The Number 1 Thing That Keeps You Broke (And It’s Not What You Think)
Managing your finances can be daunting, especially with the myriad temptations and pitfalls that can sabotage your efforts. While some reasons you’re struggling with money might be obvious, there’s one primary culprit you might not expect. From daily habits to larger lifestyle choices, here are 15 things that might keep you broke. As we start from the bottom and work our way to the number one culprit, you might just be surprised at what it is.
Subscriptions Galore
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In today’s digital age, it’s easy to accumulate multiple subscriptions—from streaming services to gym memberships. According to a 2020 survey by West Monroe, the average American spends $273 monthly on subscription services, often forgetting about many of them, leading to unnecessary financial strain.
Impulse Purchases
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That cute shirt on sale or the latest tech gadget can be hard to resist. A 2021 study by Slickdeals found that Americans spend an average of $276 per month on impulse buys, which adds up to over $3,000 annually, significantly depleting their savings over time.
Eating Out Frequently
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Regularly grabbing lunch out every day or dining at restaurants can drain your wallet. A survey by Visa found that the average American spends around $53 per week on dining out, totaling about $2,746 annually. Cooking at home is a far more economical option.
Ignoring Discounts and Coupons
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Not taking advantage of discounts, sales, and coupons is like leaving money on the table. RetailMeNot reported that shoppers who use coupons save an average of $30 per week, over $1,500 a year.
Not Budgeting
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Flying blind without a budget makes tracking where your money is going impossible. A Gallup poll revealed that only 32% of Americans prepare a detailed household budget. Having a budget helps you allocate funds wisely and avoid unnecessary expenses.
Keeping Up with the Joneses
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Trying to match the lifestyle of your friends or neighbors can lead to overspending. A study by the Federal Reserve Board found that social comparisons can increase spending by up to 16% as people strive to keep up appearances.
High-Interest Debt
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Carrying balances on high-interest credit cards is a surefire way to stay broke. According to the Federal Reserve, the average credit card interest rate in the U.S. is about 16%, making it hard to pay off the principal amount as interest accumulates quickly.
Lack of Financial Education
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Without a solid understanding of financial management, you’re more likely to make poor financial decisions. A FINRA study revealed that 63% of Americans are financially illiterate, leading to mistakes that can cost you dearly.
Neglecting Emergency Savings
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Without an emergency fund, unexpected expenses can throw your finances into disarray, leading to debt and financial strain. Bankrate reports that only 39% of Americans could cover a $1,000 emergency with savings.
Unnecessary Luxury Items
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Luxury items might be tempting, but they are often unnecessary. Opting for simpler alternatives can save significant amounts of money. According to CNBC, millennials spend an average of $478 monthly on non-essential items, including luxury goods.
Not Shopping Around
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Failing to compare prices before making a purchase means you might not get the best deal. The U.S. Bureau of Labor Statistics suggests that consumers can save up to 20% by comparison shopping for major purchases.
Falling for Sales Tactics
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Sales tactics can lure you into buying things you don’t need. A study by the Journal of Retailing and Consumer Services found that 50% of purchases during sales events are unplanned, driven by marketing strategies designed to get you to spend more.
Lack of Investment
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Keeping all your money in a savings account instead of investing can limit your financial growth. The S&P 500 has historically returned an average of 7-10% annually, far outpacing the interest rates of typical savings accounts.
Overuse of Convenience Services
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Paying for convenience, like food delivery or ride-sharing, adds up quickly. The New York Times reported that the average American spends about $1,000 annually on food delivery services alone, a significant drain on finances that more cost-effective alternatives can mitigate.
Unhappiness
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At the top of the list is unhappiness, which can stem from boredom and loneliness. These emotional states often lead to compulsive buying decisions to seek a quick dopamine hit. The temporary thrill of a new purchase can mask deeper feelings of dissatisfaction, but this habit ultimately drains your bank account. Additionally, loneliness can drive spending habits fueled by insecurity and a need for validation, leading you to buy things you don’t need in an attempt to feel better or fit in. A study by the University of Michigan found that emotional spending can account for up to 40% of purchases, significantly impacting financial stability. But don’t lose hope! Recognizing and addressing these habits is crucial for improving your financial situation.