Just like the tides, money comes in and money goes out. Managed well, you can manage to keep little pools of cash on hand for the times when the tide is low. Managed poorly, you’ll be looking at drought until the tide comes in again. In other words, you’ll be broke. If this latter circumstance describes your situation, it might be useful to explore some of the main things people who share your situation have in common.
The Desire for Instant Gratification
We live in a time when pretty much anything we want can be bought and delivered to our homes within days. Moreover, a wider variety of things to want exists now, than at any other time in human history. What’s more, credit cards make getting these things as easy uttering two words —“Charge it.”
People who are careful with their money take their time, contemplate purchases carefully and save to acquire expensive items rather than buying them on credit.
Meanwhile, the desire for instant gratification drives others to do the opposite and indulge themselves wantonly. This typically results in outsized debt loads. The good news is they can avail themselves of credit card debt forgiveness if things get out of hand.
However, they’re still living from paycheck to paycheck, never getting ahead.
Paying Interest Charges
Too many people lack an understanding of the fact that money basically has two purposes. You can use it to buy things, or you can use it to make more money.
People who only use money to buy things also tend to pay interest charges. Every time you charge an item on a credit card and don’t pay it off in full before the bill comes due, you’re paying more for that item than you really needed to pay. Further, the longer it takes you pay that item off, the more interest accrues.
On the other hand, people who use money to make more money earn more interest than they pay.
Thinking Only About Today
There is much to be said for the joy and spontaneity that goes along with living in the moment. However, when it comes to your finances, thinking only of today will keep you broke. The best way to make your money go farther is to plan how you will use it. This requires you to think ahead, set goals and develop plans for bringing them to fruition.
Let’s say you have $6,000 in credit card debt. Thinking only of today, you likely won’t have a plan to pay it off. And, as we pointed out above, this means that $6,000 debt will keep growing. However, if you develop a plan to pay it off—and work that plan—you can get rid of that debt and keep more of your money for your future needs.
Living Beyond Your Means
Reading between the lines, you’ll see how all four of these reasons are tied together. The desire for instant gratification leads people to live on credit. Living on credit incurs interest charges, which means significant portions of income is wasted paying interest charges.
Thinking only of today, with no regard for the future leads to blowing lots of cash. And, more often than not, this is directly related to spending more than is earned—living beyond one’s means.
To break the cycle, take stock of your income and establish a spending plan based upon it that includes saving and paying off debt. Develop a plan for your future and save to make large purchases—rather than impetuously charging things. If you’re too deeply indebted to dig yourself out, some credit card companies forgive debt; try to work something out with them.
Do all of this and you’ll soon find you’re no longer broke.
