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Reasons You Feel Broke

I have recently watched a video by The Break, which is the financial/life advice channel by Patricia Bright, a YouTuber who I have followed for years. In this specific video, the outlines the reasons why, despite actually earning money and being able to settle your bills, you might still feel broke as hell. I vibed hard with this video, and thought I’d outline her viewpoints in this post, with the addition of some serious behavioural science, of course! Credit where credit is due: I did get inspired to do this "fact checking" of an already existing source of edu-tainment, as it is often referred to, by friend and fellow creator Peter Judodihardjo, who runs PetesBITS (BITS: Behavioural Insights & Theories) and has a similar series on there, so make sure you check that out too!


1. You’ve got no Money Goals Her first point in the video is that you’ve got no plan for your money and as a result it’s just flying out. This is something that has long been known in behavioural science. If you fail to plan, you plan to fail. If there’s no plan, there’s no action. As soon as you set yourself a goal, you’ll have something to work towards. Patricia then makes a statement that seems like the having of the goal, which she does advice should be small and actionable, is enough. However, behavioural science has also taught us that having a plan itself is not enough. Research by Peetz and Buehler actually shows that those who have the intention to save, have the biggest discrepancy between what they thought they’d spend and save, and what they have actually spent and saved. This is also known as the budget fallacy: if there’s only intention, but no action, the intention-action gap only grows. When it comes to setting goals, please read up on my articles on COM-B and SMART, which are two behavioural change tools that help you change your behaviours to actually achieve your goals!


2. You’ve got no Financial clarity A, from my perspective, much better point made in the video is the fact that a lot of people don’t have any financial clarity. Although there have never been more ways to track your income and your spending, quite a few people are still not “in the know.” Problems start as soon as you don’t know what your income is. Living within your means becomes quite hard if you’ve got no clue what your means actually are. Also, it’s quite important to know where your money is going. What bills are due? When are they due? And maybe more important: are these bills for something you still want to spend money on? It’s often people who don’t know where there money is going who are stuck in subscriptions they no longer care about. Research on financial tracking and reduced spending/increased savings isn’t super supportive of just using the app. Just installing the app and glancing at it once in a while is definitely not enough. Make sure that when using a tracker app, or doing this with pen and paper, Kakeibo style, you also apply a behavioural change model (COM-B or SMART) to actually kick yourself into gear, and make some money move!


3. Your Money Mindset is Rubbish How do you think and feel about yourself, your ability to handle money and your ability to get rich? Patricia outlines that your perceptions of yourself, money and what money Big disclaimer here, given by the both of us: your money mindset is often “given” to you by your environment, so your parents, teachers and later on friends and colleagues. This “gift” can either be a blessing or a curse. It’s great if you were taught the value of money, how to save and the principles of investing early on. But if your entire environment is perpetuating the idea that you’re never going to be able to move up in socio-economic rank and that poverty is forever, well, that is going to have an impact. Whether we like it or not. I’m putting this disclaimer out there because it is incredibly difficult to undo years or maybe even decades of people saying that you shouldn’t “get acquainted” with money, just because it’s a fruitless endeavour and you’ll never amount to anything anyway (her words, not mine). Money is often a means to a better life: one with more freedom, less stress and more options. It’s important you understand what money can do for you. And what it cannot. What research has to say about this aspect isn’t exactly great either. Research on the psychology of poverty has shown that those who come from an impoverished background or have lived in poverty themselves have different discount functions and risk attitudes, showing that their discount functions are steeper (more impatient) and that they are more risk averse. Both of these findings are negatively correlated with successful outcomes in financial decision-making.


4. You have 500 different Payment Methods One of my favourite points in this whole video, because it’s essentially my PhD topic, is Patricia’s comment on the amount of payment methods we have. It’s too much. There’s too many. There’s one debit card, two credit cards, a Monzo account, Klarna is flying about and Paypal is also involved there somewhere. Messy much? Now my topic of study is what these different payment methods do to our spending, Patricia’s point is a bit different: it’s just too damn cluttered. This ties in nicely with point 2: financial clarity. You’ve got no clue which account has which balance, from which account you’re supposed to be paying There are people who can “successfully” manage over 10 different credit cards, but those are people with spreadsheets filled with revolving problem debt who have no other way of being able to manage that debt, and maybe eventually (not likely) get out of that debt. I’ve read that research, trust me when I tell you that you do not want to be in this position. For the sake of ease: centralize and automate everything. Every bill payment you have, that comes up regularly (say every month), try to move that on the day you get paid, or a day after, all on the same damn account that also gets your income! At least then, without much effort at all, you know you have at least managed to pay down the basics, and all of that info is stored on one account.


5. You don’t Pay Yourself On the topic of automating your bill payments, make sure to bill yourself as well. Yes, it’s time to pay yourself. I have written multiple articles on Paying Yourself First, and Patricia refers to it in her video as well. One of the key reasons people tend to feel broke is because that all the money that comes in, also just goes out. Just because you have financial clarity and a financial goal, does not mean that you are remotely close to achieving that goal. The fastest way of saving money and reaching your goals? Treating it as a bill. Something funny about bills; we are almost afraid that the wrath of God (or the financial system) might rain down on us as soon as we don’t pay them. Bills are seen as a MUST pay. Non-negotiable. But why would savings be any different? They are essentially an insurance to make sure we can pay “future bills.” It’s not all about the ability to pay future bills either. It’s about valuing yourself and whatever it is that you want to do with that money. Maybe you want to spend it on something nice for yourself. Treating yourself once in a while is no crime. Maybe you want to invest in yourself, and the money is needed for further training or education. Whatever the case may be, treat it like it would be a bill. And pay yourself!


6. You keep Comparing Yourself to Everyone Else Patricia shows that she knows some behavioural science with this one, as she refers to her sixth point as “keeping up with the Joneses.” We love a queen who knows her stuff. Keeping up with the Joneses is a phenomenon based on social comparison. In this case, it’s very heavily focused on upward social comparison, where you compare yourself to those who are doing better than you are. Trust me when I tell you there’s no better way to feel worse about yourself than doing this. Best advice? Don’t do it. Another thing to watch with this one is social media consumption. Social media, or rather, what people post on social media, is not a real representation of life. It’s a highlight reel. So if they post expensive clothes, luxury holidays (remember holidays in general?) and fast cars, you only see the outcome, and not the struggle that it would have been to get there (sometimes it’s just privilege, sorry). And if you then look at your own life, you’ll fall short, guaranteed. This can make you experience a whole wave of negative emotions. Or worse, you can try to keep up with what you see on social media. New designer clothes every day, photoshoots on white sand islands and fast cars we cannot drive fast anywhere because we live in a suburban Coventry and not Silverstone. And rather than feeling broke, if you’re trying to flex a lifestyle you cannot actually pay for, you’ll be broke. If following those type of social media accounts make you feel miserable about yourself, cut them out. You are not obligated to follow them, they’ve got plenty of money and followers as is. If this is someone in your real life (offline), what you can do is ask for advice on how they got into the position that they are. Maybe they can actually help you get a plan, or a better money mindset. Who knows?


7. You Have Only One Source of Income This is the one point I’m not super happy with, but that’s not Patricia’s fault, it’s the system’s fault (I’m such a millennial…). Patricia raises the point that the security of a single income, a single source of income, is no longer. And she’s not wrong. As we have seen through crisis after crisis, but also through the rise of the gig-economy, is that the days of stable income are over. Personnel is discarded as quickly as it is hired, and companies such as Airbnb and Amazon don’t even employ their own customer service employees anymore, they are essentially freelancers and self-employed workers hired through a different agency (this is very problematic, I would like to add). Knowing that you might have a job one day, but not the next, the answer to mitigate risk is easy: diversify. Diversify your income as your would diversify your stock portfolio when investing. Have multiple streams of income, often also referred to as side-hustles. For someone over the age of 45 this might sound a bit weird, for everyone under the age of 45 this was probably the plan all along. The economy has changed. And not for the bloody better. If you want more tips on diversifying your streams of income, this video, also by Patricia on the break platform, can help you out. As well as this video, which is on passive income.


It has become quite clear that I am *quite* the fan of Patricia Bright and her tips, but I thought that I’d put some behavioural science to it, and see if these tips still hold up. Some hold up better than others, that is for sure! Let me know on social media what you thought of this article, and what helps you the most in NOT feeling broke.


Behavioural Science

Personal Finance



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