Home » 6 Mistakes Broke People Make

6 Mistakes Broke People Make

15083417861_fa0698290d_zAs a follow up to the wildly popular (and somewhat controversial) post I ran last week, entitled 6 Lies Broke People Believe, I’ve written a new post outlining some of the mistakes broke people make.  As we’ve talked about before here, it is often The Broke Mindset that keeps people struggling financially.  Once a person learns to recognize themselves in these oft-made mistakes, they can begin to take the first steps to retraining their minds in a way that promotes positive financial decisions.

Mistakes Broke People Make

1. Broke People Borrow Blindly.  Broke people often stay broke because they borrow money in an uneducated fashion. Payday loan places and rental centers are common friends of the financially strapped.  Broke people often make borrowing decisions based on whether or not the payment sounds reasonable to them.  They pay little attention to the interest rate or terms and conditions of the loan.

The Fix: Be more protective over your hard-earned dollars.  Don’t just hand them over to any lender in order to meet your instant gratification desires.  Instead, think any loan through thoroughly, weighing both the bottom line dollars you’ll be paying back and the length of time in which you’ll be serving that lender.  Better yet, resolve to avoid loans whenever possible, saving cash for future needs and wants.

Recommended Reading: Love Your Life, Not Theirs: 7 Money Habits for Living the Life You Want

2. Broke People Don’t Understand Their Value at Work.  Being a constant observer of people’s actions, I noticed three main types of workers when I spent my days in the public working world: those who thought they were worth more at work than they were actually worth, those who underestimated their value to their employer and those who had a clear and accurate understanding of what they brought to the table at their work.  Broke people, by and large, fall into the first two categories.  The first group walks in arrogance, convinced that they contribute far more to their employer’s success than they actually contribute.  The second group does the opposite: they work their tails off for their employer, yet underestimate their value and worth as an employee.  Both of these attitudes breed an environment that almost certainly ensures they’ll be paid less than they have the potential to earn.

The Fix: If you’re of the first group, face yourself in the mirror and smell the coffee.  If you’re continually coming in late, leaving early, having a crappy attitude and not performing your job to the best of your capabilities, and yet think you’re an asset to your company, you’re living in denial. Choose to make your performance match up with your rose-colored glasses image of yourself so that when you go in to ask your boss for a raise, it’s a well-deserved raise.

Recommended Reading: The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change Interactive Edition

If you’re part of the second group, stop selling yourself short.  Write down all of the ways that you go “above and beyond” your required job duties, keep track of extra things you’ve done for a year, and then head into the boss’ office armed with the ammo you need to ask for that raise.  You do indeed deserve better.

3. Broke People Don’t Budget and Spend-Track.  Even when my mom was on welfare, a budget changed her financial life.  Having a “job” for each of her dollars ensured that as many of the bills as possible were paid, and it let her know how much more money she needed to earn to be in the black each month.  As a result of that budget, my mom retired at 62 with zero debt and a plan for how to manager her money during her retirement years.

Most people, however, don’t live on a budget, and have no real idea of what they’re spending their money on each month.  But as Rick and I learned when we went back and discovered the leaks in our financial ship, without budgeting and spend-tracking, we were spending MUCH more in each expenditure area than we thought we were spending.

The Fix: Always make a budget, every month, to have a clear picture of how much money you need to pay the bills.  Then, track your spending each month to make sure that you are staying within the budgeted amounts for each category.  While these two tasks may seem tedious and restrictive at first, you’ll eventually find that they are quite freeing, giving you the extra money you need each month to reach your financial goals and dreams.

4. Broke People Don’t Automate Savings and Retirement Funds.  There’s arguably no better way to save money than to automate it.  When you set up a monthly 401k contribution with your employer, that money comes out of your check – pretax – and you never even see it.  Before you know it, the years pass, and the retirement dollars are bigger than you ever could have grown them with a “pay yourself with what’s leftover” saving system. Most broke people, however, don’t ever implement a solid plan for savings and retirement.  They may hope for those things, but they plan to fund them with leftover money at the end of the month, and that leftover money simply never shows up for the party.

The Fix: By automating savings and retirement accounts each month, and treating them as regular “bills”, you’re ensuring yourself a cushion for both current day emergencies and future monetary needs.  Want even more proof of the wealth-building phenomenon of automating your savings? Check out The Wealthy Barber, Updated 3rd Edition: Everyone’s Commonsense Guide to Becoming Financially Independent .

5. Broke People Don’t View Themselves as Financially Responsible.  “Faith is the substance of things hoped for, the evidence of things not seen”, Hebrews 11:1 tells us. In order for people to pull themselves out of a financial mess, they need to start seeing themselves as financially responsible.  However, most broke people have spent so long being broke and making financial mistakes that they can’t imagine themselves as financially secure adults.  Therefore, they keep making, often subconsciously, the same financial mistakes.

The Fix: Start imagining, seeing, dreaming and acting as if you were already financially secure.  Refuse to focus on past financial mistakes, instead, focus on the things you’ve learned and are doing to change your financial picture.  Remind yourself when messages of failure work to come upon you that “the old has passed away; all things are new”.  Don’t let your past dictate your future.  Walk instead in the newness of your financially educated self.

Recommended Reading: The Wealthy Barber, Updated 3rd Edition: Everyone’s Commonsense Guide to Becoming Financially Independent

6. Broke People Don’t Set Concrete Goals.  In order for a goal to actually be achieved, it has to be a concrete goal and it has to have a solid action plan for success.  Most broke people have been broke for so long that they’ve lost the ability to hope and to dream.  The achievement of a financial or any goal has to start with hope and a dream, but if you’ve forgotten how to hope and dream, then achieving your goals likely won’t happen.

The Fix: Get hope.  Refuse to allow circumstances to take hope away from you.  Study and emulate people who have done what you want to do financially, using their success as a catalyst for your hope.  Then, study on how to set concrete goals and action plans to fix your individual money situation.  Set those goals and the action plans into place by writing them down, along with each small action step needed to get there, and then run your race.

Recommended Reading: Think And Grow Rich

If you’re one of the “broke” people that we’ve described here, don’t despair, and most certainly, don’t give up.  You do have the ability to educate yourself and change your financial situation for the better.  Contact us anytime if you want more information on how to do that. We’re happy to help.

What is the biggest “broke people” lie that you’ve fallen prey to?  What financial revelation changed the way you look at money?


  1. Kathy says:

    Before I retired, I worked with a woman who was amazed that I put the maximum allowed into my 401k and that I moved the money out of a fund suggested by the broker handling my employer’s account and into a different one that was safe during the meltdown. At the end of the year, she had lost money and I hadn’t simply because of this one move. I remember a couple of conversations we had and she asked how I could put so much into the account when she made significantly more than me. She claimed she couldn’t afford to put in more but she and her husband had a vacation time share as well as a pool at their home. She also wondered how I knew about the other funds that were part of the 401k, and which one to choose. The difference between us was that during lunch and breaks, I read the Wall Street Journal and Barron’s financial magazine while she downloaded ringtones to her phone. The point of all of this is that she was not a stupid woman and she was not a lazy woman, but she was very mis-guided in her financial life. I think some people have a mindset that they simply cannot get ahead and they never try to do anything different.

    • Laurie says:

      “The difference between us was that during lunch and breaks, I read the Wall Street Journal and Barron’s Financial magazine while she downloaded ringtones to her phone.” Kathy, that says it all. Whatever we value most is what we’ll spend our time on. Awesome comment – thank you.

  2. Borrowing blindly was our biggest issue and we justified it by saying everyone else does it. The wake up call for us was when we maxed out of credit lines and couldn’t borrow our way out of the problem. We had to figure out another way, that’s when we go educated and organized. Once we did that we stopped borrowing and cleaned up the mess.

    • Laurie says:

      Brian, perfect example of what I’m talking about!! You made the mistakes, but then you fixed them! Education is key, but it has to be combined with a willingness to do the work.

  3. I think automation is a huge help. My co-workers are pretty bad with money and are constantly in debt or living paycheck to paycheck. Talks about budget and tracking spending go nowhere, but automating savings into their 401k was palatable. It’s pretty easy to set up and you don’t really feel the pain of putting the money away because the tax savings and once the money is out of sight in the account…it is out of mind so it is not as easily spent.

  4. Risha says:

    We are broke because we don’t make enough. My husband is the only wage earner and he is in a job without any opportunity for advancement or significant raises. He has been pursuing a career change into technology (his degree is in this field) and applying for jobs for the past 5 years but he doesn’t have the certifications or experience that most employers want. We don’t always follow a good budget so that’s something we need to work on. But it’s hard to stay positive about our financial situation because it’s not like we just need to tighten up and get a debt paid off to make things easier. We don’t pay any debt payments monthly. We only pay mortgage, utilities, food, gas. We have long ago eliminated unnecessary expenses like eating out, movies, impulse buying, etc.

    • Laurie says:

      Risha, I would love to work to help you personally if I can. We too are in a super tight situation, and I understand how frustrating it is to try and get ahead. If you want to email me from the contact page, I would love to sit down and go over your budget/income with you and see if there is any way I can help. Thank you for reading!

  5. Jessica says:

    I completely agree with your 6 points on why broke people stay broke. I did almost all of these until I began educating myself and learned how to take small steps towards financial security. It’s diffIcult to do better when you don’t know better. Educate yourself! Stop by my blog mymoneymattersblog.tumblr.com for financial tips that change your life.

    • Laurie says:

      Thanks for sharing your blog link, Jessica! And so very happy for you that you have learned how to manage your money well. Great work, my friend!

    • Laurie says:

      Same here, Amy. It was show-stopping for us. We had no idea that we were nickel and diming ourselves into debt the way we were. We thought it was because we didn’t make enough!

    • Laurie says:

      We’re doing this too, Tonya. It makes a difference. When you see yourself as one way, you will attract those aligning values. Whether for better or for worse.

  6. beth says:

    I was stopped at a traffic light outside of a pay day loan place yesterday and there was a crowd inside. They charge a fee to cash pay cheques and yesterday was pay day for a lot of people.

    This week the government welfare and pension cheques came out too. There would have been a line up on for cheque cashing on that day. Our government is eliminating mailing paper cheques and all government cheques will soon be direct deposit only. This was to save the government money but it will force foolish people to open a no fee bank account and avoid the cheque cashing fee.

    I looked on 2 websites of the big pay day loan companies here in my city but they won’t tell you how much cheque cashing actually costs.

    • Laurie says:

      Oh dear, Beth. That is so sad, but so true. People using those services often only look at what they’ll get, instead of looking at what they’ll lose through fees and interest charges.

  7. #5 is the one that really stands out to me, Laurie. We beliefs become our reality. And many broke people believe this is the best their life can be. They may dream of better one but also don’t believe it’s within their grasp. So they keep making decisions that keep them broke and remain uneducated on what they can do to better their situation. It’s a vicious cycle, but it can be broken too.

    • Laurie says:

      It is a vicious cycle. There have been a few people that I’ve tried to convince that they can do/be/have better, but they simply don’t believe it, so they simply don’t bother trying. So sad. 🙁

    • Laurie says:

      “wealth is hard to avoid when you have clear and attainable goals.” Well said, Shannon!!! I wish more people would understand that.

    • Laurie says:

      Very true, Adam. I see it all the time, I grew up with it too. Frustrating to watch people suffer monetarily when a few simple habit changes will change their financial picture exponentially. 🙁

  8. It blows my mind when people don’t utilize tax advantaged plans. 401k is a big one, but so is the HSA. There is a woman I work with that has medical spend needs, but she lowered her HSA contribution this year because she wanted a higher paycheck. Why would you not want to save ~30% on all of your medical bills??? She’s going to spend it anyway! I just don’t get it.

  9. I love these six separate points Laurie, and fantastic to see your proposed solutions for each. For me, a big one is people not understanding the simple math behind some of these decisions, not least of which being the impact of borrowed money you mentioned in point 1. If you can put the numbers together and project it out, and see what that means for your future, it can really change your perspective on how you handle money.

    I think many broke people live in a fog, unconsciously just going through the motions, and don’t realise that you can actually break free from it with a few simple changes in habit and perception.

    • Laurie says:

      Exactly, Jason!!! Such simple fixes, yet so little drive to make those fixes, due to a lack of hope/faith that a different life really is possible. This is where education is a phenomenal help. Once I started reading about people who paid off their debt, I started to learn that we could too!

  10. Petrish @ Debt Free Martini says:

    I never use to budget or track my spending during my broke and busted days. When I look back now I don’t even know how I made it thru those days. Then one day the light bulb went off in my head and I realized that I was living below my privilege.

    • Laurie says:

      “I realized that I was living below my privilege.” Petrish, what a wise statement. Living below one’s means is akin to living well and in line with your privilege, although most don’t see it that way.

  11. I’m such an advocate for tracking spending and automating savings and retirement contributions. What I like most about tracking spending is that it’s something anyone can start doing immediately, without any fancy financial planner or strategy. It’s just a simple, honest way to take stock of your money (and consequently your priorities). Awesome advice here, Laurie!

  12. This is such a great post and one of my favorite topics when it comes to finances. 😉
    What changed me was when I decided I needed to fix my finances because I was broke all the time. Sadly, it wasn’t the money it was me. I had no budget, I had no goals when it came to my money. I was broke.

  13. Marie says:

    Your second point, touching on peoples’ perceptions of their value at work is a very important one, more prevalent amongst those who are “broke,” yes, but also on display across many levels of finance.
    I enjoy this write up, I hope that people who view themselves as “broke” can learn from it, and not just knee-jerk react. As you’ve pointed out, broke is often a mindset, not an income.

  14. Thanks for the heads-up Laurie. Broke people most often splurge when their money comes in. It’s like their mindset is “I’ve been broke for weeks, so I should be able to treat myself”. This is what always tempts me whenever I get my salary. Yay!

    • Laurie says:

      I know – it’s difficult to put aside those instant gratification desires for the long-term success choices, but SO worth it. 🙂

  15. I was guilty of #5 way too often prior to paying off my debt. I always viewed it as something that happened to me and that I was innocent. Needless to say, I didn’t stop to realize that the credit card didn’t forcibly remove itself from my wallet to buy things. With relation to #1, I had a pretty serious job prospect years ago to work at one of those “Rent A Center” type places. I ended up turning down the job after seeing what it was they did to people who were hard up – it’s crazy and they do nothing but help people stay in the cycle.

    • Laurie says:

      “I viewed money as something that happened to me and that I was innocent.” LOVE that, John!!! I think so many people think that way – I know we used to.

  16. I have done every. single. one of these things! (If there’s a list of financial mistakes floating around out there, I can usually see myself on it.) I’m getting a lot better now 🙂

Comments are closed.