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Top 7 Reasons You Might Be Broke Every Month

Payday has arrived! Your cup is full. You live your life to the fullest for a couple of weeks. By week three, you’re running at 10%. The end of the month rolls around and you are completely broke. What happened? 

With 78% of Americans feeling completely depleted at the end of the month, you are not alone in wondering where all your money went. Let’s examine the common pitfalls we fall into when it comes to financial planning and overspending.

1. You are living paycheck to paycheck

Living paycheck to paycheck is so common amongst American adults that it is strange we don’t discuss it more openly. Even high earners, with six-figure salaries, frequently leak funds throughout the month. The interesting thing about this is, as your salary increases, you probably notice less and less that you have settled into a paycheck to paycheck lifestyle. A cycle that you can only break out of once you are fully aware of it. 

Here is a good litmus test to know if you’re stuck in this vicious financial hamster-wheel:

It is towards the end of the month and you drop your smartphone. The screen shatters. It’s going to cost you $200 to fix the front and back screen. Do you have the funds to pay for it right away without a sweat? Or are you running a little low and need to wait for your next boost of income? If it’s the latter – bingo – you are in the paycheck to paycheck cycle.

2. You don’t have a way of tracking your spending

Another common reason for being broke at the end of the month is that you are simply not tracking your expenses in any meaningful way. You know that your bank account feels a little light sometimes, but you’re not sure of the reasons behind it. 

Tracking your spending is fundamental to understanding your finances. You can’t go about controlling your spending if you don’t know what your current spending habits are. Starting with a simple 7-day diary, write down exactly what you spent each day. If you have the discipline, extend this to a 30-day expense diary to get the full picture. For now, don’t judge your spending, just track it. See where your budget-busting expenses may be coming from, so you are prepared to spend smarter going forward.

What gets measured gets managed.

3. You don’t plan your shopping and meals

Food waste is one of the biggest causes of overspending. This can stem from several habits you and/or your partner may have. Maybe you hate cooking and therefore eat out often. A complete spending leak that is worth plugging, pronto. 

Maybe you don’t mind cooking but you are never sure of which ingredients you may need. More trips to the store equal a higher grocery spend month to month. 

Cooking lovers are not exempt from this either! You may love to cook and never fail to get the ingredients you need with one shop – great. But your problem may stem from buying too large quantities of perishable items like produce which can result in food wastage. 

Any food waste is also wasting your money so the best way to combat this is meal planning. This will help you to shop for exactly what you need, in the quantities you need them every time.

4. You don’t have an emergency fund

Did you know that under half of Americans can produce $1000 to cover an emergency

Are you one of them? If you aren’t, we need to fix that ASAP! 

An emergency fund is a key part of your financial health. Though it is unsexy to save for a rainy day, we are currently living through hugely uncertain times. Emergency funds are your safety net for nasty surprises such as unemployment, broken belongings, or the need to move on short notice. You don’t want these sudden expenses ruining your budget. The ideal emergency fund can cover 3-6 months of your basic, living expenses. 

I good place to keep your emergency fund is in a high-yield savings account. Although interests rates on savings accounts are generally low, comparing rates between financial institutions is an easy win.

5. You are too loyal to utility companies

When was the last time you reviewed your cellphone provider? What about electric, gas, or even your bank?

Controversial but listen, your loyalty could be costing you hundreds of dollars. We have to have these companies in our lives but we don’t have to stay stuck to them for life. 

It is good practice to regularly review the options out there for your main utilities. If you can make huge savings to your monthly and yearly costs, why not switch?  Even if you don’t want the hassle of switching, knowing what competitors are offering can help you negotiate a better deal with your current providers.

6. You aren’t negotiating better deals

Negotiating should be taught in school. It’s a life skill that can serve so many aspects of your financial life. Now, we’re not saying to walk into Walmart and haggle your sales tax down. We are also not suggesting that negotiating is appropriate in every transaction. If a plumber is charging $80 to fix your faucet, pay them, don’t be cheeky! 

Where you can use negotiations to great effect is with your utilities and financial providers. Simple phone call conversations can lower your credit card interest rate, increase your monthly cellphone data plan, waive overdraft fees, and lower your internet bill. How? Negotiation! 

Negotiation is also key to getting better pay at your current job or your next job. What no one told us in college is that salary negotiation is expected and encouraged in some industries. To get more, you need to ask for more. This may be a harder bargain to achieve but increasing your income is a gamechanger for your finances.

7. You struggle to say no

We save this one for last because it is probably one of the hardest to face up to. You may struggle to say no to your friends when they want to have an expensive steak dinner. It pains you too much to tell them it is out of your budget this month. You may struggle to say no to yourself when that cute $200 Ted Baker romper is staring at you on Net-a-Porter. 

Overspending often comes from not putting your foot down. You need to maintain boundaries to build financial health and wealth. This doesn’t mean that you can never buy the steak or the romper. Life is made for living. Moderation is key, however, so make sure you say no when you need to.

It’s time to hire a financial coach

If you’re ready to uplevel your finances, schedule a call with a financial coach to set your financial goals and get a clear roadmap to get out of debt, increase your investments, and build wealth.

Book now to see if a financial coach is right for you!

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