5 reasons you're poor

It can be shocking to hear that 78 percent of Americans are living paycheck to paycheck. Why are so many people in our country broke? Including many with high incomes?

Understanding why you are poor is the first step to breaking the cycle of paycheck to paycheck living. Here are 5 reasons you're poor!

You don't budget or track your spending.
If you want to save more or spend less, you need to be aware of where your money goes. You might think you know but tracking your spending for a few months can be eye opening.

I strongly recommend Mint.com for tracking your spending, it's free and easy to setup. You can link all of your accounts and it will auto-categorize your credit and debit card transactions. It's nifty.

You never eat at home.
A lot has been written about the "latte factor" and how a daily trip to a certain green goddess impacts your finances but most people seem to still be unaware how much they eat out and the financial impact.

We have free coffee at our office (a nice espresso maker even!) and I still have colleagues who regularly show up with take out coffee and breakfast. Breakfast is one of the easiest meals to eat at home (or I take mine to work almost daily and eat it there). You can have toast, bagels, fruit, juice, oatmeal all for >$1 serving.

Same for eating lunches and dinners out. You will spend $5-7 on even the cheapest lunch out, which really adds up. If you are trying to save, this is a key area to look at. You might be surprised how much you are spending on eating out when you start tracking. I find it's easiest to batch cook two different dishes on Sunday/Monday and then alternate the meals for lunches and dinners. If I do it right, I don't cook again until Thursday. Here are some of my favorite big batch recipes.

In my house, we eat out about 5-6 times a month and we still have $225/month budgeted for eating out! There are only two of us but if we go out for sit-down dinner, it's at least $40+tip. If we can keep it down to only once a week, we will normally come in under budget for the month.

You bought/rent too much house.
Housing is the single largest expense for most of us and it's an area that is closely linked with quality of life for most of us. Usually more space is more comfortable and living in a smaller, more economical space involves trade-offs.

But this is an important trade-off. If you can manage to live in a smaller house for a few years, delaying the purchase of your dream home you can save thousands of dollars and be in a much better financial position.

If you are renting, it's easier to move to less expensive rental but what if you already bought a big house at the top of your price range? You might consider doing some house hacking and getting a roommate or offering an extra room on airbnb, even a few nights a month could make a big difference.

This is one of our struggles right now. We have been in our modest 2-bedroom townhouse for about 3 years and while it's totally fine for the two of us, it's also not what we'd like to have at this stage of our lives. We really want a single family home with a nice sunny yard but we're tying to hold off as long as possible so we aren't just able to afford it but can live their happily while still meeting our financial goals. It's hard but it will be worth it.

You buy a new car every year or two.
It can seem like everyone is buying a new car! Or even a new to them car. Cars are one of the absolute worst places to spend your money but it can be so tempting when everyone you know is doing it. The truth is the longer you hold on your car (a depreciating asset!!) the better it is for your finances. When it is time to trade in, look for something you can pay for in cash.

How can you hold off? Stay away from car dealerships! I'm only kind of kidding. Last year for my birthday, my amazing husband had my car professionally detailed and it made my car feel brand new again! Even though I'd owned it for three years, I could have sworn it had new car smell. The cleaning was around $100, so I wouldn't make a regular thing out of it but once every year or two can give you that new car feeling.

You go shopping regularly.
For me, Target is like a black hole of temptation. If you are shopping as a hobby, you need to stop right now. If you are going to stores to browse because you want to leave the house consider going for a walk in your neighborhood or a park. Call a friend to hang out or plan to volunteer for a local group. There are a lot of ways to get out of the house that don't involve shopping.


Look at where your money is going and take control of your finances!