There are two ways to be poor, according to a recent story on MSN Money. There are people who don’t earn much and live below the federal poverty line like 47 million people or 15% of Americans, according to the US Census Bureau.
Then there’s another kind – those who make good money but are saddled with so much debt: high mortgages, astounding credit card balances, student loans, etc.
The average credit card debt of American households in 2015 was $15,310, according to Nerd Wallet. Debt has been steadly growing because “the cost of living has outpaced income growth,” according to the popular finance web site.
If you (or someone you know) is still in denial about being broke, here are some signs to watch out for:
You’re living paycheck to paycheck. How many people do you know who cannot even pay for routine expenses such as an oil change or a haircut without the next paycheck? I live in a fairly affluent suburban neighborhood but I hear people around me count the days between paychecks all the time.
You charge routine expenses to credit cards and can’t pay them off right away. Since you’re living paycheck to paycheck, you might be routinely charging groceries and other basic necessities to credit cards if you’re always coming up short each month.
You have zero or little savings. That savings account, whether it’s $100 or $1,100 is your cushion for the unexpected, like those replacement car tires or the broken water heater. The absence of one forces most people to turn to credit cards or payday loans.
You pay too much for housing. I know of at least two people who can’t imagine living in anything under 2,000 square feet. They are former homeowners-turned-renters. Even if they lost their homes during the housing bust, they just won’t downsize or negotiate on their space requirements, so they are broke because they are paying too much in rent.
You can’t distinguish between wants and needs. We all have that one friend who says “but I deserve this!” It could be a weekly manicure or a girls’ night-out twice a month. The problem is they can’t afford it. Manicures and night-outs are not necessities. You can live without them.
You can’t stick to a budget. You go clothes shopping or back-to-school shopping intendng to spend only a certain amount, but you go over budget. If this is a routine occurrence, step back and assess. Bring only cash if need be.
Stress over money is making your health suffer. Do you find yourself getting sick often? Or the pile-up of bills just makes you want to throw up? The state of your wallet and the state of your health are connected.
Your relationships are suffering. Money troubles ALWAYS carry over to relationships. I don’t think the two can be separated. You start spending mindlessly, your significant other will start worrying. The fights will start. Or you borrow money from your in-laws and they will always hold it over you. It never ends. And we all know money troubles are a precursor to divorce.
Being broke is not a great feeling. It can lead to hopelessness, despair, depression and poor health. It is not the end of the world. The good news is that we can dig ourselves out of almost any hole, financial or otherwise, but it takes conscious effort and discipline.