A lack of financial resources is a significant cause of stress. There are many factors that contribute to a small bank account. The most basic cause is outspending your income. No one can spend more than they make indefinitely. Sooner or later, the money runs out.

Several mistakes contribute to financial challenges. Luckily, a few changes in habits can get your finances back in the black.

Do you make these errors?

1. Neglect to pay yourself first. One cause of being broke is the failure to save consistently. Many make the mistake of paying everyone else first with the intention of saving whatever is left over. There’s never anything left over with this strategy. Pay yourself first and then worry about your bills.

2. No emergency fund. Without an emergency fund, your finances can take a serious tumble. You’ll be forced to use credit cards, dip into your retirement accounts, or skip paying some of your bills in order to pay for the surprise expense. All are serious setbacks to your finances.

3. Fail to consider the long-term ramification of your choices. People that overspend are often focused on their short-term pleasure. Make financial decisions with a long-term focus and you’ll find your wealth growing year by year.
   

4. Lack the necessary knowledge. Math, science, and English might be required in high school, but a personal finance class is rarely required. Unless your parents were financially responsible and took the time to share their wisdom, you’re on your own. Buy a few books or research online and begin to educate yourself.

5. Avoid using a budget. Even millionaires can go broke without a budget. Sit down and create a reasonable budget that allows you to save at least 10% of your net pay.

6. Spend money on “wants” instead of needs. We’d all like a sports car or a 70” TV, but these aren’t responsible purchases for most of us. Try spending your money on a stock, bond, or mutual fund. Most assets lose money quickly. As much as possible, limit your spending to needs rather than wants.

7. You’re stuck. If you’re in a challenging financial situation, it’s easy to feel hopeless and stuck. Taking action becomes difficult. Getting yourself out of a financial hole can take time, but it’s doable. Get help from an expert if you need to.

8. Overspend on your housing and transportation. It’s easy to make the mistake of purchasing as much home as your finances will allow. The same goes for that new car. However, it’s important to keep these expenses under control.

9. Excessive use of credit. Using debt to purchase a home or pay for college can be a reasonable use of debt. Most other uses are toxic to your finances. You ultimately have to pay for an item or service, plus interest, when you use debt to make the purchase. Dealing with debt is like running against the wind. It makes everything harder.

10. Spend more than you make. This is the core reason for a lack of wealth. You can never run out of money if you spend less than you make. Our society encourages unnecessary expenditures. Have the discipline to spend less that you earn.

Being broke is common. The only way to avoid being broke is to save regularly and spend less than you earn. Begin today to save at least 1% of your paycheck. Resolve not to use your credit cards. Keep increasing the amount you save each month and look to the future. You can live a life of financial abundance.

Silvana Jimenez