It comes as a sudden realization a week before payday and, sometimes, a text or email from the bank or the hideous embarrassment of having your debit card declined in the checkout line. The dynamic plays out in offices and businesses all across America. The realization for many happens when they check their bank balance to discover they only have a few dollars to stretch to payday. Better to get the bad news before you leave than at the table at a restaurant.
That sudden lightning strike of financial doom can trigger a lot of emotions that roughly parallel the stages of grief. First there’s that quizzical denial. That can’t be right, I had money just yesterday! Then comes a pang of annoyance fueled by embarrassment. There must be something wrong, it’s the bank’s fault or the machine isn’t reading your card right. Then comes the depressing realization that you’re broke.
Financial Grief Process
Working through the financial grief process motivates many to start looking at long-neglected bank statements. Some believe they might have been the victim of hacking or some kind of bank fraud. What happens more often is the head-scratching realization that all the deductions are typical. You weren’t hacked, no one stole your money, you’re just broke. Here are some of the more common ways people find themselves in financial grief.
Subscription Nation
We pay monthly for an increasing array of products and services and each of those is like a financial razor cut. There are monthly deductions for health clubs, massage services, shaving clubs, Netflix, internet access, online games and a bewildering parade of twenty to fifty dollar a month charges. Even some software products, like Adobe’s Creative Cloud subscription for applications like Photoshop, are now monthly charges. There’s a reason companies love subscription models and that’s because they’re profitable. Those endless nicks on your cash flow are one of the reasons you’re broke.
Housing Costs
There’s a reason real estate agents quote payments and not prices. They want you to spend more because, when you do, they make more. Left out of the calculation of housing’s true cost are expenses for maintenance, insurance, taxes, HOA dues, utilities and lawn care. Houses are an endless parade of niggling fees, repair bills and expenses. Banks, mortgage and insurance companies have all figured out that when you’re nailed to the ground you have no place to run and hide.
True Costs of a Car
Another expense most people badly underestimate is the cost of buying a car. Not that many people actually buy cars these days, most of them, like most homes, are owned by the bank. AAA has a great chart on the true costs of buying and operating a car. Even taking out the cost of depreciation, which doesn’t chisel money out of your bank account every month, you’re still looking at an average cost of $5044 a year to operate a car. That’s $420 a month just to have that hunk of metal sitting in your driveway. Yikes!
As you can see, the real reason most people hit the broke realization wall is due to small expenses getting out of hand. Eating out and that daily coffee are the usual suspects that get paraded out regularly, but sometimes it’s the stealthy monthly charges and hidden costs that are the true budget breakers.