Finding tips to save money is easy, but what are the things that make us go broke? If you’re doing any of the following you might already be on the path of financial destruction.

Having too many credit cards
The obvious way to go broke is by abusing credit. Having multiple credit cards is pretty normal, but having them all maxed out is a definite sign that you have a problem. If you find yourself applying for a new card every time your current cards are maxed out, then you’re literally one step away from a financial meltdown. Lower your credit limit and start paying off your debts.

Ignoring your current situation
The worst thing you do about your debt is to ignore it. Credit cards charge 20%+ interest; it could take you 25+ years to pay it off if you’re making just the minimum payments. Come up with with a repayment plan that will clear your debt and fix your bad finances forever.

Is a low income preventing you from paying off your debts? If so, consider improving your skills to get a better job that will pay you more. Pick up a part time job if you have to, paying off your debt as soon as possible needs to be a priority. Your financial situation won’t fix itself, do something about it.

Keeping up with the Joneses
The thing about the Joneses, they’re about to go broke. A big house, fancy car, designer clothes, that stuff costs a lot of money and the odds are they’re in debt because of it. Who cares what others are doing, just concentrate on what you’re doing.

If you have serious money problems then going to the clubs and buying people drinks every weekend is probably not  a good idea. Your friends won’t think you’re rich just because you’re treating them, they’ll just think you’re an idiot for wasting money.

Go Broke

Listening to friends or family who are clueless about money
It’s easy to go broke if you’re taking advice from people who don’t have a clue about money. Hopefully you haven’t been taking financial advice from the Joneses since they would just tell you to buy a new car, and take an expensive vacation. Your friends and family may work at a bank but that doesn’t automatically mean they are good with their finances. For all you know they could be highly leveraged.

Expecting a money bailout
It’s amazing how many people expect bailout money from the government because they didn’t save enough during their working years.  The Canadian Pension Plan and Old Age Security are meant to supplement your retirement income, not be your sole source of money. We’ve become so poor at saving for retirement that a Ontario Pension Plan has been proposed.

Some younger people who fall into the debt trap ask for a bailout from the bank of mom and dad. If you’re a parent willing to bailout your child, set some conditions so they learn from their mistakes; the last thing you want is for your kid to fall back into debt after you gave them a handout.

Buying expensive presents
It’s amazing that people who shouldn’t be spending end up buying the most expensive presents for their family. Does your mom really need an expensive Christmas present like a new iPad or laptop? You may want to appear generous, but the only thing this shows is how incredibly poor you’re at handling your money. Santa has a present for you– it’s called bankruptcy.

Buying too much House
Bigger doesn’t always mean better, especially in the Canadian real estate market. A bigger home means you’ll be paying more for your mortgage, taxes, utilities, and maintenance; this could potentially leave you house poor. Many in this situation end up relying on credit and find saving for retirement, taking vacations, and even raising kids become a real struggle. That big house could drive you to the poor house.

Final word
Don’t worry, there’s still time to fix your money situation but you need to take it seriously. Stop spending and start saving. Remember, no one will care more about your money that you. 

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Image couresty: Buzzfeed.com

16 Comments

  1. Brian So on October 20, 2014 at 2:21 AM

    “Santa has a present for you, it’s called bankruptcy.”

    Haha, ouch. A way to avoid spending too much is to make a budget like you do for other expenses. Say limit presents to family members to $50 and friends to $20. It makes it easier to shop too when you have a target price in mind.

    • Barry Choi on October 20, 2014 at 10:11 AM

      Brian,
      Seriously if you’re having money issues, buying expensive presents Isn’t going to help anyone. Well I suppose. it’ll help the credit card companies. I prefer to just share a meal with friends, no presents required.

  2. Alan Whitton on October 20, 2014 at 7:17 AM

    I am not sold, I think there are a few other ways to go broke, I want truth in Titling! 🙂

    Remind me to buy you a cheap beer the next time I see you.

    • Barry Choi on October 20, 2014 at 10:12 AM

      Alan,

      There are way more ways to go broke, unfortunately the people who are at most risk are probably already doing 2-3 things on this list. They’ll go broke if they don’t make some changes.

  3. Robert R. Brown on October 20, 2014 at 8:22 AM

    Screw the Joneses! (I read that in a book somewhere…)

    • Barry Choi on October 20, 2014 at 10:12 AM

      I think that same book also had a great chapter about buying too much house. Genius writer.

      • Robert R. Brown on October 20, 2014 at 1:05 PM

        He’s a hack. And just so you know…the first draft didn’t say “screw” the Joneses. It originally used a different verb. Just sayin…

  4. Alan W. on October 20, 2014 at 1:04 PM

    You mean me?!??! 🙂 Yeh, I just make my kids read my blog, that seems to scare them enough.

    • Barry Choi on October 20, 2014 at 1:10 PM

      Alan,

      The people who are already committed to this list probably don’t care. They see debt as a way of enjoying life. I’m just pointing these out for the rest of us =D

  5. Leonard W on October 20, 2014 at 2:42 PM

    Great Read, Thank you

  6. Tawcan on October 20, 2014 at 2:51 PM

    Stop keeping up with the Joneses will help with your financial situation a lot. Great list.

    • Barry Choi on October 20, 2014 at 3:16 PM

      Tawcan,

      For sure, too bad so many people like to live that fantasy where they are rich.

  7. Dan @ Our Big Fat Wallet on October 21, 2014 at 7:40 PM

    The biggest and fastest way to go broke that Ive seen is to buy more house than you can afford. Around here a decent house near downtown is around $950k and it seems insane but apparently there are people who are buying them and I doubt they have the income for it

    • Barry Choi on October 21, 2014 at 8:57 PM

      Dan,

      Cheap interest rates keeps them afloat for now. They can “afford” the monthly but nothing else. Who knows maybe they enjoy Kraft Dinner every day.

  8. Sean Cooper, Financial Journalist on October 23, 2014 at 6:45 PM

    Insightful article as always, Barry! Working in pensions for a living, your comment on “waiting for a government bailout” really struck a cord. The sad reality is only 25% of Canadians contribute to their RRSPs. Those not saving towards their golden years will be in for a rude awakening when they realize CPP/OAS is barely enough to cover basic living expenses like groceries and heating.

    • Barry Choi on October 23, 2014 at 10:12 PM

      Sean,

      This assumes CPP / OAS stay in their current form for us younger workers. I’m not even counting on them for my retirement. Very sad people don’t save and just expect that the government will pay for them.

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