Make no mistake about it, poverty, just like success, is a habit. I know, to many people, it seems that hitting rock bottom financially is a function of luck. It’s easy to think that something catastrophic has to happen to you for you to become poor overnight. Well, what if I told you that many multimillionaires become poor through the course of their career as high net worth individuals? What if I told you that it’s not uncommon for millionaires to declare bankruptcy after bankruptcy?
What happened to Donald Trump is not actually an exception to the rule. In fact, if you look at the careers of a lot of otherwise rich people, a lot of them go through tough times, and many of them declare bankruptcy not just once, not just twice, but three times or more. But inspite of all that, they’re still rich.
It seems that they take risks, they get really big, they take even more risks, they mess up, they get crushed. In fact, a lot of them become really poor. And then, given enough time, they bounce back up and they’re rich again. And on and on it goes. A lot of them die rich.
I raise this point because a lot of people think that poverty is just one of those things that happen to you in the United States. It’s just the luck of the draw. In fact, a lot of people dismiss the whole concept of becoming rich, as opposed to staying poor or middle class, as strictly a function of inheritance. In their minds, wealthy people were born that way.
Well, that’s a very comforting thought if you don’t like to apply yourself or you don’t like to work hard towards your dreams. You are more than welcome to think that way. But if you look at the statistics and the data concerning income and class mobility in the United States and, interestingly enough, in large chunks of the world, there’s actually a tremendous amount of movement. People who were born poor don’t necessarily have to die poor. The same applies the other way around. Just because you’re born rich, don’t feel entitled that you’re going to die rich.
I raise all of this to highlight the fact that becoming rich and successful is a function of habit and mindset, just as becoming poor and staying poor. It really all boils down to what you choose to think about and the habits you have when making decisions.
What follows are the 9 signs that you need to be on the lookout for, because these highlight certain negative financial habits. If you don’t make progress in overcoming these negative habits, chances are, you’re going to die broke as a joke. Chances are, you’re going to continue to struggle day after day, week after week, month after month, year after year, decade after decade until it’s time to leave this world in a box or an urn you are in.
I know money is not everything, but believe me, most people would rather be miserable with more than a few bucks to their name than be miserable with absolutely nothing. Do you see how this works? So make sure that you are completely honest with yourself when you’re going through these 9 signs so you can see what the problem is, what it implies, and hopefully, you can read between the lines and figure out how these flow into each other so you can make the necessary changes to take your financial life to a completely different direction. Chances are quite good that if you continue going the way you’re going right now, the ending is going to be far from happy.
Sign #1: You are currently living paycheck to paycheck
If this is your situation, you are not alone. In fact, according to a recent study, a disturbing percentage of American households are living paycheck to paycheck. Now, not all of them have always been in that situation. A lot of them actually were quite well off until the recent great financial crash put them in a bad spot.
Just because you’re currently living paycheck to paycheck, it doesn’t necessarily mean that you have to stay there, but this is a negative sign. This is a wake up call. If you notice that your household is living paycheck to paycheck with no end in sight, you might want to start making some important changes.
Sign #2: You’ve been living paycheck to paycheck for at least 6 months now
If your household has been living paycheck to paycheck for at least 6 months, then something is fundamentally wrong with your expenses as well as your income. You might want to look at alternative sources of income. You might want to look into cutting down your costs. This way, you can get some savings going so you’re not hanging by a thread.
Sign #3: Your monthly expenses always take priority over savings
Does it seem like after all your expenses and liabilities are taken care of, nothing is left over? If this is the case and this has been going on for a long time, you might want to start making changes. You’re not going to get out of that financial hole you’re in, regardless of how much money you make, if you can’t, for the life of you, save a dollar.
You have to understand that saving money doesn’t have to involve some dramatic moves. You don’t have to put away thousands of dollars every single month. A few hundred bucks, or even a hundred dollars to start, is a step in the right direction. Whatever the case may be, you need to overcome this habit of always prioritizing expenses and liabilities only to pay yourself last.
If you don’t make savings a priority, it will never be on your radar. It’s just going to be one of those things that you think would be nice to have, but you can’t get around to doing. You have to prioritize it, otherwise, it’s not going to happen.
Sign #4: You have less than $500 savings in the bank
If your total savings is less than $500 and you can’t seem to break past that $500 point, there is something seriously wrong with how you manage your money. Now, I understand that you can give all sorts of explanations on why you can’t seem to make headway past that $500 line. Unfortunately, if you want to take your financial life to the next level, you have to overcome those explanations.
It doesn’t really matter what the cost is, you need to save more. You need to put together more cash because less than $500 in the bank is setting yourself up for a really nasty financial emergency if something unexpected happens.
Sign #5: You have absolutely no investments
This usually flows from the inability to save. Also, even if you are able to save, you have to get that money out of the bank. Every year your money stays in the bank, your money goes down in value. Understand that the bank is only good for a short term storage of your money. You have to work on growing your money. This means investing it.
Sign #6: You don’t have an emergency fund
Life is what happens when you’re making other plans. Often-times, the worst things happen when you’re the least prepared for it. Understand that this is how life works, so prepare accordingly. Have an emergency fund ready because you don’t want to put yourself in a worse position when an emergency strikes.
Sign #7: You have no assets you can sell to cover you during emergencies
When an emergency strikes, you often are left to sell assets, whether it’s your car, your home, your furniture. Whatever it is, you just have to turn stuff you own into cold, hard cash because you got hit by an emergency. This is going to be a problem if there’s nothing to sell. Do you see how this works? So if this is the case, consider yourself warned.
Sign #8: You don’t have any life insurance coverage
Life insurance is crucial because you don’t want to leave your family in a tight spot. If you are a breadwinner or if you contribute a lot to your household’s income, understand the impact you will have by simply dying. Your income has to be replaced, at least for a long enough period of time until your family can fully recover. That’s hard to do without life insurance.
Sign #9: You don’t have health insurance
According to surveys, one of the most common reasons American families get reduced from a relatively comfortable middle class existence to poverty is due to an unexpected health emergency. Whether it’s stage 4 cancer or an emergency surgery, if you don’t have health insurance, you are just setting your family up for an economic disaster. It’s not uncommon for households to declare bankruptcy because somebody in the family didn’t have health insurance and suffered from a very devastating health emergency.
Keep the 9 signs above in mind. They are like the canary in a coal mine. If you see too many of these signs, chances are, something is fundamentally wrong with how you handle your finances. Consider yourself warned.
You are at the edge. Any pressure or stress can be enough to push yourself and your family over the edge. Recognize these signs and start working on resolving them.
