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Stupid Money Mistakes Broke People Always Make

Many people are left wondering why they are broke every month. Even if they have a decent income, they still don't feel that they have a sufficient amount of money to save up or even to make ends meet. Sadly, one of the most commons reasons for this is that there is a slew of money traps that people fall into that take up an enormous amount of their cash and leave them high and dry. We've put together a list of the top six stupid money mistakes that many broke people make and how to avoid them to get yourself in a better place financially.

Not Automating Retirement and Savings Funds

The best way to save money is where you do not have to do anything. That is why automation is the key to people's financial success. When you create a 401K-contribution plan with your employer, the money comes straight out of your paycheck, and so you do not see it at all. As time goes on, your retirement dollars will get larger and larger. However, most people who are broke don't bother to implement a savings plan for retirement. This is an easy fix, however; automate your retirement and savings account and act as if they were part of your monthly bills.

Using Credit Instead of Cash

One study found that people who use credit cards instead of cash to buy stuff spend an average of 12 to 18 percent more. Additionally, those who use credit cards to make their purchases and then don't fully pay off their credit card balance each month usually spend 50 percent more on all of their purchases when factoring in fees and interest. Instead of using credit to make all of your purchases, learn to shop with cash. This will help you avoid debt and protect you from overspending, which is a common mistake for broke people.

Supporting Expensive Hobbies

Having hobbies can be a great and positive thing, especially when used as a social outlet or a way to unwind. That being said, after some time, people can tend to view their hobbies as a necessity instead of an option, which can become problematic if it costs money. If you are broke, then reconsider your recreational activities and hobbies to see if there may be a cheaper alternative. For example, instead of going to that expensive yoga class, try starting a running routine.

Not Understanding the Value of Your Work

Broke people often underestimate their value. No matter how much or hard they work, they still disparage their worth and value as an employee. However, having this attitude fosters an environment in which you are paid much less than your potential to earn. To fix this, it is crucial that you stop undervaluing yourself. Create a list of the ways in which you go the extra mile with your job duties, and write down the extra things you do for your employer. After a year, go to your boss's office with that list in mind and ask to be considered for a raise.

Making Minimum Credit Card Payments

If you owe $10,000 in credit card debt and only make minimum payments, it would take you 37 years to pay off your balance entirely. In that time, you will end up paying back about $19,000 worth of interest with an 18.9 percent annual interest rate. If you have credit card debt on a number of different credit cards and are only making minimum payments, create a plan to start paying off all your credit cards in a couple of years or consider seeking debt help.

Not Budgeting or Tracking Spending Habits

Creating a purpose for each of your dollars ensures that you pay off as many bills as possible, and will allow you to see the amount of money you need to make to start saving. However, the majority of people do not use budgets, especially if they are broke, which makes it so that they have no idea how much they are spending each month. This is an easy fix, nonetheless. Simply create a budget each month to get a clear picture of how much you need to allocate towards bills and start tracking your spending habits to ensure you are staying within that budget.