3 Likely Reasons You’re Broke — And What to Do About It


People will come up with all sorts of reasons as to why they are broke. However, little do they know that being broke is often temporary, so WAKE UP, WORK HARD and FIX being broke! In other words, being broke should motivate you to work even harder to achieve your dreams. Sean McQuay said it perfectly when he stated that “understanding debt and its underlying causes is key to our future victories.”

As soon as you understand that you — and only you — have the power to change the position that you’re in, you will have the will power to get up and start working.

Stop whatever you’re doing right now and complete this exercise with me. I want you to take out your purse or wallet and count the number of credit cards that you have.

  1. Do you owe on some of them?
  2. Are some maxed out?

If you have answered” yes” to one or more of these questions, and even if you have no credit card but find yourself broke, you definitely need to read on. Here I have what I think are the three leading reasons you are broke. And as the saying goes, “knowledge is golden,” so dive in.


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Spending More Than You Can Afford

Studies have shown that most people who are broke have one or more credit cards in their possession that have payments outstanding or are either maxed out or delinquent. The 2015 American Household 2015 Credit Card Debt Study reported that the total debt owed by U.S. household consumers on credit cards is $712 billion.

Related: The Foolproof Monthly Budget: How to Save Up Money to Buy Investment Properties

So that brings me to this: Why is it so difficult for us to be content? Why is it so difficulty for us to spend only what we can afford, and if we don’t have it, why can’t we do without?

People will put themselves out of the way just to live that expensive, superficial life — driving the latest car and having the latest of everything. Get real, people. This is not living the “American dream,” and if you think that this approach will get you there, you will soon be living the “American nightmare.”

If you are taking home a salary that’s less than your expenses, you cannot afford to spend any more. This is not a complicated mathematical calculation, scientific theory or accounting principle. This is pure common sense. If your income is less than what you have to pay out in loans, credit card arrears, and living costs, things will go from bad to worse.

Now, the mistake that most of you will make is to think that after maxing out your credit card to mitigate against your upcoming monthly expenses, you will need to take out another credit card to use until you are in the clear. That is, IF you are lucky enough to qualify for another credit card.

Now, everyone’s probably thinking to themselves how silly that is. But this is actually what people do. Why would anyone think that in order to solve a financial debt problem, all you need to do is take out another credit card and take on more debt?

If you don’t have it in your account, do not spend it. Use credit cards only for points.

Borrowing With Hope of Getting a Job to Clear Your Debts

Another mistake that people tend to make is to take out a student loan and hope they can land their dream job after college. But in the end, this will only make the boss richer, and you’re going to be the one paying for it for the rest of your life. Look at me, for example. I quit school at the age of 14. I had a passion to become a successful professional soccer player. My dream came through at the age of 18 years; however, it never stopped there. I still wanted more. After playing soccer professionally for a number of years, I went back home and began exploring other job opportunities that could give me financial freedom and enable me to live the lifestyle that I always wanted. Fast forward to today. Now I’m a successful owner of several businesses in the real estate industry.

Related: 12 Reasons You’re Poor

But as many people do, you’ll probably just say to me, “You just got lucky.” If there were none like me, you could be right. But, in fact, the opposite is true. There are many other stories like this about successful business owners and entrepreneurs who never completed college and are now widely recognized and usually rich, to boot. Steve Jobs (Apple founder) dropped out of school at the age of 19, Bill Gates (Microsoft founder) dropped out of college at age of 20, Richard Branson (Virgin Atlantic group founder) dropped out of school at the age of 16, and finally, Mark Zuckerberg (Facebook founder) dropped out of school at the age of 20, just to name a few.

And if you’re still in doubt, let me give you some eye-opening statistics that I found from a study conducted by the 2015 American Household 2015 Credit Card Debt Study. They reported that the total debt owed by U.S. household consumers on student loans is $1.26 trillion.

Now, don’t get me wrong, I am not encouraging you to all quit college and go start your own businesses. All I’m saying is this. Instead of winding up in a situation where you are taking out unwarranted student loans with the hope of landing a job that will someday place you in a position to repay the loan, all I am encouraging you to do is first look for opportunities that will allow you to be financially independent first. It’s time to think smart and work hard!

Do not take out a loan to go to college with a hope to land that job that will make you richer. That route to success has gone out of fashion a long time ago. Find and make your own financial freedom opportunities.


You Are Lazy and Think the World Owes You a Favor

So you want your own house but you still live at your parent’s house, thinking that someday, things will get better. Or you may be employed, but you go to work and complain every day about how unfair your boss is and how broke you are because of your credit card debt and outstanding loans.

At the same time, you may have that great idea to start your business — that real estate idea that you have grappled over but have not done anything in your power to start. It has been proven over and over that in order for you to realize your dream, you have to change the way you think, but it all boils down to how desperate you are. Are you desperate enough? There is a saying that goes, “Desperate times call for desperate measures.” If you find yourself in a situation that leaves you feeling unfulfilled, sad, and broke but you have that one great idea that can turn your life around, it is time to FIX being broke.

Lift your head up and look around you. The only thing that hasn’t changed is you — everything and everyone else has moved on and has left you behind.

Get in a desperate state of mind, as desperate times call for desperate measures. There are too many folks that want everything but don’t do anything to get it.

Time and time again, research has proven that people who fall within these three situations are most likely out of control with their inner life and have somewhat lost sight of the vision that they had for their life. And we all had that vision. Maybe it was to travel around the world, be a real estate mogul or start a band — we all dream of something. Sometimes, though, reality gets in the way, and we forget to fight for it.

So along with the three tips listed in the post, grab these three daily nuggets to help keep you on track and quickly bounce back into gear:

  1. Take control of your thought life by changing the way you think and view the world. Nobody owes you anything.
  2. Create a plan to cut your expenses, which includes creating a budget. Rule of thumb: Never spend more than you earn and save at least 10% of what you earn.
  3. And finally, wake up everyday with your goals in mind, work hard at each goal one step at a time, and you will eventually fix being broke.

And there you go. You’re broke for a reason, but it’s not like you can’t do anything about it. 

Are there any of these issues you’ve overcome? What would you add to the list?

Let me know with a comment!

About Author

Engelo Rumora

Engelo Rumora is the CEO/Founder of Ohio Cashflow and a successful property investor that quit school at the age of 14. He is known for buying “Australia’s Cheapest House” and building a property portfolio valued at over $1,000,000 in only 6 months. To find out more go to engelorumora.com


  1. Excellent Article. Hope the right people read it and take heed. You will never get ahead spending more than you earn and hoping somehow your debts will go away. And if you think about it, we can all cut back on a few things to get where we need to be. The big question is…who is willing to do that? And the answer is….those that are becoming wiser and want to get free from debt.

  2. Maggie Tasseron

    Good article, Engelo! This is just the kick in the pants a lot of people need. Many years ago one of my co-workers asked how I was able to travel on vacation 3 times per year; I pointed out to the parking lot and said “See those cars out there…mine is the oldest”. (BTW, she had just bought a brand new behemoth that probably got 8 MPG.) I bought my first new car at age 40, but I bought my first piece of real estate at 29, and the rest is history.

    • Engelo Rumora

      Sorry to hear Todd,

      I quit school at 14 and it was the best thing that could have happened to me.

      My grammar sucks and my math skills are poor but I still manage to run 5 companies.

      It’s about having the right people doing the thing you can’t 🙂

      Much success

  3. Christy Greene on

    What I am seeing in my younger employees is that even though they have student loan debt, they still live at home with their parents, and continue to bring in their Starbucks coffee EVERY MORNING, and sometimes after lunch, go to Vegas for the weekend and eat out all the time. They have even asked me why I bring my lunch everyday. I have tried to share with them in little snippets during our meetings about finance tips . They smile and nod….and continue with their lifestyles.

    They are amazed when I take few weeks vacation to Fiji, Hawaii, etc. They want it all but they don’t want to do the work. They are completely content to work part time and not pay off debt.

    When I offered a workshop that was free to them to attend regarding paying off student debt, the response I received was…”No thanks, we’re going to Vegas this weekend.”

    I concluded that until the financial strain is too great for them, they will continue to live in denial.

    You have to want it bad enough that you are willing to do almost anything to achieve your goals.

    • Maggie Tasseron

      Hi Christy: I suspect that most of these young people are living “at home” rent-free…big mistake on their parents’ part, IMHO. I started work at 17, immediately after graduating from high school, and when I came home with my first paycheck, my Mom informed me that now I would need to pay rent. This, BTW, after she had told me I couldn’t move out at that time as I first needed to “get some experience”. They charged me $50/month, which in retrospect I think was too much as I was only earning less than $200/month. Well, I paid faithfully and after a year moved to the city to live on my own. Even while paying them, I had still managed to save enough to buy a car and make the move. To this day, I still feel good about never having taken any help from them in any way. Maybe it’s just a matter of personal pride and self-respect, which seem to have gone out the window for the most part since those days. Your young employees will probably learn the hard way, but if their parents keep coddling them that could take awhile.

  4. Great article. Let me see if I agree with the criteria.

    I went to a top 25 graduate business school, but my employer paid for it (I committed to work for five years after that or pay the money back, I worked eight and moved on to better things). Before, I went to an international renowned program abroad on a 50% academic scholarship, worked a computer programming job to pay about 20%, and loaned the rest. Within a year I was debt free. I decided to go there although I had acceptances from top 20 US universities but they offered little or no help.

    So, yes, not getting students loans is key.

    Second, living within your means. My wife and I decided to live with what we could afford on 50% of our income. That meant, we took the bus during the first year, and once we were debt free, we purchased our first car in cash, it was a Chevy Prizm 5 years old with 35K miles on it (cheaper version of the reliable Corolla). Later, we didn’t buy our primary property until we got 30% down. We figured out what house we could affort (at the time it was about $350K) and then decided to buy a house half that price ($175K). So living within your means is key.

    The third (not being lazy), however, I would rephrase as “Don’t be afraid to take risks”. While I agree that many people really expect their parents to do everything for them, I found a big number of people are extremely afraid of taking risks. Myself included. I bought our first investment property seven years ago, and I couldn’t sleep thinking it was a big risk. Buyers remorse almost got the best of me. That is even after having more than 3 years of cash reserves to pay for the mortgage without having a tenant. After we learned the ins and outs, we purchased another house (two years later). The following year, we purchased two more. Unfortunately this year, we had line of sight and were to close on two short sales, but the bank pulled the plug at the last moment.

    Which brings me to perhaps the forth criteria. Be patient. Understand what you want, and what you are comfortable doing. What worked for Joe Smith might or not work for you. I see way too many people trying to imitate what worked for someone without understanding why it worked for that someone, and why it makes sense to try it and be good at it. Some of them fail and never try again. My advice to someone very afraid is to try it on a safe scale. If you fail, you will learn the lessons and it won’t be that relevant. If you succeed it will give you invaluable learning that you can apply to your investment strategy.

    So, I agree with this posting.

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