I’m a Financial Expert: This Is Why You’re Still Broke
Written by
Vance Cariaga
Edited by
Jenna Klaverweiden
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While there’s no standard definition of being “broke,” it usually means your debts exceed your assets. This has become a growing problem in the United States due to the combination of economic challenges and poor financial decision making.
The number of bankruptcy cases involving individuals and businesses has grown in double digits the last two years, according to Debt.org. In 2024, more than 517,000 bankruptcy cases were filed in the United States.
Stubbornly high inflation has contributed to the problem, along with high interest rates on loans. But beyond economic factors, why is it so hard for some people to dig themselves out of a financial hole? GOBankingRates asked a financial expert to share his insights on why you might still be broke.
You Don’t Have a Clear Budget or Financial Goals
This is one of the top reasons people stay broke, according to Chad Cummings, an attorney and CPA at Cummings & Cummings Law, who previously worked in finance and tax with American Airlines, PwC and JPMorgan Chase.
“Without a plan, money easily slips away, leaving little to save or invest,” he told GOBankingRates.
If you haven’t done so already, Cummings recommended creating a monthly budget and setting specific short- and long-term financial goals. This “gives your money purpose” and “keeps you accountable.”
You Spend More Than You Can Afford
Living beyond your means is another reason you might stay broke — especially if you pile up debt to fund splurges.
“Paying interest on debt leaves less money available to build wealth, trapping you in a paycheck-to-paycheck cycle,” Cummings said. “The solution is to cut unnecessary expenses and avoid new debt. Align your lifestyle with what your current income can support. As income increases, resist the urge to inflate spending. Use raises or bonuses to pay down debt or boost savings instead.”
You Don’t Pay Yourself First
“Paying yourself first” basically means contributing to your savings and retirement accounts before spending money on nonessentials. Many people wait until they earn more money before establishing a regular savings plan — a mindset that often backfires, according to Cummings.
“As income rises, expenses often rise too, so the habit of not saving continues,” he said. “Without regular saving or investing, you miss out on compounding growth and stay unprepared for emergencies.”
The way to fix this problem is to treat saving as a “non-negotiable expense.” Saving early and contributing regularly “will build wealth over time and provide a safety net for the unexpected,” he said.
You Don’t Build Your Financial Knowledge
You need a basic understanding of credit, interest, taxes and personal finance to stay out of financial trouble. Without this knowledge, it’s “easy to make costly mistakes like running up high-interest debt or missing out on tax savings,” Cummings said.
“The solution is to increase your financial knowledge and seek guidance,” he explained. “Read up on personal finance basics or consult a financial planner.”
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