The Truth About Being Broke

It's been a long time since I've been broke, but I can still remember exactly what it felt like. I can picture all the ugly details of the way I used to struggle: the empty bank account, the awkward moments, the feelings of despair.

Image via Drazen (Shutterstock)

And honestly, one particularly awkward conversation with my sister still plays clearly in my mind to this day:

"Hey sis, I'm coming into town this weekend," she said innocently. "Maybe we could go grab dinner."

"Ummm, let me think about that for a second." I struggled to find a tactful way to tell her that I couldn't afford it.

It's been about 10 years since then, but at the time I was 22 years old and flat broke. A series of bad decisions meant that I was trapped in a desperate situation that felt nearly impossible to get out of. And although I was going to school part-time, I was living off a full-time job that only paid a whopping $9.15 an hour. Oh, and it gets worse.

Bad Decisions Have Consequences

Have I ever mentioned that I once bought a $22,000 car while making just a little over minimum wage? The resulting $500 monthly car payment meant that almost half of my take home pay was being spent on transportation. And by the time I realised what I had done, it was much, much too late. Since I had always had wonderful credit, I refused to let a car repossession ruin everything in one fell swoop. I was (and still am) stubborn. So, instead of letting the car go, I struggled. This often meant that I didn't have the money to put gas in my car or to go to the doctor. And I certainly didn't have the money to go out to eat with my sister.

"Sorry, I don't have the money to go out to dinner," I said with shame and emotion I may never forget.

"You can't afford to go to Applebees?!"

I could tell by my sister's tone that she thought it was ridiculous that I couldn't afford to eat at the cheesy neighbourhood bar and grill. And honestly, I thought it was ridiculous too. Living so close to my means meant that I was always just one step away from disaster. One day off work, one prolonged sickness, or one unfortunate incident had the potential to leave me completely desolate. I knew that I had to change something. Unfortunately, I struggled to figure out where to start.

The Truth About Being Broke

Shortly after realising I couldn't afford to eat at Applebee's, I learned the truth about being broke. As much as I didn't like it, I was going to have to make some drastic changes in order to improve my situation. So, I sucked it up and moved back in with my parents. As sad and pathetic as that must have looked to outsiders, I knew that this was my chance to get on a solid financial footing.

Since I no longer had to pay for living expenses, I used the opportunity to start making additional car payments. I also began cleaning houses on the side while I went to school. I would often make $1000 or even $1500 payments on that stupid car, and I felt a sense of victory each and every time. It became a matter of principle. Every inch of my being wanted to pay off the darn thing, and I was itching to mail in that last and final payment. Fortunately, it was only a matter of time.

After a year or so at home, my car was completely paid off, and I pledged to drive it into the ground. Well, I ended up owning it for seven years before the events of getting married and having my first child necessitated a family-friendly (used) minivan. However, I still learned an important lesson from the whole ordeal. When I finally sold it, I was shocked to learn that it was only worth $2500. I couldn't believe it! I cringed at the thought of all I had given up for that car. After all, I had just spent several years of my life living like a pauper to own a car that lost 90 per cent of its value in seven years. And, for what? The unfortunate truth is that I did it for no reason at all, except perhaps the opportunity to learn a lesson that I may never have learned otherwise.

What I Learned From Being Broke

Being broke gave me an entirely different perspective on cash flow, debt and my own financial well-being. I learned that there was a big difference between looking like you have money and actually having money. I also learned about living within my means and the real-life consequences of unplanned purchases. And most importantly, I became willing to do anything and everything to make sure that I was never broke again. Once I was out of debt, I pledged to never let that happen again. I promised to rise above my situation and start with a clean slate. And I did.

Of course, things haven't gone perfectly since then. As I've written about many times before, my husband and I took the concept of lifestyle inflation to a whole new level in the early years of our marriage. Fortunately, we've reigned things in over the past few year years, and we're now building wealth like never before. We're debt-free aside from a small mortgage and we're hell-bent on staying that way for eternity. And even though I've strayed several times since becoming an adult, some of the lessons from that part of my life have stuck with me. Here's what I learned from being broke:

  • Don't rely on one income stream. I was never going to get ahead while relying on one full-time job for my entire livelihood. In fact, I never really started making progress against my debt until I started picking up cleaning jobs on the side. Sure, cleaning houses wasn't much fun. But the truth is, the extra income that it brought in completely altered my financial situation over the course of a few years. Now that I'm older, I still strive to have several streams of income coming in. I started a profitable blog with my husband and have secured a multitude of part-time jobs that create a full-time living. I've also diversified my investments as much as possible including the acquisition of rental properties. I've learned that having one "job" means that you're only one step away from not having a job at all.
  • Only you can solve your problems. As I look back, I realise that I would probably be much better off if I had filed for bankruptcy and taken the car back to the dealership. I could have easily bought an old banger to drive around. It would have taken time, but I would have eventually restored my credit rating back to its former glory. Although that sounds tempting, I know that I wouldn't be where I am now if I had chosen that path.
  • Live below your means. In retrospect, I now realise that spending half of my income on transportation is absolutely ridiculous. What was I thinking? Unfortunately, I wasn't. Amazingly, I never once crunched the numbers to see what the real cost of buying that vehicle would be. Now that I've been broke, I realise how important it is to live below my means. And now that I make more money, I choose to live much further below my means that I really need to.

Life After Broke

The truth about being broke is that it can be exhausting and demoralising. And although that part of my life caused a lot of heartache and embarrassment, I'm so glad that I was able to learn all of those lessons firsthand. Now that I'm on the other side, I use those experiences as motivation to continue my quest for financial independence and security. And now when someone calls to ask me to dinner, I have a choice. And when I say no, it's not because I don't have 10 dollars in my bank account or because I'm saving to pay my electricity bill. It's because I've been broke and I want to make sure that I'm never broke again.

The truth about being broke [Get Rich Slowly]

Holly Johnson is a staff writer at Get Rich Slowly, a site dedicated to debt elimination, saving money, and practical investing.


    Article suggests that if you are broke, you must have made bad decisions. That is just not true. Yeah, there are people who are broke for that reason; thousands of them. There are very many more - especially in the United States, where the writer is based - who are broke because they can't get a job, because unemployment assistance is inadequate when it is available at all, because the health system is a joke, and so on. Here in Australia there are fewer people broke for these reasons, but there are certainly some. Not everyone can move back in with parents (I had friends thrown out of their middle class houses at age 15).

    To call the article "the truth about being broke" is at best a gross distortion, and absurdly egocentric. At worst, it amounts to blaming the victims. What you *should* have learned from being broke is some compassion for those who are victims through no fault of their own, and a realization that even when you were broke you were privileged because you had a safety net.

      You're seriously ticking off the author for sharing different life lessons to the ones you wanted to hear?

        No 5318008, I am ticking her off for this unethical garbage. Had she written an article called "how bad choices made me broke; some lessons worth sharing" I would have read it and moved on. She didn't. She wrote an article called "The Truth about being Broke" (a sub-editor might have added the titles, but she used the phrase in her article). In that article, she did not report the truth about being broke. She did not note that her experiences were those of a relatively privileged person who f*-d up. It would be like writing an article about the truth of the experience of disease in which you derived general lessons from that time you had a cold.

          Most messed up way to interpret the article. The article was a sound piece.

            So when she wrote "The truth about being broke" I was supposed to interpret it as not meaning "the truth about being broke"?
            Oh sorry, you are right. This is a most insightful article about porcupines.

      Huh??? If you're broke and it's not your fault, then who's fault is it?

      I thought it was a good article myself. Everyone needs to take responsibility for their own finances.

        Rownan: first stuff happens and its no one fault. False dichotomy.
        Second, lots of time its someone's fault and not yours. For instance if you live in a country with 8% (or say Spain: 28%) unemployment and you can't get a job. Whose fault is it then? Lots of people: financial regulators, governments, many individuals and corporations.

        You're welcome.

          Thanks Ostrich. I suppose you wanted to read an article that said "Broke, don't worry, it's not your fault".

          I personally am self employed and make a fairly decent living. It's not spectacular but it's okay. Noone gave me a job. There are always options if you're prepared to do something and take your destiny in your own hands.

            Rowan that is the stupidest thing I have ever heard.

            Ostrich is right, i read this article and all i could think was what a load of arrogant bullshit. This particular person had a full time job and spent all his money on a new 20k car, that's not being broken its being an idoit. It reads as though, if you are broke, its because you made a really stupid mistake like the author, period.

            Which is obviously insulting and fact less, as ostrich pointed out there are many people who are broke through no fault of their own, they can't get jobs/housing/ or any kind of assistance and all this article does is imply its their own fault.

            Insulting throughout which made any relevant comments moot.

              I agree, all I took from this is that you were dumb enough to buy a car that was above your means then instead of selling the car to reduce your debt and pay it off, you went and mooched off your parents.
              If you really want to know what its like to be broke ask your readers. I am sure there are people like me here that are broke and in debt and have to deal with there mistakes, not go crying back to mummy and daddy..
              On the plus side you managed to get a second job and paid off your debt and I do think that is better then defaulting on your responsibility's.
              I am still a long way from clearing mine and that is the only reason I read this dribble.

              Then maybe you should learn to read more thoroughly kingpotato? There's a lot of tips in the article, the car thing was just one example.

      Indeed. I was not only 'thrown out' of my middle-class home at 15, I was bashed up savagely, then thrown out. Of course there is more to the story, which time does not permit me to chat about. The point that 'ostrich' makes though, is indeed valid.

    If you cant pay in cash you cant afford it.

      expanded slightly, if it doesn't make you money and you can't pay cash you can't afford it, then you should figure out the best way to buy it if you can afford it because that isn't always cash.

        Yeh.. I mean "if you can't buy it in cash you can't afford it" is a silly and naive way to live. How in the heck will you ever buy a house/property?? Even discounting the purchase of a car for the moment.. houses/units cost a lot more than one person could realistically save in time to actually make use of it...

        You just need to be realistic about how much you can afford.. it would have been better for the author of this article to make sure they really needed a car.. and if so, then get a MUCH smaller loan for a used car.. or even buy a cheaper model new car..

          I think what warcoft was trying to say is that if you are paying for everything by credit card because you never have the cash (savings) to pay for it, you're doing something wrong (obviously excluding large once-off expenditures such as house / car / etc.).

            Thank you single_malt. That's exactly what I mean. Most people (like yourself) would understand that.

              Then one would say "Don't live beyond your means." or "Don't spend/commit to more than you earn." Not, "If you cant pay in cash you cant afford it."

              I didn't understand it because you used that language to describe a more complex idea.

      Good luck buying a house. "Here's my $400,000 cheque - I'd like one house please."


      so your telling me 99.9% of people shouldn't buy a house?

    Thanks, that was refreshingly honest. I was expecting something like "It's not that bad", so it is nice to know that yes, it is that bad.

    Some good lessons here.. very good article...

    I have to question the bank's responsible lending policies though.. who'd give a student a $22,000 car loan when their NDI was 0.5.. that's irresponsible in anyone's book.

      That's exactly what banks do. If you cant afford to repay then the bank will reposes your items, take you to court, garnish your wages and youll be in debt to them for life. Its a smart investment on the banks behalf. They rely on suckers making poor purchasing decisions.

        Banks have been taken to court and lost for doing this.. I guess most people don't realise they have the ability to do this..

        "A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." - Mark Twain

    My biggest issue with the article is one that can't be helped. It is written from an American perspective, where one job really won't pay the bills sometimes. The minimum wage here is high enough that a person actually can live within their means on a full time wage, even with a car loan, unless they have other expenses that can't be avoided (medical expenses or children being the first to come to mind).

    As someone who works with people living on income support every day (in Australia), this article misses the mark on a lot of points (for the Australian context). I live in an area hit by significant job loss recently (Geelong, Victoria- Alcoa, Ford, Target, Shell recently cutting jobs) these people have worked these jobs for anywhere between 5-30 years, and many have no other training or experience and a lot of these skills don't translate well to similar jobs in the area, leaving a lot of these people with no option but to leave the area or re-skill.

    I speak to people daily (as part of my job) who are living on middle to low wages, many who may have made relatively safe decisions while employed who have ended up in significantly worse situations due to the employer's decisions (Ford, Shell and Alcoa's recent cuts due to production costs) and are really struggling. on top of that, i deal with people living on income support only (disability pensions or newstart) and when my own rent is just under double their income (I live in a 3 bedroom house, 30 minutes walk to Geelong CBD - nothing special) it's easy to see how these people live on credit or struggle with debt... hell, my alcohol cost are half their income...

    In Australia, if you're not permanently contracted you might want to stop and think about how easy it is to end up on an income support payment (read: the dole) these payments are shit, and with the current job market it is not easy to fix this situation unless you have an outstanding resume or know the right people.

    It seems people don't like accepting blame
    i.e. "Its not their fault they lost their Job after 30 years, and are not trained to do anything else."
    Bullet point in article offers "Don’t rely on one income stream."
    So whose fault was it that in 30 years, no one learned anything new to insure against the loss of their primary income?

    It was going okay until "I moved in with my parents". What are we supposed to take from that? Get greedy? Don't worry your parents will support you until you to get out of it. Lucky for some but not for most.

    I don't often comment but that was a pretty poor article. Idiot buys car thats too expensive for her, has to sponge off mum and dad till car is paid off. Should have sold that car and used public transport or bought cheaper car. Wow. Certainly not 'The truth about being broke'. Insulting to millions.

    Ok the tittle didnt suit the story for the generalised audience but it did for the authors life experience with a lesson for everyone to listen to. People need to get a grip sometimes and pay attention to the little things that have whole lot of meaning to the story. You thinking reading one article will get you rich quick or something ? How do you think the big guys get successful? Learning from their mistakes, learning other people's success niches and persistence. You give a million dollars to a poor person and 99% chance in a year will be broke again. Take every cent from a successful person and 99% chance they will be successful a year later. It's a disiplined mind set and saying people don't have a choice in being poor is complete rubbish( excluding severe disadvantaged) not poor uneducated Joe in the ghetto, he has no excuse if he desires to be successful. Anyone has the ability to be successful in anything they desire, even if their desire is to be just happy and enjoy life with their love ones. The most successful people I know are living simple, humbled and don't give a toot building a bank account. Holly, I liked your story and inspired that you chose to share your success with the rest of us. Thank you :)

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