It is safe to assume that most people all over the world barely have any idea how to manage their finances well. This is why they end up broke every month, even with their high paying job. This is due to overspending. Did you know that Americans, the ones that bring in home over $75,000 annually, are living one paycheck after another? This is from a survey conducted by SunTrust Banks.
But that’s not the only reason why they remain the way they are right now. Other factors include the amount of debt of their credit card that stands almost at $16,000 and the gloomy savings wherein they only have less than $1,000 active in their savings account. Thus it raises this question: why are the people with good income always end up broke?
Financial experts have shared their knowledge and observations with their clients. The following are their answers.
You are trapped in debt.
When you are poor, it is very easy to get stuck in the trap of debt since you are very desperate. Whether this is debt settlement scam, payday loan or just using the credit card because it was an emergency, it is very easy to make reckless decisions when you are stressed. Such decisions can make people get broke.
You are ignoring your huge debts.
When you become broke, you have already piled up overdue notices and bills. Thus it becomes your biggest source of dread and anxiety. But when you avoid these problems, and you fail to manage your debts, it will only make your situation worse.
Many of today’s young adults are burdened with various debts including student loans, and they do not even realize that there are more options made available for them. Student loans are common among students as a way for them to get into college, but there is another option available for this. They are programs that help lower payments and forgiveness. However, you are responsible for taking positive action and look out for these programs.
You are powerless.
Or this is best viewed as you feel powerless. When you are poor, or you are currently in a financial hardship, it can make people feel powerless from doing anything to change their situation. But giving in to this kind of feeling will only hurt more.
People can get empowered if they get accurate and unbiased advice and knowledge about managing their finances. It will help them gain balanced finance decisions and take better steps so that they will have a brighter financial future.
You barely have any idea about personal finance.
Most people have poor finances or always broke because they do not learn more about personal finance. Added to that, the example of danger when it comes to debt is that it comes with compound interest that is working against the individual rather than it is more beneficial to them, especially when it comes to investments.
One of the biggest factors that affect people’s attitude towards their financial situation is psychology. Instead of thinking about how to spend their money in making them happy, it should be shifted to “How to use the money to buy financial freedom shortly.” When people can make this shift, they will be able to overcome the most reasonable of hardships.
You do not pay yourself first.
This is the number one reason why people end up poor because they do not pay themselves. When you pay yourself, it means that you are putting a portion of every paycheck you receive into the savings accounts before you delegate them to cover all your expenses.