Why Most People Stay Broke: 7 Habits to Break Before 30

Introduction: Why do so many people – even those with decent incomes – still struggle financially or live paycheck to paycheck? The truth is that money problems often have more to do with habits than income. In fact, over half of Americans (53%) say they live paycheck to paycheck, including one in five households earning over $150,000 a year. This means even high earners can stay broke if they fall into certain behavioral traps. The habits we form in our 20s around spending, saving, and debt tend to stick with us. Breaking these bad financial habits before 30 is crucial for building long-term wealth and achieving financial freedom. As personal finance author John C. Maxwell famously quipped, “A budget is telling your money where to go instead of wondering where it went.” In other words, if you don’t take control of your money, your money will control you. The good news is that you can change course early – your 20s are the perfect time to fix these mistakes, while time is still on your side. Below we’ll explore 7 common habits that keep people broke, with explanations of why each habit is so financially damaging, real data and expert insights to illustrate the point, and practical step-by-step advice to help you break free. Whether you’re a student, young professional, or aspiring entrepreneur, eliminating these habits now will set you up for decades of financial success instead of a lifetime of living paycheck to paycheck.

A young couple stressed over bills and finances, a common scene for those living paycheck to paycheck without a solid financial plan.

Habit #1: Spending Without a Budget (Living Paycheck to Paycheck)

What it is: This is the habit of not having any budget or spending plan – money comes in and goes out with little tracking or intention. You pay bills and buy what you want until the money’s gone, often living paycheck to paycheck. Without a budget, it’s easy to spend more than you earn or fritter away cash on non-essentials. Many people in their 20s avoid budgeting because it sounds restrictive, but failing to budget is a recipe for staying broke. If you don’t have a plan for your money, you’ll constantly wonder where it went. In fact, a widely cited Gallup survey found that only about 32% of American households keep a written or digital budget – meaning the majority are flying blind with their finances. It’s no surprise, then, that 53% of Americans are one unexpected expense away from financial trouble (living paycheck to paycheck). When you spend without a budget, you tend to overspend on wants, neglect savings, and rely on credit to cover shortfalls. This habit keeps you broke because you never deliberately allocate money toward building wealth. As the saying goes, “If you don’t tell your money where to go, you’ll end up wondering where it went.” Without a budget, every month becomes a cycle of money in, money out – with nothing left for you.

Why it keeps you broke: Living without a budget often means no consistent saving and no emergency fund, so any surprise expense (car repair, medical bill) throws you into debt. You also risk mindless overspending on little things that add up – $10 lunches or $5 lattes seem small, but without tracking, you might burn hundreds of dollars a month on such impulse purchases. One survey found that 16% of Americans spend more on impulse buys than they invest in retirement most months – a clear sign that unplanned spending can crowd out wealth-building. Budgeting might sound tedious, but not budgeting leads to financial chaos. People who don’t budget often struggle to pay bills or feel “broke” regardless of income because their spending expands to use up all available cash. If you always pay yourself last (i.e. save only if there’s anything left, which there rarely is), you’ll never get ahead. To illustrate, personal finance educator Dave Ramsey notes that without a budget, it’s easy to spend everything and make everyone else (landlord, utility company, stores) rich while you stay with nothing. The result is a perpetual cycle of stress and scarcity – you’re one paycheck away from disaster. Budgetless spending also tends to mask deeper issues: you might be buying things you “think” you can afford, only to find out later you can’t. This habit deprives you of the clarity and control needed to improve your finances. It keeps you broke because it prevents any systematic saving, making it nearly impossible to accumulate wealth or invest for the future. As one financial planner advises clients, living without a budget often means “nothing ever changes – some people even avoid checking their bank account because they feel hopeless”. In short, failing to budget guarantees you’ll always be reacting to money problems instead of proactively building wealth.

Real-world example: Imagine two friends, Alice and Bob, who each earn $3,500 a month in their mid-20s. Alice never bothers to budget – she pays her rent and bills, then uses her debit and credit cards freely for daily expenses and fun. She often treats herself to dinners out, new clothes, and weekends away, figuring “I make decent money, I deserve it.” By the next payday, Alice’s bank account is nearly empty, so she never consistently saves. When an unexpected $500 car repair pops up, she puts it on a credit card because she has no emergency fund. Bob, on the other hand, keeps a simple budget. He uses the 50/30/20 guideline – about 50% of his take-home pay goes to needs (rent, utilities, groceries), 30% to wants (dining out, entertainment), and 20% to savings and debt repayment. Because Bob tracks his spending, he notices he was wasting $200 a month on food delivery, and he cuts that in half by cooking more. Over a year, Bob manages to save a small emergency fund and start investing in an IRA. Alice, meanwhile, stays stuck living paycheck to paycheck. In this example, Bob isn’t earning more than Alice – he’s simply allocating his money more intentionally. Alice’s lack of a plan keeps her broke despite an average salary. This scenario plays out in real life for millions; surveys show only 32% of households use a formal budget, and those who don’t often struggle to save anything. The difference is clear: without a budget, it’s almost impossible to get ahead financially. Alice constantly asks “Where did all my money go?” while Bob told his money where to go.

How to break it: The cure for uncontrolled spending is to start budgeting in a way that works for you. This doesn’t mean you can’t have any fun – it means giving every dollar a purpose (including fun money) so you have control over your finances. Here’s a simple framework to break the no-budget habit:

1. Track Your Expenses for One Month: Start by seeing where your money currently goes. Use a spreadsheet, a budgeting app, or even just a notebook. Record every expense for 30 days – bills, coffee, groceries, etc. Most people are surprised by how much the “little things” add up. Awareness is the first step. For example, if you find you’re spending $300 a month dining out, you might set a goal to cut that to $150 and free up $150 for savings.

2. Create a Simple Monthly Budget: Plan your next month’s spending before it begins. List your take-home income, then list all your expected expenses. Prioritize needs (housing, utilities, food, transportation, minimum debt payments), then wants (entertainment, eating out), and include saving/investing as a non-negotiable category. A popular rule is the 50/30/20 budget – aim to spend no more than 50% on needs and 30% on wants, while allocating at least 20% to savings and debt payoff. Adjust the percentages to fit your life, but ensure some portion goes to savings first. Essentially, pay yourself first (even if it’s 10% of your income to start) rather than hoping something remains at month’s end.

3. Use Tools and Automate: Make budgeting as easy as possible so you’ll stick with it. Consider using a budgeting app or even the envelope method – whatever keeps you accountable. Automate transfers to savings or investment accounts right after payday (so you don’t “feel” that money as available to spend). For instance, set up an automatic 10% paycheck deposit into a savings account or 401(k). This forces you to live on the remainder. Throughout the month, check in with your budget at least weekly. If you overspend in one category, adjust another. Over time, this becomes a habit and you gain full control of your finances. Remember, a budget is not a jail sentence – it’s a plan for financial freedom. It lets you consciously decide where your money goes, so you’re in charge. Breaking the no-budget habit is the cornerstone of escaping the broke life. Once you master it, you’ll start seeing money left over for savings and future goals instead of the constant zero balance cycle.

Habit #2: Impulse Buying and Emotional Spending

What it is: Do you often buy things on a whim – grabbing items because they’re on sale, trendy, or give you a quick thrill – only to later wonder why you spent so much? Impulse buying (unplanned, spur-of-the-moment purchases) and emotional spending (shopping to cope with feelings or boredom) are habits that drain your wallet and keep you broke. This habit is common in our 20s, when social media ads and peer pressure can easily trigger “I gotta have that!” moments. Impulse spending ranges from small daily indulgences (that extra coffee, a cute top you didn’t plan to buy) to big splurges (a new gadget or weekend trip booked spontaneously). The key is that these purchases aren’t budgeted or truly necessary – they’re driven by temptation or emotion in the moment. Over time, these unplanned buys can add up to huge amounts. Consider this: American consumers spent $150 on average per month on impulse purchases in 2023, which is $1,800 a year gone with little to show for it. Even more alarming, a recent NerdWallet survey found 22% of Americans made an impulse purchase in the last year that significantly hurt their finances. That could be anything from an expensive gadget put on a credit card to a shopping spree that emptied their savings. Impulse buying often stems from emotion – we’re sad, stressed, or even just enticed by a flashy sale – and we convince ourselves “I deserve this” or “It’s a great deal!”. But the dopamine rush of buying is temporary; the bill is very real and can keep you broke. In short, this habit is about choosing instant gratification over long-term goals.

Why it keeps you broke: Impulse spending erodes your ability to save or invest because you’re constantly leaking money on non-essentials. These purchases often land on credit cards as well, racking up debt (a double whammy habit we’ll discuss further in Habit #3). Even if each impulse buy seems small, they accumulate. For example, an average of $150/month on impulse buys means $18,000 evaporated over 10 years – money that could have been growing toward a house down payment or business investment. Shockingly, about 1 in 6 Americans (16%) admit they spend more on impulse purchases than they contribute to retirement savings most months. That means short-term whims are literally outweighing their future financial security. This habit also often comes with buyer’s remorse – you feel guilt or regret later, which can kick off a vicious cycle: feeling bad, then buying something else to feel better. Retailers and credit card companies love impulse buyers, because they tend to overspend. But for your personal finances, it’s disastrous. You might find your bank account empties out much faster than expected or your credit card balance keeps growing, and you’re not sure why. It’s death by a thousand cuts – those spontaneous $20-$50 buys throughout the month that sabotage your budget. Moreover, impulse spending lacks alignment with your real needs or goals. Money that could fund your education, a startup idea, or build an emergency fund is instead frittered on clothes you wear once, gadgets that collect dust, or nights out you barely remember. Over time, this leaves you with lots of stuff but little wealth. Financial experts often point out that we live in a consumer culture where it’s easy to confuse “wants” as “needs.” Impulse buying feeds that confusion and keeps people broke by preventing them from accumulating meaningful savings. It also often leads to clutter and financial stress – you have piles of purchases, but also mounting bills. In summary, impulse and emotional spending prioritizes immediate pleasure at the expense of long-term prosperity. Until you break this habit, it’s like trying to fill a bucket that has a leak – money will always slip away, no matter how much you earn.

A young woman on a shopping spree with bags in hand – impulse purchases can be fun in the moment but often lead to overspending and post-shopping regret.

Real-world example: Think of Sam, a 24-year-old professional who earns a modest income. Sam doesn’t consider himself “bad with money” – he pays his bills on time – but he can’t seem to build any savings. One look at Sam’s spending reveals the issue: every week, he makes a few impulsive buys. On Monday, he’s feeling down, so he orders $40 of takeout and dessert to treat himself. On Wednesday, he sees an Instagram ad for new sneakers – they look great, and even though he has similar pairs, he clicks “Buy Now” and spends $120. Over the weekend, he goes to Target for toiletries but ends up grabbing some gadgets and home decor, adding another $60 of unplanned spending. None of these single purchases break the bank, but by month’s end Sam’s impulsive spending might total $300 or more. That’s $300 that could have gone to his student loan or savings, but instead it’s gone with nothing to show except maybe clutter and a temporary mood boost. Over a year, this habit could cost him $3,600+. Now imagine if Sam instead invested $300 per month – in 10 years with compounding, that could grow substantially. The opportunity cost of impulse buying is huge. Another real scenario: many people fall for sales and marketing tactics – “50% off today only!” – and buy things they didn’t budget for. A Bankrate survey noted Americans impulsively spent $71 billion in a year on purchases influenced by social media ads alone. For instance, your friend sees a flash sale on tech gadgets and drops $500 spontaneously. If she didn’t have that $500 spare, it might sit on her credit card accruing interest (making the “deal” very costly in the end). These examples show how impulse spending directly undermines financial stability. The people in these scenarios often end up asking for help or using credit to get through emergencies because they never accumulated savings – their extra cash leaked away on impulse buys. If you find packages arriving at your door you forgot you ordered, or frequently say “I really shouldn’t have bought that,” you might be trapped in this habit. It’s extremely common, but also incredibly costly over time.

How to break it: Curbing impulse spending is all about building awareness and creating speed bumps between you and purchases. Here are concrete steps to regain control over your spending impulses:

1. Use the 24-Hour Rule (Delay Gratification): Make it a personal policy that for any non-urgent purchase above a certain small amount (say $50, or even $20 if you’re really struggling), you will wait 24 hours before buying. Often the initial urge will pass, or you’ll realize you don’t truly need the item. Simply forcing yourself to pause can prevent countless impulsive buys. Some people even leave items in their online cart for a day – if you still strongly want it later and it fits your budget, fine; but many times you won’t. This rule trains you to separate emotion from spending decisions.

2. Set Up Barriers and Budgets for “Fun Money”: Allocate yourself a monthly “allowance” for discretionary/impulse spending – an amount you can afford that won’t derail your finances (it could be $100, $200, etc., depending on your budget). Keep this fun money separate – maybe withdraw it in cash or use a prepaid card. Once it’s gone, it’s gone. This way, you still enjoy guilt-free splurges but within limits. Additionally, unsubscribe from promotional emails and avoid mindless scrolling of shopping apps or sites, which fuel temptation. If you know Amazon one-click buying is your downfall, remove your saved card info so it’s not so easy to buy. These small friction points help reduce spur-of-the-moment purchases.

3. Practice Mindful Spending and Identify Triggers: Take note of when and why you impulse spend. Is it when you’re stressed? Bored at night scrolling on your phone? Shopping with certain friends? Once you spot your triggers, find healthier responses. For example, if sadness or stress makes you want to shop (classic “retail therapy”), find a no-cost alternative to boost your mood – call a friend, exercise, watch a movie. If boredom online leads to late-night Amazon buys, set a rule like “no shopping apps after 8pm” or keep your phone out of reach. Another tip: implement a waiting period and an approval process for yourself – e.g., “If I see something I want, I’ll add it to a wish list and revisit it in two weeks. If I still truly want it and it fits my budget, then I can consider buying.” Often, you’ll find the impulse fades. To reinforce mindfulness, remind yourself of your bigger goals: “Would I rather have this $50 item now, or be $50 closer to my Europe trip fund or new business venture?” Visualize the trade-off. Keeping a picture of your goal (like a home or car you want to buy) near your cards or on your phone can literally make you pause and think. By implementing these strategies, you’ll transform from an impulsive spender to an intentional spender. You can still enjoy shopping and treats, but on your terms and within limits – which is key to not staying broke.

Habit #3: Relying on Credit Cards and High-Interest Debt

What it is: This habit is about using debt as a crutch – constantly swiping credit cards or taking out loans to cover expenses you can’t truly afford, and then carrying those balances. Many young adults fall into the trap of buying now and paying later (plus interest), whether it’s putting daily purchases on a credit card and paying only the minimum, or financing a lifestyle with personal loans, “Buy Now Pay Later” plans, etc. If you routinely carry a credit card balance or have mounting high-interest debt (like payday loans or consumer loans), you’re essentially living beyond your means and borrowing from your future income. Relying on debt to get by is a major reason people stay broke. It might start innocently – you had an emergency or you really wanted that new phone – so you put it on a card. But if you don’t pay the full balance, interest builds, and soon a $500 purchase can turn into $600 or more of debt. Then, because credit gives an illusion of having more money, you might do it again…and again. Suddenly you owe thousands. The average American’s credit card balance is around $5,500–$6,500, and with interest rates now averaging about 22% APR, that debt can spiral quickly. Using debt for consumables (clothes, eating out, gadgets) is especially harmful because you’re paying interest long after the item is worn out or forgotten. This habit also includes only paying minimums on your cards, which keeps you in debt for years. Essentially, relying on credit or loans to float your lifestyle means you’re spending money you haven’t earned yet. It creates an illusion of affordability while quietly digging a financial hole.

Why it keeps you broke: High-interest debt is one of the biggest wealth killers. When you carry debt, your income is constantly siphoned off to pay interest – money that goes straight into lenders’ pockets instead of building your future. For example, if you have the average credit card balance (~$6,500) at ~22% APR and make only minimum payments, it would take over 6 years to pay off and cost roughly $3,000 in interest on top of the principal. That’s $3,000 essentially wasted – interest is the price of borrowing, and it’s very expensive. In 2024, Americans paid a staggering $254 billion in credit card interest and fees. That is money that doesn’t buy anything for you – it’s the consequence of past spending. Living in this debt cycle means a portion of every paycheck is already spoken for by your creditors. It’s hard to get ahead or save when you’re forking out $200 in credit card payments each month for stuff you bought long ago. Debt also tends to snowball: you pay one card late, fees get added, your interest rate might jump, and your balance grows. Or you get trapped paying one card with another (robbing Peter to pay Paul). The stress of juggling debt can even lead to more impulse spending as “escape,” creating a vicious loop. Moreover, relying on credit often means you haven’t built an emergency fund, so the next unexpected expense forces you into even more debt. The habit prevents wealth accumulation because instead of earning interest on savings or investments, you’re paying interest to banks. As financial author Robert Kiyosaki says, “Each month, your cash flows to either make you richer or someone else richer.” When you carry debt, you’re making the bank richer at your expense. Psychologically, living on debt also delays confronting overspending – it masks the problem until the debt load becomes overwhelming. Some people in their 20s only make minimum payments thinking it’s manageable, not realizing they’re mainly paying interest and barely chipping away at principal. For instance, a typical credit card minimum might be 2% of the balance. On $6,000 debt, 2% is $120 – you pay that, but maybe $110 of it is interest and only $10 actually reduces your balance. That’s why people stay broke for years carrying debt – they mistakenly believe they’re handling it, while in reality they’re stuck. In short, using credit cards and loans as an extension of your income ensures you’ll always be paying for your past instead of investing in your future.

Real-world example: Consider Jane, 28, who loves fashion and travel. Rather than miss out, she’s been financing this lifestyle on credit. She has $8,000 in credit card debt across a few cards, some of which she ran up in her early 20s furnishing a nice apartment and taking a spring break trip. At the time, she thought, “I’ll pay it off quickly once I get a better job.” But years later, it’s still there – in fact, it’s grown. She pays the minimum ~$160 combined each month, which barely covers the interest (let’s say her weighted APR is 20%). In a year, she’s paid nearly $2,000, but her balances have barely budged. She’s essentially renting her past purchases at 20% interest. Meanwhile, her friend Alex had a similar income but avoided credit card debt and invested $200 a month; after a few years, Alex has a growing stock portfolio while Jane is still paying for a couch and vacation long past. Another scenario: Mark, 25, doesn’t save up for a rainy day. When his car needed a $1,200 repair, he put it on a credit card. Then his laptop died, another $1,000 on the card. Now he’s carrying a balance that keeps accruing interest. If Mark only pays minimums, those two emergencies could take years to pay off, costing hundreds in interest. Many people also fall into using credit cards for everyday necessities when money is tight – groceries, gas – which signals a deeper budget imbalance. Over 40% of Americans who can’t cover a $1,000 emergency in cash would put it on a credit card, which can lead to long-term debt if they can’t pay it off quickly. There are also those who take out high-interest personal loans or use “Buy Now, Pay Later” plans for electronics, furniture, etc. While these can be tools if used sparingly, they often cause people to overspend (because it doesn’t feel like spending when payments are delayed). The end result: large portions of income committed to debt repayments, leaving little to save or invest. A telling quote from a finance writer: “People get in the habit of paying their minimum payment and don’t realize how much of the payment is going to interest”. This describes how easy it is to live with debt without realizing the true cost. Real stories of broke individuals often involve a pile of credit card bills – it’s a common denominator keeping people financially stuck.

How to break it: Escaping the debt trap requires both behavioral changes and a strategic plan to eliminate what you owe. Here’s how to break the habit of relying on debt and start living within your means:

1. Stop the Bleeding – Pause Unnecessary Credit Use: First, commit to not adding any new debt. Put your credit cards on ice (literally, some people freeze them) or remove them from your wallet and online autofill. Switch to a cash or debit-card-only diet for daily spending while you tackle existing debt. This forces you to confront your true living expenses and adjust rather than leaning on credit. If an expense isn’t truly urgent, wait and save for it instead of swiping a card. Learning to delay purchases until you have the money is key to staying debt-free long term. In parallel, build a small emergency fund (even $500 to start) to avoid turning to credit for every surprise bill. Sell unused items or take a temporary side gig if you have to – the goal is to have a safety cushion that breaks the debt dependency cycle.

2. Organize and Attack Your Debts Systematically: List all your debts (credit cards, personal loans, etc.) with their balances, interest rates, and minimum payments. Choose a payoff strategy like the Debt Snowball or Debt Avalanche. Debt Snowball: pay off the smallest balance first (while paying minimums on others) to get a quick win and motivation, then roll that payment into the next debt, and so on. Debt Avalanche: prioritize the highest interest debt first to save money overall. Either method works – pick the one you’ll stick to. For example, if you have a $500 store card at 25%, a $2,000 Visa at 20%, and a $5,000 loan at 15%, Snowball says crush the $500 first (even if its rate is highest, the psychological boost of clearing a balance helps). Avalanche says focus on the $500 as well since it has the highest rate in this case. The point is: make a plan and throw every extra dollar you can at the target debt. This might mean cutting expenses or boosting income temporarily. Use windfalls (tax refunds, bonuses) to knock down balances rather than splurge. Each debt you eliminate frees up that payment to go toward the next – that’s the snowball effect. Celebrate small victories as you pay accounts off. Importantly, pay more than the minimum. Even an extra $50 or $100 a month can dramatically shorten your debt timeline and save you hundreds in interest. Remember the earlier stat: average minimum payments would keep you in debt 6+ years on a typical balance – you want to do better than that.

3. Change Your Mindset: Use Credit Wisely or Not at All: Finally, redefine how you view credit. Credit cards are not extra income – if you can’t pay the full balance in the grace period, interest will punish you. Ideally, you want to reach a point where you use credit cards only as a convenience or for rewards and pay them in full every month. Many financially successful people treat credit cards like debit cards – never charging more than they have in the bank. If you find credit too tempting, it’s perfectly okay to stick to cash/debit for good. You won’t “miss out” – in fact, you’ll likely spend less. Educate yourself on interest mechanics: for instance, knowing that a $1,000 credit card charge could cost you hundreds in interest if not paid promptly can deter careless swiping. A powerful motivator is to calculate how much your debt really costs: use an online calculator to see how much interest you’ll pay if you only do minimums. The number will shock you and can strengthen your resolve to avoid that fate. Additionally, focus on building savings once debts are paid, so you never have to rely on cards again. As you pay off each debt, redirect those payments into a “future fund” (savings or investments) – this turns a negative habit into a positive one. Breaking the debt-reliance habit might be challenging, but the freedom you’ll gain is life-changing. Instead of paying for yesterday with interest, you’ll have money for today and tomorrow. Many have done it: for example, people on debt-free journeys often clear tens of thousands in a couple of years by following these steps and then enjoy the relief of not owing anyone. You can too. The key is to start now – as a young person, time is your ally. Every dollar of debt you eliminate now saves you many more down the road and frees up your future income to build wealth rather than service loans.

Habit #4: Not Saving or Investing Early (Paying Yourself Last)

What it is: This habit is essentially failing to save and invest when you’re young, often due to the mindset of “I’ll start later” or simply never prioritizing it. People who “pay themselves last” wait to see if any money is left after expenses and spending – and usually, none is left. It’s a habit of putting off saving for the future, whether that’s building an emergency fund, contributing to a retirement account, or investing in general. Many young adults in their 20s think they have all the time in the world to save later, or they believe their current income is too low to start investing. The result: they don’t save a dime, or they save sporadically with no consistent plan. According to surveys, a huge portion of people in their 20s have minimal savings – one report found 40% of Americans could not cover a $1,000 emergency in cash. Additionally, the U.S. personal savings rate has been quite low (around 4-5% in recent times), indicating that many people are not setting aside much of their income at all. The habit of not saving also includes missing out on investing early, which is critical because your 20s and 30s are when time (and compound interest) can work the most magic on even small amounts. A classic symptom of this habit: you get your paycheck, pay bills, spend on wants, and only if by some miracle money remains on payday eve do you transfer a bit to savings. More often, nothing remains – so you tell yourself you’ll start saving “when I make more” or “next year.” Meanwhile, precious time is slipping away. Not investing early is a habit that literally throws away free money, because even modest investments can grow exponentially over decades. For example, if you invest $100 a month starting at age 25, by age 65 (at a modest 7% return) you could have around $250,000. But if you wait until 35 to start the same $100/month, you’d have only about $120,000 by 65. That’s over $100k less, even though you contributed $12,000 less – purely because of the lost time and compounding. As one financial adage states, “The most powerful force in finance is compound interest – and it’s greatest when you start early.” If you don’t harness that in your youth, you’re likely to stay broke or at least far behind where you could be.

Why it keeps you broke: Failing to save means you’re always one step away from financial ruin. Without savings, any setback – a job loss, car breakdown, health issue – can send you scrambling (often into debt, as we saw). It also means you miss out on opportunities that require capital (like investing in a business, buying a home, or even taking a calculated career risk). Essentially, living with no savings or investments is living on the edge; you’re “broke” in the sense that you have no cushion and no growing assets. You might be making ends meet, but you’re not building wealth. The cost of not investing early is enormous. Thanks to compound interest (earning interest on interest), small early contributions can lead to huge balances later – but the reverse is also true: delay is extremely costly. To illustrate, consider two scenarios: Investor A starts at 25 and invests $5,000 per year for just 10 years (then stops at 35, total $50k invested). Investor B starts at 35 and invests $5,000 per year for 30 years (until 65, total $150k invested). Assuming a 7% annual return, Investor A will have over $500,000 by age 65, and Investor B will have about $540,000. Investor B put in three times the money but ended up only slightly ahead – because they started later. This example (often cited in financial literature) shows that time can be more important than the amount invested. If you’re not saving/investing in your 20s, you’re forfeiting that advantage and will have to save much more later to catch up – something many people find very hard to do when mortgages, kids, etc., enter the picture. Additionally, the habit of not saving often correlates with not having financial goals. If you never set aside money for the future, you may drift into your 30s and 40s with no retirement fund, no down payment, nothing – which means you remain hand-to-mouth. Many people unfortunately wake up in their 40s realizing they have to play expensive catch-up on retirement savings (or worse, they resign to never being able to retire). In short, not saving is a guaranteed way to stay broke in the long run, because you’ll either always depend on each paycheck or you’ll have to lean on others or work forever. Conversely, every dollar you save in your 20s works far harder for you than a dollar saved later. It’s like planting a tree: the sooner you plant it, the bigger it grows. Neglecting to plant those seeds early means you’ll have a sparse financial forest later.

Real-world example: Emily and Jack are both 22-year-old recent graduates. Emily immediately starts “paying herself first.” Her company offers a 401(k) match, so she contributes enough to get the full match, investing about $200 a month. She also automates $100/month into a Roth IRA on the side. It’s not a huge amount, and she still has fun money, but she treats saving like a bill that must be paid. Jack, on the other hand, figures he’ll start saving “once I earn more” or when he’s closer to 30. In his 20s, he spends his full paycheck – upgrading his car, going out, etc. Flash forward 10 years: Emily is 32 with a solid portfolio. Between her 401(k) and IRA, maybe she’s amassed around $50,000–$70,000 (thanks to market growth and her contributions). She also has a habit of saving, so she’s built a small emergency fund too. Jack at 32 has virtually $0 in investments or savings. He’s made some raises, but his expenses grew too (the classic “lifestyle inflation” which we cover in Habit #5). Now Jack has to start from scratch, and even if he starts putting away more aggressively, he lost a decade of compounding. Another example: a survey might show the median retirement account balance for millennials in their 30s is under $20k, implying many didn’t start early. Those who did often have exponentially more. There are also unfortunate real examples of people who didn’t save and then had to rely on high-interest debt or family when emergencies struck – which can lead to long-term financial setbacks. Perhaps you know an older colleague who says, “I wish I had started saving in my 20s; now I’m scrambling.” That’s a common refrain. In contrast, those who break this habit and invest early often reach their 30s or 40s with a level of financial security that others envy. It’s not necessarily that they earned a ton more – they just leveraged time. One more illustration: Albert Einstein (attributed) allegedly called compound interest the “eighth wonder of the world” – those who understand it earn it, those who don’t pay it. Not saving means you’re on the paying side (via debt interest) rather than the earning side (via investment growth). The bottom line: failing to save/invest in youth is a huge lost opportunity that keeps people in perpetual catch-up mode.

How to break it: The solution is straightforward: start saving and investing immediately, and make it automatic. Even if the amounts seem small, it’s about building the habit and leveraging time. Here’s how to break the “no saving” habit:

1. Pay Yourself First – Automate Savings Each Month: Treat saving like a must-pay expense. The moment you get your paycheck (or even better, via direct deposit split), siphon a chunk into a separate savings or investment account before you pay any other bills or spend on wants. This concept, often recommended by financial experts, ensures that you are prioritizing your future self. For example, set up an automatic transfer of, say, 10% of your income to a high-yield savings account or brokerage account every payday. If 10% feels impossible, start with 5% or even a flat $50 – the key is to start now. You can gradually increase it as you adjust. By automating, you remove willpower from the equation – it just happens in the background. You’ll quickly adapt to living on the slightly smaller amount in checking, but you’ll gain the peace of mind of growing savings. This “pay yourself first” approach is how ordinary people with ordinary incomes end up with substantial wealth over time.

2. Leverage Retirement Accounts and Free Money: If your employer offers a 401(k) match or any retirement plan, take full advantage. That match is literally free money – a 100% return on your contribution up to some percent. Not contributing is leaving money on the table. Enroll in the plan and contribute at least enough to get the match (common example: they match 50% of the first 6% you contribute – so you contribute 6%, they add 3%). Because it’s pre-tax (in traditional 401k) or tax-advantaged, it has minimal impact on your take-home pay. If you don’t have a workplace plan, open an IRA. Starting in your 20s, even small contributions can snowball. Also, consider investing in broad stock index funds or a target-date retirement fund – you don’t need to be an expert stock picker to grow wealth; simply riding the general market via low-cost funds can turn small savings into large sums given enough years. Historical data shows that over many decades, the stock market tends to yield positive returns (around 7% annually on average after inflation). As an example, by investing just $200 a month at age 25, you could potentially have over $500,000 by age 65. But if you start that at 35, you’d accumulate roughly half as much. Use this as motivation: every year you delay has a tangible cost. So, exploit your youth – start now, even if it’s small.

3. Set Clear Goals and Make Saving Fun (or at Least Rewarding): It’s easier to save when you know what you’re saving for. Establish some goals: an emergency fund of $1,000 then 3–6 months of expenses, a “investment milestone” of say $10k by age X, a down payment fund, etc. Track your progress and celebrate milestones. Also, reframe saving as buying your freedom. Each dollar saved is a step closer to financial independence or that dream venture you want to fund. To make it more tangible, you could use visual aids – maybe a chart coloring in how much you’ve saved toward a target. Some people also find motivation in challenges, like a “save $5 a day” challenge or a no-spend month that boosts their savings. Surround yourself with like-minded peers or online communities where saving and investing young is normalized – this helps counteract the societal pressure to spend now. Finally, realize that investing is a way to make your money work for you. If budgeting feels like depriving yourself, flip the script: saving/investing is how you pay yourself (rather than paying Starbucks or Apple or landlords all your life). It can actually be exciting to watch your accounts grow. Perhaps use a finance app that shows projections – seeing that you might be a millionaire by 60 if you keep it up can be incredibly motivating. And if you get a raise or bonus, try to increase your savings rate before you increase your lifestyle. Breaking the habit of not saving essentially comes down to starting now and staying consistent. Even if you start with just $20 a week, the habit will build and you can scale it up. As time passes, you likely won’t miss the money – but you will thank yourself profoundly for the nest egg you’ve accumulated. By your 30th birthday, you could either have nothing or have tens of thousands of dollars working for you. The choice hinges on breaking this habit today.

Habit #5: Lifestyle Inflation – Spending More as You Earn More

What it is: Lifestyle inflation (or lifestyle creep) is the habit of increasing your spending whenever your income increases, instead of using raises or windfalls to improve your financial health. In simpler terms, as you make more money, you find new ways to spend more money – upgrading your apartment, buying a nicer car, splurging on brand-name everything – such that you never actually feel like you have extra. Many people in their 20s and 30s fall into this trap: your first job out of college, you survive on $40k; a few years later you’re making $60k but somehow still living paycheck to paycheck because your lifestyle expanded. You eat out more, travel more, maybe get the latest phone and a more expensive wardrobe. It feels deserved (“I work hard, I should enjoy my money”), but the result is no progress in savings. Lifestyle inflation often comes from social pressures too – seeing peers take fancy vacations or buy homes, feeling the need to “keep up.” It might also manifest as upgrading defaults – for example, where you once cooked at home 5 nights a week, now you’re ordering takeout regularly, or trading your perfectly fine Honda for a luxury car with high payments because you got a promotion. A classic sign of lifestyle inflation: no matter how much your income goes up, your bank balance doesn’t – your expenses rise to meet your income. This principle is so common it’s known as Parkinson’s Law of Money: “Expenses rise to meet income.” If not kept in check, it can keep even high earners living broke. There are plenty of real examples: surveys have found a significant percentage of high-income individuals (making six figures) still live paycheck to paycheck. For instance, in one recent survey, 36% of workers earning $100,000+ a year said they were living paycheck to paycheck. How is that possible? Lifestyle inflation – they’ve simply upped their spending to match that high salary (bigger mortgage, fancy hobbies, etc.). The habit of lifestyle inflation robs you of the chance to use increased income to build wealth or security; instead, you just get “nicer stuff” but also possibly more stress (because now you need that higher income to sustain your new standard of living).

Why it keeps you broke: If every raise or bonus gets absorbed by new expenses, you’ll never get off the hamster wheel of needing the next paycheck. Lifestyle inflation often locks people into a cycle of working to pay for an expensive lifestyle, with no wiggle room. The danger is that as your expenses grow, so do the stakes: losing a job when you have a lean lifestyle is inconvenient; losing a job when you have a huge mortgage, two car payments, and expensive tastes is a crisis. Moreover, lifestyle creep usually means missed opportunities to save/invest. If you kept living like a college student for a few years after getting a real job, for example, you could sock away a huge portion of your income. But most don’t – they immediately elevate their spending. That’s money that could have been compounding for future wealth. Another angle: lifestyle inflation can actually cause debt accumulation even at higher incomes, because the upgraded lifestyle might slightly exceed income. For example, someone making $80k might inflate their lifestyle to spend $90k via credit – believing future raises will cover it. It’s easy to rationalize: “I’ll pay off the new car over time” or “I can swing the payments on this big house somehow.” This is how doctors or lawyers earning $200k+ can still drown in debt – they inflate lifestyle first (big house, luxury cars, private schools, etc.) and worry about funding it later. There’s a saying: “Big hat, no cattle,” meaning someone might show outward signs of wealth (big hat) but have no actual wealth (no cattle) – high income but also high spending and debt results in no net worth. Lifestyle inflation keeps people asset-poor even if they’re income-rich. It also increases stress and reduces flexibility; when you dial your lifestyle up to the max you can afford, you have no margin. Financially savvy individuals often do the opposite – when income goes up, they inflate their savings/investments, not their lifestyle. That’s how wealth is built. For most, controlling lifestyle inflation is the difference between being comfortably well-off vs. one crisis away from broke. As evidence of how pernicious this habit is, consider that around 61% of Americans overall were living paycheck to paycheck in 2023, including many in middle and upper-middle class. The reasons might be complex, but overspending as income grows is a big factor. If you always tell yourself “I’ll save later, when I make more,” but then spend that “more,” you’ll never truly escape living broke.

Real-world example: Let’s say Joe starts out earning $50,000. He shares an apartment with roommates, drives a reliable used car, and spends modestly. He manages to save a little. Then Joe’s income jumps over a few years to $80,000. Instead of banking the difference, he upgrades: moves into a luxury apartment by himself (rent goes from $800 split with roommates to $1,800 solo), trades his car for a brand new SUV with a $500/month lease, and starts dining at upscale restaurants and taking pricey vacations because “I make more now.” Very quickly, Joe’s expenses have caught up to (or even exceeded) $80k – he’s back to scraping by each month. In contrast, his friend Lisa got the same raise but kept her lifestyle almost the same – she stayed in her reasonable apartment and kept driving her paid-off car a bit longer. As a result, Lisa was suddenly able to save an extra $1,000+ a month. In a couple of years, she saved a down payment for a house or built a sizable investment portfolio. Joe has nicer day-to-day comforts, but zero progress in net worth. Another example: lifestyle inflation often happens when people get large bonuses or tax refunds. Instead of investing that lump sum, many will immediately spend it on a new gadget, lavish trip, or by upgrading appliances, etc. Then they wonder why their net worth isn’t improving. Think of pro athletes or celebrities who made millions but went broke – often it’s because as soon as money flowed in, they increased spending (mansions, entourage, luxury goods) to match or exceed it. A famous statistic (often cited in discussions of habits) is that 70% of lottery winners end up broke within a few years (with nearly one-third declaring bankruptcy). Why? Sudden lifestyle explosion without financial discipline. They buy mansions, cars, live large – and the money evaporates, leaving them broke again. While those are extreme cases, the principle is the same for ordinary folks: more money won’t fix money problems unless you fix spending habits. If you give a habitual overspender a raise, they’ll overspend more. As one personal finance writer put it, “Expenses rise to meet income” – if you’re having a hard time making ends meet now, more money alone might not solve it unless you change your behavior. This is why someone can feel broke on $30k or on $300k – it’s all relative to spending. The real-world takeaway: lifestyle creep is stealthy and dangerous. You might not notice that each small upgrade (a slightly pricier apartment, a slightly nicer phone plan, etc.) is eating your entire raise, but at the end of the year you realize you haven’t improved your financial position. Breaking this habit is critical to actually benefit from your income growth.

How to break it: Combating lifestyle inflation doesn’t mean you can’t ever upgrade your life, but it does mean being intentional and moderate about it. Here’s how to keep lifestyle creep in check:

1. Live on the Same Budget After Raises (and Bank the Rest): A powerful strategy is to pretend you didn’t get that raise or bonus. For example, if you go from $50k to $60k, that’s roughly $700 more take-home per month (depending on taxes). Commit to automatically diverting most of that – say $500 – into savings or investments. Continue living on roughly the $50k budget you were comfortable with. This way, every raise directly boosts your wealth, not your spending. Many financially successful individuals practice this: they periodically increase their savings rate with each raise. You can still allow a little lifestyle treat (perhaps use 10-20% of the raise for fun), but lock in the majority for your future. If you get a 5% salary bump, try upping your 401(k) contribution by an extra 2-3% and auto-transfer the rest to savings. The key is to do this immediately when the raise kicks in, so you never get used to the higher cashflow in checking. You’ll be surprised how little you miss money you never “saw” in your spending account.

2. Set Firm Financial Goals that Outpace Lifestyle Wants: One way to resist lifestyle creep is to have strong competing goals for your money. If you aim to, say, max out your Roth IRA ($6,500/year) and save for a home down payment, those goals will “eat” extra money before lifestyle can. Essentially, pay your goals first, then see what’s left for lifestyle upgrades. For instance, after a promotion, increase your 401k or IRA contributions, beef up your emergency fund, or start that brokerage account for your entrepreneurial dream. Make these increases non-negotiable. Also, focus on experiences and relationships over things – often lifestyle inflation is driven by buying status symbols or more material comforts that have diminishing returns on happiness. By keeping your core expenses stable and finding low-cost ways to enjoy life (like game nights with friends instead of bottle service at a club), you fulfill your happiness without draining your wallet. It’s not about being frugal to the point of misery; it’s about recognizing that bigger and pricier doesn’t always equal happier. Remind yourself that every new recurring expense (bigger rent, car payment) is a claim on your future income. Only upgrade deliberately and within limits. A good rule of thumb: when considering a lifestyle upgrade, ensure your savings/investment contributions are already on track. If you’re not saving at least, say, 15-20% of income for the future, you likely can’t afford a major lifestyle bump yet.

3. Practice Gratitude and “Anchoring” to Your Old Lifestyle: Psychology can help. Continuously remind yourself how you managed on less and that you don’t need to match what others have. For example, if you used to be content living with roommates or driving an older car, consciously appreciate the benefits that simpler lifestyle gave – maybe less stress, more community, or lower costs. If you get more income, you might upgrade some things, but do it because it truly adds value to your life, not just because you can. One trick: anchor your spending to a past level. For instance, if you lived on $3,000/month as a student, challenge yourself to keep core living expenses near that even as your pay grows, and direct extra funds to investments. Also, avoid comparative upgrades: just because a friend bought a house in a posh area doesn’t mean you should stretch for one. Define what “enough” means for you. Perhaps a comfortable 2-bedroom apartment is enough even if you could technically qualify for a mortgage on a 4-bedroom house – if the smaller space meets your needs, you’ll save a fortune not inflating that aspect of life. Some financially savvy folks set “lifestyle caps” – e.g., “I’ll drive my car at least 10 years or until maintenance is too costly” or “I won’t spend more than 25% of my income on housing even if I can afford more.” These self-imposed limits keep you from overspending just because money is available. Finally, consider adopting the mindset of “stealth wealth” or the millionaire-next-door mentality: many millionaires live in average neighborhoods and wear inexpensive jeans, funneling money into assets rather than status display. The goal is to be rich, not look rich. If you can internalize that, you won’t feel compelled to inflate your lifestyle to impress others. Breaking lifestyle inflation is about balancing enjoying some fruits of your labor today with preserving plenty of fruits for tomorrow. By keeping your expenses growing slower than your income (or even flat for a while), you create an ever-widening gap – that gap is where wealth is built. As a bonus, maintaining a modest lifestyle gives you financial freedom: you could handle a job loss, pursue a new career, or retire earlier because you need less to be happy. In other words, controlling lifestyle inflation in your younger years buys you options and security later on, instead of keeping you broke on the treadmill of ever-increasing expenses.

Habit #6: Neglecting Personal Development and Income Growth (Staying in Your Comfort Zone)

What it is: This habit is a bit different from spending habits – it’s about complacency with your income and skills. Essentially, it’s the failure to invest in yourself or to seek opportunities to increase your earning potential. People who stay broke often have the mindset of “I’m stuck with what I earn” or they avoid pushing for more (like negotiating raises, changing jobs for higher pay, learning new high-value skills, or starting side hustles). In your 20s especially, it’s easy to fall into a comfortable routine at a mediocre job or to spend free time only on entertainment instead of self-improvement. The result is stagnant income – your earnings barely keep up with inflation, and you never break out of a low-paying trajectory. Many young professionals might fear asking for a raise or switching careers due to loyalty or fear of rejection, but that hesitation can cost them significantly over time. For instance, studies have shown that people who frequently switch jobs (strategically) in their early career often see much higher salary growth than those who stay put with minimal annual raises. In 2023, job switchers saw average pay increases around 13%, while those who stayed got maybe 3-5%. If you never take those opportunities, you could be leaving money on the table. Neglecting personal development might mean not learning new skills that could qualify you for better positions or not pursuing higher education/training when needed. It could also mean not exploring multiple income streams. Many wealthy or financially secure people have side incomes (freelancing, small businesses, investments generating passive income, etc.). Someone who’s stuck in a broke mindset might think “One job is all I can do” and then spend evenings binge-watching shows. In sum, this habit is about not maximizing your earning ability. If you combine this with high spending habits, it’s doubly hard to get ahead. Even if you’re frugal, neglecting income growth means you’re limited in how much you can save – there’s only so far you can cut expenses, but there’s theoretically no upper limit to how much you can earn if you continually improve yourself. Warren Buffett, one of the richest individuals, famously said, “By far the best investment you can make is in yourself.” If you ignore that advice, you hamper your financial progress.

Why it keeps you broke: If you’re not actively growing your skills or seeking higher income opportunities, you might find your income stagnates while the cost of living rises – effectively making you poorer over time. This is especially true in today’s economy: skills become outdated, industries evolve. If you don’t keep learning, you may get bypassed for promotions or stuck in low-wage positions. For example, someone who never learns basic financial literacy might stay in entry-level roles or never start that profitable side investment because they just don’t know how. Or someone who doesn’t work on communication and leadership skills might be passed up for management positions that pay more. In contrast, building valuable skills can lead to big raises or new job offers that significantly boost income. Additionally, not negotiating your salary or raises can cost huge sums over a career. There’s data showing that over half of people don’t negotiate their starting salary, and those who do often get something. Not negotiating could mean you start $5k or $10k lower than you could have – that affects all future raises too (since they’re percentage-based), amounting to hundreds of thousands lost over decades. So a habit of never advocating for yourself financially literally keeps you earning less than you deserve. Similarly, sticking to one income source is risky; if that job is lost, you’re in dire straits. People who develop multiple streams (even a small side gig) have extra resilience and cash flow that can accelerate paying off debt or building savings. In a nutshell, if you don’t increase your earning power, you may always feel “broke” because your income barely covers necessities and modest wants, with little left over. Growing expenses (due to inflation or family needs) will squeeze you since your income isn’t keeping pace. Another factor: not investing in yourself can mean missing out on what could be your passion or higher-calling that also might be more lucrative. Many entrepreneurs or high-paid professionals got there by aggressively learning, networking, and stepping out of comfort zones early on. If you never do, you settle for the status quo, which might be financially mediocre. We often hear that millionaires on average have 7 streams of income (though this is a rough figure) – the point is, they cultivate multiple avenues. If you just rely on a single paycheck and never try to grow it, you limit your upside severely. Ultimately, staying broke isn’t just about spending too much; it can also be about earning too little (relative to your potential), which is directly tied to this habit of not improving yourself or seeking advancement.

Real-world example: Imagine two friends, Chris and Alex, both starting at entry-level jobs making $35,000 at age 23. Chris treats it as just a job – does the work, goes home to play video games or hang out. No extra effort to learn new things. He figures loyalty will eventually get him raises. Alex, on the other hand, takes online courses to gain new certifications, volunteers for projects to build skills, and after two years, asks for a raise or she will look for other opportunities. Chris gets the standard 3% raises and by 27 is making around $39k. Alex hopped to a new company at 25 for $45k, and by 27 she’s at $55k with another promotion. Now Alex has significantly more income to save or invest, whereas Chris is barely staying ahead of bills (especially since inflation made everything cost ~15% more over those years). Another scenario: Beth never negotiates. Her first offer out of college was $50k; she happily accepted without question. Her colleague who had the same credentials negotiated to $55k. That $5k difference might not seem huge, but over a 10-year period with annual 3% raises, the colleague ends up tens of thousands ahead (and has more employer 401k contributions, etc., because those are percentage-based too). Beth essentially lost out on perhaps $60k+ of cumulative earnings over a decade for not negotiating that one time. Multiply that over each job change and it’s massive. Now consider someone who doesn’t invest in new skills: say you work in marketing but never learn about digital analytics which is in demand; you might hit a ceiling in roles around $60k. Meanwhile peers who picked up those skills move into $80k roles. Lastly, think of multiple incomes: John works one job and complains he’s always broke. His friend Sam also streams on Twitch as a hobby, which eventually earns him an extra $500 a month, and he sells some artwork prints online for another $200. Sam’s not working massively harder than John (he turned hobbies into cash), but he’s got $700 more a month – which he uses to pay down debt and invest. In a year, that’s $8,400 – a game changer for savings. John remains broke, Sam’s building a cushion. These examples show how ignoring opportunities to grow your income can leave you financially stagnant. Meanwhile those who break out of comfort zones, negotiate, hustle a bit on the side, or continuously learn can dramatically change their financial trajectory. It’s often said the average millionaire is constantly learning and often has side ventures; staying broke often correlates with just doing the minimum and hoping things improve magically.

How to break it: The remedy is to adopt a mindset of continuous personal growth and to be proactive about increasing your earning potential. Here are steps to break the habit of complacency in income:

1. Invest in Your Skills and Education: Identify valuable skills in your industry (or a field you want to pivot to) and start learning them. This could mean pursuing certifications, taking online courses (many are inexpensive or free), attending workshops, or even going back to school if that’s appropriate and cost-effective. Importantly, focus on high-income skills – for example, coding, data analysis, digital marketing, sales, project management, etc., depending on your interests. Improving “soft skills” like communication, public speaking, and leadership can also fast-track your career. Warren Buffett once noted that improving your communication skill can increase your value by 50% instantly. That’s huge. So join that Toastmasters club, or take that leadership course. Don’t hesitate to spend time (and some money) on books, courses, or workshops – think of it as investing in the stock called ‘YOU’. Over time, these investments can pay off in higher salaries or new income streams many times over. Make a plan: say, learn one new significant skill every year. In a few years, you’ll be well ahead of peers who stayed static.

2. Be Ambitious and Proactive in Your Career: Don’t settle for minimal raises or staying in a role where you’re underpaid. Regularly review your market value – check job listings, talk to recruiters, see what others with your experience are making. If you find you’re underpaid, prepare a case and ask for a raise. Many employers won’t boost your pay significantly unless you ask or have another offer, so sometimes you have to initiate that conversation. Yes, it can be uncomfortable, but even a 5-10% raise won by negotiation can compound into big money over time. Also, if growth opportunities at your current job are limited, don’t be afraid to job-hop to advance. Especially early in your career, switching jobs every couple years for higher positions or pay can accelerate your income. Pew Research found about two-thirds of people who negotiated or switched jobs saw higher earnings. Of course, do it strategically – maintain good relationships and ensure you actually deliver value so that you’re in a strong position to negotiate or move. Another aspect: if you have a passion or side idea, develop it into a side hustle. This could range from freelance work, consulting, tutoring, an e-commerce store, content creation – anything that can generate extra income. Start small; even $200 a month is progress. You’ll gain new skills and a safety net of additional income. Some side hustles might even grow enough to become full-time businesses. The gig economy and online platforms have made it easier than ever to monetize skills (writing, graphic design, coding, even driving for rideshare or delivering food as a last resort). Use that to your advantage rather than spending all free time on low-value activities.

3. Network and Surround Yourself with Success-Minded People: There’s truth in the saying “Your network is your net worth.” By connecting with mentors, industry peers, and high achievers, you’ll hear about opportunities and get inspired to push yourself. Attend professional meetups or join online communities in your field. Often, better job openings or freelance gigs come through networks before they’re publicly advertised. Additionally, seeing how others have increased their income (through business, investments, etc.) can spark ideas for you. If all your friends are content being broke and just complain without action, lovingly try to find new circles who encourage growth. You don’t have to ditch old friends, but expanding your circle to include ambitious individuals can really change your perspective. Mentors especially can guide you on what skills to learn or how to negotiate effectively. Another important facet is to set income goals and periodically assess them. For example, aim: “By age 30 I want to be earning at least $X or have Y amount in side income.” This gives you a target to work towards and can motivate you to take action (whether it’s asking for that promotion or learning a needed skill). Lastly, embrace discomfort and learning: Take on challenging projects at work, even if they’re hard – that’s how you grow. Volunteer for cross-functional teams or propose solutions to problems; being visible and valuable can lead to promotions or raises. If you’re running a small side business, push yourself to learn marketing or other aspects you’re not comfortable with. Each time you step out of your comfort zone, your comfort zone expands. Breaking this habit is fundamentally about shifting from a passive mindset (“I hope I get paid more someday”) to an active mindset (“What can I do to earn more?”). As famed entrepreneur Jim Rohn said, “Work harder on yourself than you do on your job.” The returns from self-improvement are immense – not just financially, but in confidence and opportunities. Over time, instead of saying “I can’t afford that,” you begin to focus on “How can I afford that?” – which is the mindset of wealth creation. By continuously developing yourself and your income streams in your 20s, you set the stage for exponential financial growth in your 30s and beyond, rather than being stuck on a low plateau.

Habit #7: Ignoring Financial Planning and Education (Flying Blind with Money)

What it is: The final habit that keeps people broke is avoiding financial literacy and planning – essentially, not taking the time to understand how money works and failing to create a roadmap for your finances. This can manifest as never tracking your net worth or expenses, not learning the basics of investing, insurance, taxes, etc., and not setting any financial goals. Many young people find finances intimidating or boring, so they adopt an “ignorance is bliss” approach – they don’t budget (as covered in Habit #1), they don’t read about personal finance, and they might assume things will just work out. Unfortunately, what you don’t know can hurt you in money matters. For example, not knowing about interest rates could lead you to take a predatory loan. Not knowing about compound interest might mean you never invest. If you don’t plan at all, you might wake up one day with retirement looming and nothing saved, simply because you never thought ahead. Financial planning means setting goals (short and long-term), making budgets, planning for major life events (like buying a home, having kids, retirement), and regularly reviewing your financial situation. If you ignore all that, you’re just drifting – and most drifters don’t end up wealthy by accident. A lack of education also makes you susceptible to common financial pitfalls: scams, bad investments, overspending, etc. Surveys consistently show that financial literacy is low – for instance, only 27% of U.S. adults passed a basic 7-question financial quiz on concepts like inflation, interest, diversification. That means many are making decisions without fundamental knowledge. If you find terms like 401(k), Roth IRA, APR, index fund, etc. to be gibberish, it’s a sign you need to educate yourself. Ignoring that is a habit that keeps you broke because you miss opportunities and fall into traps. It’s like trying to navigate a city with no map or GPS – you’re bound to get lost financially. People who never check their account statements or bills might incur fees or fraudulent charges and not even realize it. Those who don’t plan might spend decades working with nothing to show. In short, financial ignorance = financial impotence – you can’t make your money work for you if you don’t understand the tools and rules.

Why it keeps you broke: Knowledge truly is power when it comes to money. If you avoid learning and planning, you’ll likely make expensive mistakes and fail to capitalize on growth opportunities. Some specific reasons: 1) Missed opportunities – for example, not knowing about employer 401(k) matches or IRAs means you don’t invest when you could have, losing out on market gains and free money. 2) Costly mistakes – if you don’t understand credit, you might carry high-interest debt or have a low credit score that makes loans and insurance pricier. If you don’t grasp how loans work, you might buy a car you can’t afford or fall prey to a predatory payday loan. Not knowing about diversification could mean you put all your money in one risky investment and lose it. 3) Lack of goals – without goals like “pay off $X debt by Y date” or “save $Z for a house,” you just spend aimlessly, which usually results in nothing substantial being saved. Compare that to someone who educates themselves: they might set a goal to achieve financial independence or retire early and thus invest aggressively; the uninformed person just hopes Social Security will be enough. The data on financial literacy underscores this: a FINRA study found that only 1 in 3 Americans could answer basic financial questions correctly. And those with lower literacy are more likely to have costly behaviors (like using high-cost credit, incurring overdrafts, etc.). Another aspect: If you don’t plan, you might fail to protect yourself with things like appropriate insurance or an emergency fund. Then a single unfortunate event (accident, illness, job loss) can wipe you out financially – a huge reason people end up broke or in debt is lack of preparation for emergencies. Also, ignorance can lead to procrastination – “I don’t get how investing works, so I’ll do it later” – which as we saw in Habit #4, can cost huge sums due to lost compounding time. People often regret not learning sooner; for instance, only in their 30s or 40s they realize they should have started retirement saving earlier. Lastly, scams prey on the financially illiterate – get-rich-quick schemes, MLMs, or crypto scams often lure those who haven’t educated themselves on legitimate investing. Falling for such things can decimate what little money someone has. Essentially, flying blind means you’re reacting to financial events rather than proactively steering toward wealth. That’s a recipe for staying broke or at best, treading water. Those who become financially successful almost always have at least a basic education in money management and a plan that they adjust over time. Without that, you’re playing a game without knowing the rules, and likely losing.

Real-world example: Let’s consider two siblings, Jake and Emma. Neither learned much about money in school. Jake shrugs and says “money stuff is too complicated.” He never bothers to read any finance articles or books. He doesn’t really know the difference between a stock and a bond, or how interest rates work. As a result, he keeps all his savings (when he does save) in a checking account – missing out on potential investment growth. He also signed up for a credit card without understanding APR and got into trouble carrying a balance at 24% interest, digging himself deeper. Emma, on the other hand, decides to read a beginner book on personal finance and follow a few reputable finance blogs. She learns about budgeting, compound interest, and the importance of diversification. So she starts investing a bit each month in a low-cost index fund, and she’s careful with credit card use (paying in full each month). Fast forward 10 years: Emma has built a solid financial foundation – she has retirement savings, a brokerage account, and managed to buy a home with a reasonable mortgage. Jake is still living paycheck to paycheck, renting, with no investments and some lingering debt – not necessarily because he earned less, but largely because he never planned or learned how to make his money grow. Another scenario: Many folks ignore financial planning for retirement and then hit their 50s with very little saved; some end up having to work far longer or rely on family or government assistance. In contrast, those who planned early often reach their 50s or 60s with enough to retire or at least with some comfort. Also, think of something like taxes: If you never learn, you might consistently overpay or miss deductions – effectively giving away money. Or insurance: I know people who didn’t understand health insurance terms and racked up huge bills by going out-of-network or not realizing they could negotiate a medical bill. Educated individuals avoid those costly errors. There’s also a stark example: financial scams – say someone doesn’t know how to evaluate investment opportunities; they might sink $5,000 into a “too good to be true” scheme (like promise of 50% returns) and lose it all. A bit of financial education would throw up red flags to avoid that. Studies have also shown that those with higher financial literacy tend to have higher net worths and make better decisions like planning for retirement. A Money magazine report mentioned only 27% of Americans could be considered financially literate and this aligns with many struggling financially. The evidence is clear: ignoring financial knowledge and planning often results in people staying broke or in a perpetual state of financial anxiety. On the flip side, even a modest effort to educate oneself pays dividends (literally and figuratively).

How to break it: Breaking this habit requires a commitment to educate yourself and actively plan your financial future. The great news is, you don’t need a finance degree – there are plenty of accessible resources to become financially savvy. Here’s how to get started:

1. Start Learning the Basics (Financial Literacy is Key): Dedicate some time each week to improving your financial knowledge. This can be reading a personal finance book (classics like “Rich Dad Poor Dad”, “The Total Money Makeover”, or “I Will Teach You to Be Rich” are popular starting points), following reputable financial educators on YouTube or podcasts, or even taking a free online course on Khan Academy or Coursera about money management. Focus on core topics: budgeting, saving, investing (stocks, bonds, index funds), how credit works, basics of insurance, and taxes. There are countless beginner-friendly resources because many have recognized the financial literacy gap. For example, try to understand concepts like compound interest, diversification, inflation, and risk vs. return – these will help you make informed decisions. One practical step: Take a financial literacy quiz (like the FINRA 5-question quiz) to see what you know and don’t. Then target your weak areas. Make learning fun – consider joining a personal finance subreddit or community where you can ask questions anonymously and see others’ questions. Bit by bit, terms like “401(k)” or “Roth IRA” will become part of your vocabulary, and you’ll feel empowered.

2. Create a Simple Financial Plan with Goals: Sit down and outline your financial goals and a plan to reach them. This doesn’t need to be overly complicated. Start with basics: What do I want in 1 year, 5 years, 10 years? Perhaps in 1 year, your goal is to pay off credit card debt and have a $5,000 emergency fund. In 5 years, maybe buy a house or start a business, and in 10, be on track for retirement savings. Write down these goals. Then break them into actions: e.g., “Save $300 a month for emergency fund” or “Contribute 10% to retirement account”. Also plan for known life events: if you aim to have kids in, say, 5 years, start a savings fund for that now. If retirement is 30+ years away, calculate roughly how much you might need (there are online calculators) and what monthly investment would get you there, then incorporate that into your plan. Planning also means budgeting – ensure your plan covers spending less than you earn and assign portions of income to different goals (debt payoff, savings, fun, etc.). Schedule periodic check-ups – e.g., every six months, review your progress and adjust the plan if needed (maybe you got a raise or a new goal). The act of planning converts vague hopes into concrete targets. It’s like setting a destination on a map; you can then figure out the route. Without it, you wander financially. Moreover, having a plan reduces anxiety – you know you’re doing something about your future, not just leaving it to chance.

3. Seek Advice and Use Tools: You don’t have to do this alone. Consider speaking with a financial advisor – many will do an initial consultation for free or low cost, or there are fiduciary advisors who charge by the hour to help you set up a plan. They can spot things you might miss and educate you in the process. If an advisor is not accessible, leverage technology: there are budgeting apps (Mint, YNAB) and investing platforms (robo-advisors like Betterment, or tools like Fidelity and Vanguard that have lots of educational content) that make planning easier. For instance, a robo-advisor can help you invest according to a goal (like a house down payment in 5 years) with appropriate risk level, without you having to be an expert. Join community workshops or seminars – many local libraries or community centers host free finance classes. Even listening to personal finance podcasts regularly can reinforce your education. Also, learn from others’ mistakes and successes – maybe talk to a family member who is good with money and ask how they did it, or conversely, observe someone who struggled and understand why (lack of insurance, overspending, etc.). This real-world context makes lessons stick. Lastly, incorporate financial discussions into your life: if you have a partner, make money talks a regular thing (so many couples avoid it, to their detriment). If you have friends interested, form a small “money club” where you share tips or progress (this can keep you accountable and break the taboo of talking about money). Breaking the ignorance habit means facing the music – looking at your bank statements, understanding your net worth (assets minus liabilities), and actively managing it. The first time you do a net worth calculation, it might be negative or lower than you want, but that’s OK – it’s your starting point, and from there you’ll measure your improvement. Knowledge truly compounds; as you learn a bit, you’ll ask better questions and learn more, and soon things that once baffled you (like how a mortgage works or what “APR 0% for 12 months” really means) will be crystal clear. The empowerment that comes from this will help you avoid scams, seize opportunities (like investing in a down market rather than panic selling, because you know the history and logic), and ultimately build wealth instead of staying broke. Remember, you don’t have to become a financial guru overnight – just commit to continuous learning. As the FINRA Foundation’s Gerri Walsh said, “Knowledge of everyday financial concepts remains a challenge for many Americans”, so by overcoming that challenge, you set yourself apart. In the long run, breaking this habit ensures you’re the one in control of your money, not the other way around.

Conclusion: Breaking these seven habits before you hit 30 can dramatically change your financial trajectory from one of scarcity to one of abundance. It’s often said that personal finance is 80% behavior and only 20% head knowledge – the habits you build in your 20s around money will either set you up for wealth or for struggle. The common thread in all of these habits is intentionality: being proactive with budgeting, disciplined with spending, strategic with debt, consistent with saving, moderate with lifestyle, ambitious with income, and thoughtful with planning. By confronting each of these areas, you’re essentially flipping the script – instead of money controlling you, you start controlling your money. This doesn’t mean you won’t enjoy life; on the contrary, eliminating these habits frees you from the stress of being broke and opens up more choices. Imagine entering your 30s with no high-interest debt, a growing investment portfolio, a clear budget, multiple income streams, and a solid financial plan – while many of your peers may still be trapped in paycheck-to-paycheck cycles. That head start will compound into greater opportunities (starting businesses, buying property, retiring early, etc.). It’s critical to act now, in your youth, because time is the one thing you can’t get back in finance – every year of good habits now is worth many thousands of dollars down the line thanks to compounding and career momentum. As you break each habit, don’t be surprised if you feel a sense of empowerment and confidence. You’ll likely notice your bank account growing, your stress diminishing, and your financial freedom increasing. You might even inspire friends or family to follow suit – financial success can be contagious in a positive way. Remember, none of these habits require perfection to break; they just require persistence and willingness to change. You might slip occasionally (an impulse buy here, a month without saving there), but with your awareness now raised, you’ll get back on track. In summary, most people stay broke because of these common habits, but you now have the knowledge to avoid that fate. By budgeting and living within your means, curbing impulse spending, ditching reliance on debt, saving/investing early, keeping lifestyle inflation in check, growing your earning potential, and planning for the future, you are stacking the odds in favor of wealth. Your 30-year-old (and 40-, 50-year-old) self will thank you profusely for breaking these habits today. You’ll be on the path to long-term wealth and financial freedom, enjoying the peace of mind and opportunities that come with a solid financial foundation. So start now – tweak one habit at a time – and watch how your money (and life) transforms from broke to abundantly prosperous. Good luck, and here’s to your bright financial future!

Sources:

• Gallup survey on budgeting: Only ~32% of American households use a written budget. This indicates the majority spend without a plan, contributing to financial instability.

• LendEDU Personal Finance Survey 2025: 53% of Americans live paycheck to paycheck, including about 44% of those earning $50K-$100K and even 20.6% of those earning $150K+. Over 40% couldn’t cover a $1,000 emergency in cash. Low savings (personal savings rate ~4.6% in Feb 2025) show the consequences of not budgeting and saving.

• NerdWallet 2024 survey: 22% of Americans made impulse purchases in the past year that significantly hurt their finances, and about 16% spent more on impulse buys than on retirement savings. Average monthly impulse spending was $150 in 2023. This highlights how unplanned spending can crowd out wealth-building.

• WalletHub data: Americans paid $254 billion in credit card interest/fees in 2024. Average card APR ~22%, average balance ~$6,500 – at minimum payments it takes 6+ years and ~$3,000 interest to pay off. This underscores how relying on debt and paying only minimums keeps people broke.

• CFPB analysis: Credit card APRs ~22.8% in 2023 (record high), making carried debt extremely costly. Major card issuers charged $105 billion in interest in 2022.

• WealthMichigan example: Starting to invest early yields huge benefits – investing $5k/yr at 25–35 (10 years) can grow to ~$500k by 65, vs. starting at 35 and investing till 65 (30 years) yields ~$540k. Early start = far less contribution for nearly the same result, demonstrating the power of compounding.

• GOBankingRates (Codie Sanchez habits): Parkinson’s Law – “expenses rise to meet income.” Many middle-class folks increase spending with pay increases, preventing wealth accumulation. Even millionaires can go broke by overspending – nearly one-third of lottery winners end up bankrupt. These show lifestyle inflation and lack of financial discipline keep people broke despite high incomes.

• Pew/Robert Half data: Around only 39% of people negotiate salary (46% men, 34% women), yet those who do negotiate or switch jobs often get higher pay raises. Not negotiating can cost hundreds of thousands over a career. Warren Buffett advises “the best investment is in yourself” – neglecting that limits income growth.

• FINRA Foundation 2022 study: Only 27% of U.S. adults passed a basic financial literacy quiz (5 of 7 questions), with an average score of 47% (an F). This lack of knowledge correlates with poor financial decisions. Gerri Walsh noted “knowledge of everyday financial concepts remains a challenge” for many. Emphasizes that ignoring financial education leads to mistakes and missed opportunities.

By applying the lessons behind these stats – budgeting, controlled spending, wise use of credit, early saving, mindful lifestyle choices, self-investment, and financial learning – you can avoid the fate of staying broke and instead build lasting wealth.