“Why Am I Broke?” 5 Possible Reasons and How To Fix It

If you keep asking yourself, “Why am I broke?” and don’t have the financial situation you want, I hate to tell you but, at least on some level, it’s your fault.

Circumstances aside, your decision-making skills, financial education, and relationship with money play a huge role in your financial success.

If you want to stop being broke, you have to change your mindset and behaviors.

Let’s talk about why you’re broke and some solutions to fix the problem.


1. You don’t have the right skillset

If you want to make money, you need to develop skills that the marketplace values.

Many people get upset because they think they deserve to be paid more. It’s not about what’s fair or moral. At the end of the day, the market decides.

Take these classic examples:

  • School teachers should get paid more.
  • Professional athletes shouldn’t be making all of that money.

You can argue that teachers provide a more inherently valuable service than athletes, but athletes make more money for the following reasons.

Athletes can bring millions of eyeballs to an event, get tens of thousands of people to pay money to watch live and drive revenue through companies who want to run advertisements during the games. Compare this to a teacher who can, at maximum, only teach 30 or so students.

Often the market assigns more value to entertainment than to education.

The rarer something is, the more valuable people perceive it to be. School teachers are awesome, but there are thousands of them. Professional athletes are the rarest talents in the world—the top 1 percent of the top 1 percent. There are only 450 players in the NBA. Even among those athletes, only a few dozen or so players are true stars.

If you want to stop being broke and make more money, you need to develop skills that are:

  • Rare: Lots of people can flip burgers. A select few can custom code applications from scratch, which is why computer programmers make more money than fast food workers.
  • Profitable: You make money by helping other people or companies make more money. The more revenue you can help drive, the more you get paid. If you learn marketing and can help a company add thousands, tens of thousands, hundreds of thousands, or millions to their bottom line, they’ll pay you handsomely to do so.
  • Valued by consumers: Mr. Beast makes outlandish YouTube videos. Maybe they lack intellectual substance, but because they are entertaining, people tune in, and he gets paid.

Take your emotions out of it.

If you want to make more money, pursue opportunities with a higher financial upside.


2. Your scarcity mindset keeps you from earning

Money is everywhere.

Trillions of dollars in transactions happen every single year. You just need to be on the right side of the equation more often—seller instead of buyer, creator instead of consumer.

Most people struggle with money because they look at money as a scarce resource.

This makes them hesitant to take risks with money, like investing in the stock market or investing in themselves by getting some coaching or taking a course on learning profitable skills.

A scarcity mindset also blocks you from understanding that you can make big money moves without fighting for every penny you earn.

Making $10,000 a month is as simple as finding one person or company who will pay you that amount to provide a service for them. Think about that for a second. Now, the execution might be a challenge, but the concept is simple.

There’s tons of money out there if you know where to look. To stop being broke, you must believe there’s money out there for you. You’ll know where to look once you do. 

That $10,000 might seem like a lot of money to you, but it could be a drop in a bucket for a Fortune 500 company that wants help with its social media content.

There are many levels to the money game. Odds are, you’re selling yourself short about how much you think you can make, and you have a limited mindset that prevents you from understanding just how abundant money is.


Rewire your money mindset with these tips

  • Practice being rich: In the book “The Secrets of the Millionaire Mind,” the author suggests saving a portion of your money to spend on an experience that a richer version of you would do, like buying dinner from a Michelin-star restaurant, to get used to what it feels like to be richer.
  • Look for examples: I follow lots of entrepreneurs on Twitter. Seeing the cash some of them pull in inspires me to think even bigger. When you realize ordinary people like you are making way more money than you, you realize you can do it, too.
  • Watch the way you talk to yourself: The next time you see something you want to buy, instead of saying, “I can’t afford it,” ask yourself, “How can I afford it?” to begin stretching your thinking to come up with novel ways to make money.


3. You aren’t investing in your financial education

Money isn’t everything, but it’s one of the most important aspects of our lives.

Sadly, we don’t learn nearly enough about money in school. In general, most people have a poor financial education, which is why they’re broke.

The more attention you pay to something, the more you can spot related opportunities. 

The more you study a concept, the more you’ll know about it.

Most skills are learnable given enough time, education, and implementation of what you’ve learned.
9 Ways to Learn About Money infographic: 1) Books 2) Podcasts or Youtube 3) Save on taxes 4) Track spending 5) Understand interest, debt schedules, amortization tables 6) Learn how compound interest works 7) Invest in index funds 8) Spend time with those who are good with money 9) Learn to read profit and loss statement

Invest in yourself to fix your money woes

Take time to invest in your financial education.

Some good books you can read:

Some good podcasts and YouTube channels you can study:

Make a habit of finding wealthy people in your area, getting to know them, and soaking up knowledge from them. Go to local business and personal finance events in your city. Spend less time with broke people and more time with financially successful people.

If you immerse yourself in finance and constantly study the art of making and keeping money, you’ll make more money.


4. You can’t properly manage your emotions

Knowledge alone isn’t enough.

From Morgan Housel, author of “The Psychology of Money”:

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people.

You can be a smart person but make dumb financial decisions. Often, making and keeping money has more to do with your emotional intelligence than your I.Q. Most people aren’t broke because they’re dumb. They’re broke because they can’t manage their emotions.

Let’s talk about some emotional factors that play a role in your financial future.


Delayed gratification

Anyone can become a millionaire. In the book, Housel tells a story of a janitor who retired with millions because they put their money in a simple index fund once a month for decades.

Anyone could get rich going this route, but it takes discipline.

Most people suffer financially because they can’t delay gratification:

  • They spend every dollar they make.
  • If they get a huge income increase, they inflate their lifestyle to match it.
  • They don’t have the patience to learn profitable skills or build a business that can pay off in the long run.

As Housel mentioned, patience and other emotional factors related to money are hard to teach. You just have to find a way to practice it in your life.


The ability to handle risks

You have to get good at handling risk in both directions to create wealth.

    • Risk tolerance: you have to be willing to bet on yourself and risk losing money (or time spent) to make money
    • Mitigating risk: you don’t want to take on so much risk that you risk wiping yourself out financially

My advice: choose vehicles for wealth where you only have to risk a little to make a lot.

Online business fits this category. You don’t have to fork up tons of cash to start a business. Heck, if you’re a freelancer, you just need an internet connection and the willingness to ask people to buy your services.

Once you do stack up some cash, invest it wisely. Don’t pour your life savings into crypto.

Listen to Warren Buffet’s two rules for money:

      1. Don’t lose money.
      2. Follow the first rule.


The ability to handle ups and downs

The arenas you can make the most money tend to have volatility.

Investing in the stock market is a good long-term bet, but you will have to stomach swings in prices.

You can make great money with a successful business, but you might have to start several failed businesses before one succeeds. Even a successful business has ups and downs in revenue.

There are changes to the economy that can affect you. More competition might enter the fold. Technology can change the playing field (just look at A.I. for a stark example).

You have to develop the ability to roll with the punches.

There are no quick fixes, but here’s what you can do:

  • Accept upfront that financial success isn’t a linear process.
  • Realize that the more time you give yourself to succeed, the less volatility will play a role.
  • As cliche as it sounds, take it day by day when it comes to every aspect of financial success—like learning new skills, taking the next step in your business/career, and taking time to study wealth.


5. You don’t feel the pain of inaction enough (yet)

You’re broke because, on some level, you’re okay with being broke. The pain of your financial situation isn’t strong enough to inspire you to act.

When I use the word broke, I’m speaking in relative terms here.

Even if you live at the poverty line in America, your life is cushy compared to people living in third-world countries. We have so many modern conveniences that being broke might be annoying, but it’s comfortable enough to keep you complacent.

The Comedian George Carlin once said:

Most people work just hard enough not to get fired and get paid just enough money not to quit.

Most people are in a situation that’s tolerable enough for them to keep doing it.

Of course people want more money, they want a better job, and they want to start a business someday. But, often, they want other things more.

They want to remain inside their comfort zone. Instead of learning about money and building a business, which is time-consuming and often boring, they want to spend time on fun and leisure activities.

When it comes to overcoming these challenges and doing what it takes to earn more, keep more, and build a better financial future, this Tony Robbins’ quote comes to mind:

Change happens when the pain of staying the same is greater than the pain of change.

So, to rephrase a bit, you’ll stop being broke when the pain of being broke is greater than the pain of doing what it takes to build wealth.

You’re capable of doing it. But you’ll never reach that capability if you sit on the sidelines and complain about your financial situation instead of doing something about it.

Break away from asking, “Why am I broke?”

Start building wealth today.

Pick up a book.

Jot down some ideas for a business.

Look into making a career switch that can increase your earnings.

Download a personal finance app to track your expenses.

Do something—anything—but get started as soon as possible.