Many people think that they are financially stable by having a job that can provide for their utility bills, high mortgage, travel expenses, and even support their shopping spree. Yet, reality tells us otherwise— they are broke.
You could be poor and think that you’re truly wealthy because of how much you earn and spend. However, your salary or how well you are living doesn’t really matter. It all actually boils down to your lifestyle.
Signs That You Are Poor
How can you determine being poor? What are the approaches you can do to fix them?
You Use Credit Card Monthly
Having a credit card may seem to have a good idea because of the convenience and perks it accommodates. You would not be anxious about how low or high the money you have at hand by having a credit card.
You can immediately get money whenever you need it. And by using a credit card to make purchases and paying all of them off on time, your credit scores will make it much easier for you to lend money with a reasonable interest rate in case of emergency.
Building your credit scores could be beneficial for you, at the same time, disastrous.
Despite the advantages credit cards give to their users, we can’t deny that countless expert financial advisors are anti credit cards. Finance experts contribute a lot of energy to prevent us from using it for a good reason, stopping us from accumulating debts.
Since credit cards are easy to use, it often leads us to the temptation of swiping them all the time. We tend to be so dependent on cards and overspend on things we don’t really need, thinking we have a card on our backs. Furthermore, as credits are debts, if you purchase something and don’t pay it off on time, you will end up with a pricey interest charge on your account.
In other words, if you buy through a credit card, the items you buy costs you more than their original price when bought in cash.
Basically, your income alone should suffice all your expenses along with savings and investments. So if you are continuously using your credit card to pay for your bills, it may be a sign that you are poor.
How to fix:
Have a breakdown of your monthly expenses. Compute the total amount, and then add 20% of your income for savings and investments.
Find another source of income. One source of income will not be sufficient to cover all your expenses, especially when emergencies happen. Hence you need to have a backup side hustle.
Don’t use credit cards for luxury but for emergency purposes only.
You Can’t Pay Your Bills
If you don’t have the way to pay all of your bills monthly and need to prioritize which to pay first, then you have a financial crisis. Paying basic necessities like water, electricity bills, food allowances, and insurance should be covered by your paycheck. If your income is not adequate to fund them all, you’re in a bad situation.
How to fix:
- Minimize electric consumption.
- Lessen water usage.
- Move to a cheaper house.
- Use smart power strips.
- Sell your car, if you have, to reduce cost.
- Cancel TV subscriptions.
You’re Living from Paycheck to Paycheck
According to statistics, 78% of U.S. workers live from paycheck to paycheck. You might have a monthly income that could cover all your expenses, yet you lose all your hard-earned salary in return. If you end up using your paycheck as soon as it hits your account, poverty is knocking at your door.
How to fix:
- Upgrade your skills which you can use to apply for a better paying job or to apply in a side hustle.
- Avoid using credit cards as you will not pay for them if your paycheck is not even sufficient for your necessities.
Wrong Mindset
This might sound cliche vaguely but what you think of yourself is what you actually become. You may have a good financial status now, but you will be taking a road towards poverty with the wrong mindset.
Have you seen millionaires and heirs who ended up rat poor in a very short while? Perhaps, that’s because of their wrong mindset. You might have a well-paying job today, a lot of assets, investments, and sources of income. However, if you don’t know how to manage all of these right now, there will be no way for you to keep everything.
How to fix:
- Read inspirational and motivational books.
- Join seminars or webinars.
- Have someone to coach you.
You Have No Assets
Do you have assets? Savings in a bank? Investment in stocks? A realty? If you don’t, then you are poor. Assets can be a physical or intangible economic resource— it may be a home, bank savings, investments, college education, and businesses that can produce value to their owners.
Assets are essential as it generates revenue. If you don’t have assets and prefer to use up your money for liabilities like cars, travel, and shopping, you will face a crisis in case of emergency.
How to fix:
- Set aside some money for savings and investments.
- Put up a business.
- Don’t buy things that don’t generate income.
Powerlessness to Handle Emergencies
The future is uncertain, so you need to be prepared for it. Think of the worst-case scenario. Imagine you get hit by a car and needs to be hospitalized for the time being. Naturally, you will not be able to work at your job. Thus, you will not have income that would support your medical bills. How will you get by then?
That is why emergency funds are essential. You need to prepare for uncertainties that might come along the way.
How to fix:
Aside from your savings, set aside 5% of your monthly income and open up a bank account for emergency funds.
Look for a side hustle where you can get to earn your emergency funds without hurting your primary income.
You Don’t Have Financial Goals
“If you fail to plan, you are planning to fail!” – Benjamin Franklin
If you’re merely living to survive everyday life without knowing how much money you currently have, how much your expenses were, and without financial direction, then your future is at stake. You might not feel it now, but five to ten years from now, you will be suffering for not having a financial plan.
How to fix:
- Create a budget.
- Pay all debts, if there are any.
- Devise a plan for your monthly expenses
- Create a short-term and long-term goal.
- Set aside money for emergency and retirement funds.
- Develop a goal chart.
Key Takeaways
If you are infected with these poverty viruses, the clock is ticking for you. You have to opt for a firm decision now to fix these things to be able to achieve financial freedom. The changes you have to make will not be easy. Of course, change is always hard, but you have to make sacrifices for future pleasure. Your decision will determine the course of your life.
