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You’re broke? No wonder you have no money!

August 15, 2010

Figured I’d make my first post something simple. Straight and to the point.

Most of my friends on Facebook are college students. There’s usually another adjective that joins “college students.” That adjective is “broke.”

The other day, one of my friends mentioned that we were both “broke college students.” Now, after working part-time for a few years, and private tutoring on the side, I don’t really like calling myself “broke.” So I disagreed.

Broke, I believe, is a mentality. Actually, dare I say–it’s an excuse. It’s a person’s excuse explaining why they have no money. Why they can’t afford to visit you. Why they can’t afford to invest their money in some worthwhile endeavor. It’s merely an excuse.

Last year I asked my friends if they wanted to go laser tagging with me. These were friends that I get to see once or twice a year. Most of the replies were, “I’d love to, but I’m broke.” Now I didn’t see that as an excuse–I saw it as them not having money. Nothing wrong with not having money.

The problem is that most people equate “not having money” with “being broke.” I don’t think this is the case. One of my relatives makes well over RM30,000 a month–that’s USD10,000 a month, in a country whose standard of living is RM40,000 a year. However, he’s in debt up to his ears. On the other hand, one of my other relatives makes around USD26,000 a year, and she’s able to support her mother and help out her own family. One’s broke and the other isn’t. One has money and the other doesn’t. I’ll let you figure out who’s who.

What’s the point of this post? Simple. No matter how much money you make, if you spend more than you earn, you’re gonna be broke. You’re gonna be in debt. However, if you budget and prioritize your costs, you’ll never be in debt. Of course, there come those times where your car breaks down and you need to charge your credit card. Or you break your leg and need to pay for hospital expenses. Now, God forbid that either of these things happen to you–but as the saying goes, $@&# happens. But they always left out the latter part of the saying–it’s what you do about it that matters. So if something happens and you need to charge your credit card or you DIE (this is rarely the case), then charge your credit card. No use not being broke if you’re dead. However, for future expenses, you’ll need to budget your debt and pay it off ASAP.

Now I know first-hand that most families spend more than what they earn. I also know first-hand that the most families who don’t spend more than what they earn spend ALL of what they earn. So at the end of the month, what do they say? “I’m broke.”

Here’s a surefire way to ensure you’ll never be broke for the rest of your life.

First, allocate your monthly income. Many people have a single stream of income from their jobs. That makes this step easy.

Second, allocate your monthly expenses. The necessities. Usually they’re rent (or mortgage), utilities, food, gas, cell phone bills, and car payments. They do NOT include things like Netflix, cable (I’ve lived without cable for 7 years), your subscription to that soap opera magazine, or anything like that. It’s things like these that make many people go broke. Disposable income is fine to spend on cable, but we’re trying to set up a budget. Budget for your priorities then you can spend on whatever you want.

Third, take 10% of your monthly income. Add it to your monthly expenses. Call it SAVINGS. Save 10% of your monthly income and treat it as you would your rent. Once you put money into your savings account, DO NOT take it out. Have you ever asked your landlord if you could have last month’s rent back, that you’d pay him later? Probably not without him laughing in your face, telling you to tell him another joke! Treat your savings as you do your rent.

If you cannot save 10% because your necessary monthly expenses are too high, then start with 5%. Or even 1%. The point is to get into the habit of saving money. Then you may gradually increase to 10%. Or if you’re feeling really frugal, you can increase it to up to 25%! But make 10% your goal.

After all’s said and done, the rest of your money is free to spend wherever you want. Of course, it’s nice to have an “emergency funds” account for when your car breaks down (and trust me, it will when you least want it to). I highly recommend an account such as this, so you won’t have to go into debt to pay for a “$&@# happens” situation. After all, would you rather pay interest on your credit card or keep that money for yourself? Credit card companies make enough money from broke people, so I’d rather keep that money for myself.

So those are my tips on how to save yourself from being broke.

Want to learn from a professional? Check out Brian Tracy’s Getting Rich Your Own Way: Achieve All Your Financial Goals Faster Than You Ever Thought Possible!

Got a tip? Feel free to post in the comments! Think my tips suck? Post those complaints in the comments as well!

Until next time,  stay strong!


6 Comments leave one →
  1. davidgoad permalink
    August 15, 2010 9:14 pm

    You’re already quoting Brian Tracy at age 20? You’ve got a bright future ahead of you Rasheed 🙂

    • August 15, 2010 9:21 pm

      Thanks Mr. Goad! I’m lucky to have a mother who has a library full of Tracy’s, Kiyosaki’s, Ziglar’s, Robbins’, and other great authors’ books! I just gotta “check it out” from my own home library!

  2. August 24, 2010 11:25 am

    Great fundamental message. I completely agree with getting yourself into the habit of saving 10% of every paycheck. After two years of going to college without working, I’ve made the switch to a working man and have started getting into the habit myself.

    Something to look into for those who have accumulated a small sum is investing. For those new to investing, I’d recommend checking out a popular podcast called “Wallstreet University” available for free on iTunes. Two friends of mine who are now working at hedge funds in San Fransisco and LA started this project with great success.

  3. August 31, 2010 2:19 am

    This a truly great post and may be one that should be followed up to see how things go

    A companion e-mailed this link the other day and I’m eagerly looking your next content. Proceed on the top-notch work.

    • August 31, 2010 7:38 pm

      Thank you! I am currently trying to figure out a weekly schedule to discuss things, such as every Monday would be financial information, Tuesdays time information, etc. But I will be following up on this post in the near future! I appreciate the support 🙂

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