You will be Broke If you do the things listed below. Poor is a condition of poverty and broke is a state of mind. Being poor is not being able to buy groceries when you are hungry while being broke is having enormous debt but yet being able to purchase a $10 coffee. People are kept in the middle class. They work for 40 years in a job. They may not enjoy it because of these financial transgressions. These are not uncommon situations. Most people default to these financial sins because they are what they observe others doing, what their families did, how they were raised, and because they are unaware of any other options.
Let’s examine the seven financial sins that we must avoid if we desire more from life and our money. You will be broke if you do these things.
Exchange Your Time For Cash
You cannot scale into prosperity if you are constrained by the amount of work you put in. Leverage is the key to wealth, thus employing a financial model that doesn’t demand a perfect correlation between your time and your earnings will help you become wealthy. Your earning potential is constrained by the fact that your time is finite and cannot be replaced.
Lack Of Financial Literacy
Education doesn’t start when you graduate from high school. There is sometimes little to no financial education provided in schools, thus students must educate themselves. Too many people lack basic financial literacy and even fewer understand accounting, business, real estate, or investing. Ignorance in personal money is the first fault.
You must acquire the skills necessary for financial success if you want to repent of this trap and educate yourself. You have a variety of learning options at your disposal, including reading books on finance by writers you enjoy, watching instructional and amusing YouTube channels, or just Googling the information you require. Today, information abounds, but focus and attention are in short supply. Learn about the financial topics you should be knowledgeable about, and educate yourself.
Spend More Money Than You Earn
If you spend more than you earn, you will always be broke. Out of control spending is impossible to overcome. This is the lifestyle creep that the middle class experiences as they update their home, vehicle, or getaway with each income increase, professional advancement, or bonus from their job. You’ll just be sitting in a fancier car or house with no money if you increase your spending and debt in proportion to your income.
Even the highest incomes, such as professional sportsmen and lottery winners, can attest to this. They will lose big sums of money if they don’t know how to invest it, manage it, and make it grow rather than spending it on unnecessary purchases and making poor decisions. However, those who are good with money might start out with nothing and become billionaires because of their knowledge, attention, and discipline.
You won’t become bankrupt if you spend less than you earn; break the cycle.
Maintain Your Debt
Debt can be used to leverage bank capital in real estate and business to make more than you could on your own. However, utilising debt to purchase depreciating consumer goods is a surefire way to become bankrupt. If you have terrible debt, the money that ought to be invested and put toward assets is going into credit card and car payments. Large debt repayments severely restrict your financial options and ruin your positive cash flow.
Bad debt requires payments, but good debt generates cash flow and capital gains. If the value of your home increases, your mortgage may be a beneficial investment; however, if it decreases in value, your car payment may be a terrible one. The less money you have available for investment and asset acquisition, the higher monthly expenses you have. You are probably unable to afford it and are living beyond your means if you use credit cards to make purchases and do not pay the balance in full each month.
You only earn money via a job.
The majority of people start out in life with a job, but it shouldn’t be your sole source of income or how you spend the next 40 years. For risk management in your finances and to increase your wealth, you should have multiple sources of income. The IRS estimates that millionaires have seven different sources of income on average.
- Employment earnings
- Earnings from capital gains
- Interest earnings
- Dividend earnings
- Rental earnings
- Business earnings
Not starting to develop at least some sort of second income early in life is a financial sin. One day, if you do it well, it might rank as one of your only seven sources of income.
Possess No Assets With Cash Flow
Liabilities cost money to own; assets provide you money in exchange for ownership. Owning cash-flowing assets has a profit component. Once you’ve made one cash-generating asset, you can keep making more of them. This explains why there are so many companies with numerous locations; once they develop a profitable business strategy, they scale it up. A long-term cash-flowing asset is what a trading or investing system with an edge is.
A Poor Outlook
While having a broke attitude can ensure that you will never have money. Having a rich mindset is focused on creating wealth. The appropriate optimistic mindset is necessary to seek wealth creation because it is not an easy trip. Because it is a mental model of negativity, victimhood, and frequently jealousy, a broke mindset is simple to spot.
A person with a poor mindset believes they will never succeed and that their present situation is their fate for life. They don’t think they can make money, advance in life, or accumulate wealth. They believe that only egotistical, greedy individuals who exploit others can produce prosperity. The majority also struggle with their finances and believe that money is only useful if it is spent on stuff. They lack self-control when it comes to spending as well as knowledge of investing and saving. For cash flow, having a broke mindset is an unpardonable sin. People with a pessimistic outlook are avoided by capital.