butts in gear. You have some excellent ideas. I hate to plug another site but I have found that a combination of info can be a good thing. Check out Gail Van Oxlade as well. She says it like it is – tough love- so to speak. I will definitely bookmark your site and refer to it often!
Every time I need a kick in the pants I come back and re-read this post. Which has been several times in the last couple of months. Thanks for helping me get straightened out.
@Lynera I think you need a hug.
To bad we can’t get everyone to read this kind of stuff. I work with a lot of Credit Counsellors, and it’s amazing how many people they see who are headed toward bankruptcy but have already been bankrupt one or even two times. If these people only learned how to budget and stay out of debt, most of them could spare themselves the ordeal and have a great life.