The Top Reason You’re Broke

by |

Want to know the number one reason that you’re broke?

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.

How to Purchase Real Estate With No (or Low) Money!

One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.

Click Here to Download


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.

We’re republishing this article to help out our newer readers.

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

Comment below!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.


  1. Joshua Diaz

    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.

  2. Erik Whiting

    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!

  3. Angel Santiago

    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.

  4. Earl Wright

    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.

  5. Joseph Agins

    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 :-)!

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here