do you ever look around and wonder why so many people struggle financially most people have some
form of education and many work full-time jobs yet they still complain that they never have any money
left at the end of the month why is that hopefully I didn't just describe your current financial
situation but whether you're living paycheck to paycheck or on your way to becoming rich there
are certain habits you must be aware of that can limit your ability to grow your wealth and in
this video I will share with you ten reasons why you will always be broke and make sure to watch
until the end as the final reason is one that you don't want to miss believe it or not millions of
Americans live beyond their means between the rise in social media and the ever-increasing number of
new gadgets - by resisting our temptations to spend can be nearly impossible unfortunately
not being able to control these temptations can have dire financial consequences in fact a recent
survey found that about 1/3 of people ages 30 to 49 had more credit card debt than savings imagine
being middle-aged and having absolutely nothing in your bank account to show for your years of
work I think the question most of us need to ask ourselves is what drives us to spend so
much behavioral economists have been studying the nature of spending for years and have identified
the 10 main reasons people overspend which I will now outline reason number one you're not
selective in your spending in a world of scarcity choosing one thing means giving up something else
when we spend money on one thing it's money that we cannot spend on something else now or later
for instance if you choose to attend a four-year college program then you're giving up the salary
you could be making if instead you work full-time during these four years or if you have only $1,000
and buy a new TV then the opportunity cost is spending that same money to buy a new computer
in short there's an opportunity cost everything we do and that cost is expressed in terms of the next
best alternative for example the true benefit of buying a new car can be assessed in terms of
other equally significant items we could have done with the money unfortunately when the next best
alternative option is considered people tend to lack the ability to abstain from choosing between
either one and instead decided by both often the latter being on credit so in the example I just
provided the same person would not only buy the new TV with $1,000 he had but would then charge
the new computer to their credit card causing them to overspend to satisfy the temptation
to have both devices as this behavior becomes more routine the overspending only gets worse
making your chances of building wealth slim to none reason number two you don't see the
bigger picture have you ever been gifted money for clothes or to put towards a new phone and
while you're drowning in debt you still use that money for its intended purpose you see most of us
perform mental accounting by dividing our money into separate mental accounts such as accounts
for food clothes rent school supplies and play money and when done right we spend based on the
dollar values we attribute to these categories in short we only consider the opportunity cost
within a specific account without looking at the bigger picture for example you may have a line of
credit with $5,000 outstanding that you should put your gift money towards but because it was
gifted with the intention of being used for a new phone or outfit you have mentally tagged
that money into its respective account and will choose not to use it for more beneficial purposes
instead you should be looking at your finances using a holistic perspective when you have a
cash inflow assess where the money will be best put to use rather than allocating it using mental
accounting reason number three you overspend on special occasions have you ever been on a diet
and decided that just for one night you would break your diet to celebrate a special occasion
it could be your birthday a holiday or just a random Friday night and while it feels good to
indulge from time to time unfortunately those calories still count well the same phenomenon
takes place when it comes to spending we tend to overspend on special occasions birthdays are
Christmas because we don't keep track of just how many of them we have consequently we end
up spending over our normal budget failure to incorporate an exceptional purchase into our
budget as one in a series of special purchases can encourage overspending luckily you can budget for
infrequent expenses by creating special savings accounts earmark specifically say for birthdays
so that you don't hinder your savings progress by enjoying yourself from time to time reason number
four you overvalue present pleasure present bias occurs when individuals place extra weight on more
immediate rewards than those in the future for example my future self may want to buy
a home but my present self wants to splurge on a tropical vacation it often seems illogical to be
giving up the potential for large future awards in exchange for momentary pleasures the reality
is that the further into the future the reward is the harder it is to keep its value in mind
in fact this is the reason most people fail to put away the money required to fund their retirements
while most people could be millionaires in their retirement years by investing consistently from an
early age they instead succumb to spending on $8 coffee's in the newest iPhone in essence the more
we disregard our long term interests in favour of immediate gratification the more likely we will be
to have an overspending problem which is why you should write down your short medium and long term
financial goals and review them daily so that you can keep those longer-term rewards at the
forefront of your mind reason number 5 the east of credit card spending in addition to the present
bias that makes us overvalue our current spending versus future rewards the use of credit cards to
pay also increases the potential for overspending you've probably experienced it yourself that it's
much easier to swipe your credit card to pay for something then it is to open your wallet and pull
out cash and this phenomenon has been researched extensively in fact a 2001 study found that
shoppers who rely on credit cards is their form of payment compared to those who only pay with
cash spend a hundred percent more hence making overspending that much easier and this makes
sense when you pay with cash you can literally see your funds diminishing whereas paying with
credit doesn't cause the same emotions to resonate so if you want to spend less take out the cash you
want to spend every month and once that amount is gone you must wait until the following month to
make any of your desired purchases reason number 6 you don't believe in yourself what you believe
about this statement will determine if it's true if you believe you're always going to be broke
you're probably right and guess what what you believe has the direct influence on what you do
so if you believe you're always going to be broke you're probably not actively seeking ways to get
ahead luckily your attitude is something you have control over and when that is paired with positive
action then achieving financial success is well within the realm of possibilities take Elon Musk
is an example most people doubted that he would be able to build his own aerospace company but
the business magnate has been able to not only build SpaceX to the size it is today but it's also
Sina's own rockets into space proving all those non-believers wrong so when it comes to you and
your money believing yourself if you're in debt start making payments to lower your balance if
you've been putting off investing for retirement then set up a 401k at work believ an act towards
success and I promise you will achieve it reason number seven lack of willpower willpower refers
to effortful control that is exerted with the purpose of controlling our impulsive behavior
I like to look at willpower as a resource that we deplete over the course of every single day
you start each day with a tank full of willpower and as its depleted you become more inclined to
act on impulse and are more likely to be swayed by desires urges and cravings although you may regret
them in the long run this insight suggests that shoppers who are tired or distracted will likely
increase impulse purchases this is why you need to ask yourself how much willpower you have available
in making financial decisions if you're well rested and relaxed you will be in a much better
situation to make a good spending decision than if you had just finished a full day's worth of work
and are stressed out by all the work you foresee having the following day let your willpower be
a tool and not your kryptonite reason number eight retail therapy some people relieve stress
by working out others talk out their feelings with friends and sadly some people resort to compulsive
spending to overcome their emotions while detrimental to your bank balance the dopamine
spike that spending offers has been proven time and time again to provide an immediate improvement
to a Shoppers mood you see shopping allows people to visualize themselves in a better life where
they're dressed in nice clothes are surrounded by nice things buying makes these visualizations a
reality there's no doubt that this form of therapy works which is why so many people partake in this
behavior in fact a 2016 survey found that 96% of adults and 95% of teens participate in retail
therapy making spending a mood enhancing tool used by just about everyone reason number 9
shopping addiction beyond periodic retail therapy lies the potential for developing a real shopping
addiction a shopping addiction is characterized as an impulse control disorder and about 6%
of the population could be considered compulsive buyers now a person cannot be classified as either
a compulsive buyer or not this disorder exists along a continuum in reality there are excessive
shoppers and then there are compulsive they buy things they do not need and often cannot afford
and place their work their families and their mental health in jeopardy some of those people
who end up in bankruptcy or binge buyers suffering from a disease similar to alcoholism the most
effective first step for treatment is to identify why and how you're shopping initially became a
problem experts suggest starting a journal to keep track of your triggers which is the first
step in tackling this overspending issue reason number 10 you justify your unnecessary spending
you've just finished another grueling 40-hour work week at a job you hate and the only thing you can
think about is going over to the mall and treating yourself to a new outfit that you can wear out on
the weekend does this sound like you I hope not but unfortunately this is the mindset that many
people have they absolutely must find some sort of relief from their 9 to 5 grind and one of the
only ways they know how to make themselves feel better is by turning to retail therapy however
the spending high you gain from swiping your credit card will not resolve your discontent
with your job or your life and will in fact only make things worse therefore if you want to ditch
the broke mindset then stop justifying unnecessary purchases and start putting that hard-earned money
to work so that you can make strides in your path towards financial success thank you guys so much
for watching give us a big thumbs up and subscribe with that said I'll see you in the next one