Many Americans face a slew of financial burdens, from high costs of living and healthcare expenses to taxes and college tuition. And for some people, these countless burdens can make it seem like they’ll always be poor — or at least “poor” by their standards.
Whatever your definition of “poor” is, there are strategies you can use to build your wealth over time. But before you start building your wealth, it’s important to understand which habits are putting a strain on your finances. Click through to find out why you’ll always be poor — and what you can do to change that.
1. You’re Stuck in a Debt Trap
“When you’re poor, it’s easy to get stuck in a debt trap because you’re desperate,” said Kristin Wong of Brokepedia. “Whether it’s a payday loan, debt settlement scam or even just using a credit card for an emergency, it’s easy to make rash decisions when you’re stressed — and these decisions usually keep people broke.”
2. You’re Ignoring Big Debts
When you’re broke, stacks of bills and overdue notices are a huge source of anxiety and dread. But avoiding those problems and failing to manage your debts only makes them worse, according to Robert Farrington, founder of The College Investor.
“A lot of young adults are burdened by student loans and other debt, yet they don’t realize there are a lot of options out there for them,” Farrington said. “For example, for student loans, there are tons of programs that can help with lower payments and even forgiveness. But you have to take positive action and seek out these programs.”
3. You Feel Powerless
When you’re poor or in the middle of a financial hardship, it can make you feel powerless to do anything to change it. But giving in to those feelings of helplessness will only hurt you, said AJ Smith, managing editor of SmartAsset.
“By getting accurate, unbiased knowledge and advice, people can feel empowered and confident in their personal finance decisions,” Smith said. “They can then take steps to make a better financial future.”
4. You Haven’t Learned About Personal Finance
“Most people are broke because they don’t learn about personal finance,” said the founder of Lazy Man and Money. For example, many people don’t know that the dangers of debt comes from compound interest working against you instead of for you as it does with investments.
“I think the psychology should shift from ‘How can I spend money to make me happy now?’ to ‘How can I use this money to buy me financial freedom in the future?'” he said. “If you are able to make that shift, you should be able to overcome most reasonable hardships.”
5. You Only Pay With Credit
One of the biggest reasons you’re poor might be because you’re “paying with credit,” said personal finance expert Barbara Friedberg.
When possible, consider paying with cash rather than a credit card. You’ll avoid the high interest charges many credit card issuers charge.
6. You Put Today’s Happiness Before Future Financial Needs
Poverty is often generational, according to Luke Landes, a speaker and personal finance writer at Consumerism Commentary. You might be poor simply because your family always has been, “which is one of the hardest environments for making progress,” he said.
“People who should be in good financial shape may not be, often because the decisions they make aren’t aligned with their future financial needs,” Landes said. “Making conscious decisions that require some thought about the future isn’t as satisfying in the moment as choosing something that they perceive to have an immediate positive effect on happiness.”
7. You Lack an Emergency Fund
Jeff Rose, certified financial planner founder of GoodFinancialCents.com, listed “not having nearly enough cash savings in emergency funds” as one of the biggest ways people hurt themselves financially.
Always have an emergency fund. You can start small with $1,000, but work to increase the amount each year.
8. You’re Not Making Savings a Priority
“In my own life, I saw the biggest financial stagnation when I wasn’t paying myself first, even when I had a nice-paying job,” said personal finance expert Philip Taylor of PT Money. “When you get paid, make sure you are saving those first few dollars for your future.”
“Do it automatically each pay period, and you’re more likely to stick with it,” he added. “You get ahead financially by making savings a priority.”
9. You Don’t Course-Correct Your Finances
“There’s almost always a cheaper or better way of doing something, but you have to get into the habit of questioning and challenging your current way of going about it,” said Stefanie O’Connell of The Broke and Beautiful Life.
“Use your creativity and critical-thinking skills to find and implement more cost-effective alternatives, whether it’s renegotiating your insurance rates, switching banks or planning your next vacation,” she added.
10. You’re Spending Too Much on Housing
It might be time to consider moving to a smaller place. “Spending too much money on rent or a mortgage” is the biggest reason people struggle financially, said Andy Josuweit, CEO of Student Loan Hero. “After living in New York City for a few years, I met dozens of young people who were ‘house poor.'”
“These were people who make above-average incomes but end up spending too much on rent,” he said. “As a rule of thumb, you should try to keep housing costs under 20 percent of your income, as opposed to the 28 percent to 30 percent limit that most banks allow.”
11. You Don’t Have a Money Plan
The biggest reason people stay poor, according to Elle Martinez of Couple Money, is because they don’t have a plan for their money. “It is easy to hope that there is money left over at the end of the month, but many times, our behavior gets in the way,” she said.
To curb behavior and work against bad spending habits, she suggested automating bills, saving and investing as soon as paychecks come in. “It’ll cushion the blow when emergencies pop up, and you’ll have something for retirement,” she said.
12. You Don’t Know Where Your Money Is Going
Donna Freedman, a personal finance expert and writer, said the biggest thing she sees keeping people in the paycheck-to-paycheck cycle is not having a budget.
“If you don’t know where your money is currently going, you can’t turn it in the direction you’d prefer it would do the most good,” she said. “When you know you have enough money to deal with all of your needs and some of your wants — plus those pesky emergencies — you can sleep very well at night.”
13. You Don’t Separate Wants From Needs
“People, generally speaking, have a hard time differentiating wants and needs,” said Grayson Bell, personal finance blogger at Debt Roundup. “They use the word ‘need’ for almost everything they purchase, causing them to actually believe they ‘have’ to spend the money.”
“You might ‘need’ a car for transport, but you ‘want’ the luxury model,” he added. “This mentality keeps us down financially.”
14. You Have No Degrees or Training
Louis DeNicola, a consumer expert and writer for Cheapism.com, said that sometimes it comes down to unfortunate circumstances that work against you. Many people lack access to good-paying jobs and have limited time or opportunity to receive training that would allow them to get one of those jobs, according to DeNicola.
15. You’re Investing in Stuff Instead of Yourself
Julie Rains, personal finance writer and founder of Investing to Thrive, said economic disadvantages play a big part in why some people are poor. But that’s not the only thing holding people back.
“Others might find themselves in crises because they have repeatedly under-invested in areas with long-term benefits — [such as] professional career and education, savings, investments — and over-invested and overextended themselves in other areas, such as luxury products and upscale housing,” she said.
16. You’re Trying to Get Rich Quick
Too many people are looking for the quick and easy way out of poverty and are trying to get rich quick, said Jon Dulin, founder of Money Smart Guides. “Whether it be a hot stock, a job or business idea, too many of us chase the idea that we can come into extraordinary wealth overnight,” he said.
“Sadly, it doesn’t work this way,” he added. “You have to put in the hard work to become rich. We see the rich now, thinking they got lucky or made it without much work. But we don’t see behind the scenes at just how much work they put in to get where they are.”
17. You Don’t Stick to a Budget
Having a budget is personal finance 101, yet many people still don’t have a budget or don’t stick to one. “Many end up in financial hardship because they think they don’t need a budget,” said Michelle Schroeder-Gardner, personal finance blogger at Making Sense of Cents.
“No matter how rich or poor you are, a budget is almost always a necessity because it can help you figure out where your money problems are and what you can do to improve your financial situation,” she said.
18. You Don’t Keep Track of Due Dates
“Not planning ahead is the No. 1 reason I was broke as a younger me,” said Linsey Knerl, blogger at 1099 Mom. From not keeping track of due dates and getting hit with late fees to not planning out trips and losing track of deposits and withdrawals that led to overdraft fees, planning was her big challenge, she said.
“It was never about not having enough money initially,” Knerl said. “It was that I was so bad at planning, and I missed important opportunities to hold onto it. It’s the little things that kill a budget.”
19. You Buy Depreciating Assets
“One of the main reasons that people can become poor is that they focus their time on buying depreciating assets like cars, ATVs, boats, etc.,” said Deacon Hayes, personal finance blogger at Well Kept Wallet. “Because of this, they have little resources to build wealth and, therefore, they continue to live paycheck-to-paycheck.”
How can people fix this problem? “Focus on buying appreciating assets like stocks and real estate, which would grow over time and eventually give [you] more resources so that [you] are no longer living in poverty,” Hayes said.
20. You’re Unwilling to Sacrifice
“The No. 1 reason people end up poor or in some type of financial hardship is because of bad behavior,” according to Brian Fourman, personal finance blogger at Luke1428. “Success with money is only 20 percent head knowledge. A person’s actions have to change in order to win — and most aren’t willing to sacrifice and do that.”
21. You’re Trying to Have It All
“People end up broke because they want too many things too soon,” Pauline Paquin, personal finance blogger at Reach Financial Independence.
This is especially challenging for recent college grads who go from living on peanuts to having a livable paycheck but still can’t “realistically afford the new house and the new car and the nights out and the holidays abroad,” she said. This gets particularly dangerous when you start using credit to fund all those purchases, which “can cripple your future financial life.”
Instead of trying to have it all, Paquin advised picking one big “want” to budget for, and leave the rest for the future when you’ve had a chance to build up some savings and earn a pay raise. “Living one more year like a student while saving your first paychecks can help tremendously,” she said.
22. You’re Paying Too Much for Your Cellphone
Lance Cothern of Money Manifesto said that the No. 1 reason people end up broke is that “they buy cellphones and cellphone plans they can’t afford.”
Instead of opting for a top-of-the-line smartphone and unlimited data, he said, “People should stick with cheaper phone carriers that have affordable rate plans, no contracts and lower-cost phones that you aren’t pressured to upgrade every year or two.”
“You can get phone plans that only cost $10 a month plus taxes for a simple unlimited talk-and-text plan if you look in the right places,” he added.
23. You Don’t Have Other Sources of Income
Nick Loper, founder of Side Hustle Nation, said the root cause of being broke is nearly always the same: People “spend more than they make.” “As far as I know, that’s the only cause of bankruptcy,” he said.
“The good news is you can tackle this from both sides of the equation,” he said. “Spend less to live within your means, and work to earn more so you have more financial breathing room.”
Keep Reading: 20 Hidden Sources of Income Lying Around Your House