Personal Finance

The Top Reason You’re Broke

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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Want to know the number one reason that you’re broke?

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You can work as hard as you want. You can hustle around the clock seven days a week, but not change the dynamics of your finances and time—not unless you get to the root of the problem.

By no means am I a financial guru. However, I can tell you that I have personally seen a significant change in my income and real net worth by rewiring my thinking about money—and grasping and practicing this one key fact. 

The top reason most people are broke and stay broke is that they’re consumers, not investors.

Some might make a good six figure income and have a nice job title, car lease, and big house. Still, most of those people are still broke. Most have zero—or more likely a negative—net worth, virtually no free time, and little truly disposable income.

If you want to have more control over your time, have more financial security and freedom, or just put an end to being broke month after month, be an investor, not a consumer.

Related: 12 Reasons You’re Poor

Now, that doesn’t mean you can’t spend money. It doesn’t mean you can’t enjoy nice things. It does mean that you invest first. Then you let your investments pay for all of these other things.

Anything I earn, I invest in myself or in real estate deals. I put my money into things that increase my worth and passive income, instead of buying things that go down in value over time.

Here are some examples of that.


The most important investment you can make is in yourself. Ask any billionaire, and they’ll tell you it is the best investment you can make. Invest in your knowledge, skills and performance, which will ultimately help you earn more, because you can bring more value to the marketplace. Obtaining skills along with knowledge are things that people can’t take from you.

However, if you’re considering investing in a college education, think twice before accumulating that bad debt. Those are years you won’t get back. Often spent on irrelevant information, and those loans will keep taking money out of your pocket for years.

Instead, consider books, seminars, events, and training with a mentor. This information tends to be more transferable to the real world. Do what you can afford, and as it pays off and increases your income, keep dedicating a part of everything you make to more learning.


Cars are easily one of the top two or three things that keep Americans broke. For most, it is inconceivable not to be driving the most expensive car they can possibly get a loan or lease for. That means they are always tapped out on their income. A big portion of their income every month goes into an depreciating asset. Buy a new car, and you are instantly throwing away half of the money on the price tag.

Now, once you have already invested, and if that money will be coming from passive income from investments and cash you don’t have anything better to do with, then absolutely treat yourself to a sweet ride.


The same goes for houses you live in. For most, this will be the biggest expense of their lifetimes. Buying a home can be a somewhat smart financial move. Still, few get how much they really pay for a home when they factor in interest and taxes and other fees and maintenance. Like cars, most max themselves out to the limit. They chain themselves to those big piles of bricks that can hold them back from many other things they’d prefer to be doing—like free time or the ability to pick up and move elsewhere.

Related: 4 Steps to Buy the Car You Want Within the Budget You Can Afford

Invest and let your investments in income-producing real estate pay for your own home. Don’t sacrifice your ability to invest for a home that is a burden as soon as you get those keys.



The number one reason people in America are broke is simply because they are spenders first. Those who aren’t broke are those who invest first. This article shows some classic examples where you can change the odds in your favor and get control of your money. If you ever get stuck in deciding how to use a dollar, just remember to ask yourself whether that purchase or investment will take you closer to your goals. If not, it’s taking you further from them.

What’s your opinion—is consumerism the top reason Americans are broke?

Comment below!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Alex Craig Real Estate Professional from Memphis, TN
    Replied about 2 years ago
    You forgot another big reason people are broke…paying to much in taxes prevents them from investing!
    Marcus Lawson from Roselle, NJ
    Replied about 2 years ago
    I think it goes beyond taxes. If you instantly cut their tax bill in half, I guarantee you 90% of those people will still be broke
    Andrew Smith
    Replied about 2 years ago
    ^ nailed it
    Brent Cook Investor from Longmont, Colorado
    Replied almost 2 years ago
    Marcus, you are 100% correct for those aren’t financially literate or don’t invest. For the rest of us, it is an issue.
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied about 2 years ago
    Amen Sterling!
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied about 2 years ago
    Great post. Thanks, Sterling.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    Thank you, Karen.
    Jeffrey Almonte Rental Property Investor from Los Angeles, CA
    Replied about 2 years ago
    Great post Sterling, I completely agree!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    Thanks for the comment. What was your biggest takeaway, Jeffrey?
    James R. from Winter Garden, Florida
    Replied about 2 years ago
    Well stated and true, thanks.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    No, thank you! Glad you enjoyed the content.
    Joshua Diaz Rental Property Investor from Bronx, NY
    Replied about 2 years ago
    Simple yet so true! Looking at articles like this, it seeems almost ridiculous how many people fall into this trap but I believe there is always an emotional aspect or upbringing aspect involved. I will freely admit I screwed up on the education and the cars part. However I am now working to correct that. (The car is paid off, I am working on the student loans and I got into the game by purchasing my first investment property which I am fixing up and renting out) I wish I had articles or even the knowledge of things like this much earlier in life.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    Thank you for the transparency. Completely agree with you regarding the upbringing part. Outdated guidance and incorrect information from older generations.
    Josh Shapiro
    Replied about 2 years ago
    I read your article and agree with you that the difference between being an investor and a consumer is the make break point of moving towards or away from financial freedom.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    Yes indeed.
    Erik W. Real Estate Investor from Springfield, MO
    Replied about 2 years ago
    Amen. We’re the brokest rich country on Earth! More disposable income as a percentage of what we earn than at any time in history, and we do exactly that with it….dispose of it. We have family members who worry or complain about lacking finances. We’ve tried to get them to follow us on basic financial planning processes like Dave Ramsey’s Financial Peace University. “Oh no, that costs $100 to attend and I don’t have $100 to spare.” Same folks own $50,000 time shares and shell out thousands per year in maintenance fees. We learned to stop talking about it. Just smile politely and move on. If they’re ever interested, we’ll show them what we did. Not financially independent just yet, but very close. Our house is paid off and our rentals are cash flowing nicely. 5 years, I think and we could say bye bye forever to the day job, Good Lord willing and the creek don’t rise! Then again, I kind of like my day job and get to work from home, so it’s a good gig!
    Angel Santiago
    Replied about 2 years ago
    Agree with your statements. let’s be honest, most people spend and live WAY beyond their means. I see it every single day. larger homes , cars, lifestyle they cannot afford based on the assets or income levels. I know people who lease and pay for very expensive cars, but don’t have a single cent to invest or save.
    Krista Walker from Cave Creek, Arizona
    Replied about 2 years ago
    I was just telling my 17 year old daughter last night that education is important, but not so important that you should go into debt for it!
    Shirley R. Rental Property Investor from Hartford, CT
    Replied almost 2 years ago
    Or as my mom used to say: “If you put that money into a dream house that house won’t buy you a business, but if you put that money into a business, that business will buy you a house”
    Ramesh Nyberg Investor from Miami, FL
    Replied almost 2 years ago
    Outstanding article, Sterling. Right out of Kiyosaki’s philosophy (that’s a compliment, because you re-stated everything very well)
    Earl Wright from Palmetto, Florida
    Replied almost 2 years ago
    I completely agree with your article. I would add that most people don’t even know where their money is going. Budget is a bad word to most people. I was a victim of this and my life changed significantly when I had a plan to follow. Things got a lot better when I told my money where to go instead of letting it just disappear. 10 years after starting my journey I am debt free and have sufficient passive income from investments to live comfortably. From the outside looking in, people would have thought that I was doing very well before I started my plan. Looks can be deceiving.
    Dan Sheeks Rental Property Investor from Denver, CO
    Replied almost 2 years ago
    Thanks for the article, Sterling! Lots of wisdom.
    Joseph Agins Rental Property Investor from Houston, TX
    Replied over 1 year ago
    Great article! Still proudly driving my 2007 Tahoe that I purchased from and insurance auction in 2009. These brand new Tahoe’s look great and I must admit I am envious when I see them. But. I would much rather spend my $ on another SFH than a new car. Besides, my 2007 don’t look all that bad :-)!