Imagine you overhear two people bemoaning their financial situations. “I’m so broke!” you hear one say. “That’s nothing, I’m so poor!” the other one replies. You might smirk and wonder. Why are they bothering with the distinction? Aren’t being broke and being poor basically the same? While they might have some commonalities, there are distinct differences.

Being broke and being poor are rooted in financial troubles and reflect the lack of money. If you don’t have enough money coming in, you’re one or the other. Finding the difference between the two has a lot to do with one’s mindset.

You are broke when…

You had enough money before, but you currently don’t. We have all been there at one point in our lives. Should you be labelling yourself as broke, it’s a condition of your current situation. Your income and expenses aren’t balanced, and you need more than you have.

You might be earning decent money, say enough to have you been labelled middle class or even upper middle class. However, you might have all kinds of debts and other expenses. You owe money as fast as you earn it. Therefore, you can’t properly enjoy it.

Still, no matter how long the situation lasts, we don’t fear being broke is a permanent state.

You are poor when…

You believe you can’t change things. It is a dangerous mindset because it stops you from taking action. When you believe you can’t change something, you won’t do anything to even try.

You might have been born into poverty. No matter what the cause was, being poor is something that can easily feel like a permanent burden. It’s a class designation that can seem as indelible as your race or eye colour.

Being poor can be overcome, but it’s much more challenging. Those who are poor tend to inherit certain behaviors that cause them to think what’s happening now will be forever. Anything remotely luxurious or ambitious just seems like a pipe dream.

While you should not spend money you don’t have, you also shouldn’t feel as though you are permanently closed off from nice things. If you honestly believe you are poor, it means you should change your attitude towards your current state and un-learn everything you think you know about money.

How to make a switch

Money management is something that can be taught, like any other management. To change our beliefs, that’s the difficult part. It is good to start with mini habits. The first habit to implement should be the things we say when we are considering a purchase.

When we want to buy something that is out of our budget, there’s also the feeling of being further in debt present. We give up the need and say: “I can’t afford it.” This statement sentence reinforces the negative belief of poverty. Instead, we should put our creativity to work by asking ourselves: “How can I afford it?” The questions we ask ourselves can change the way we think and force us to come up with solutions.

Fiscal management starts with taking accountability. It begins with being honest with yourself. Be honest about how you came to have that credit card debt. Think about your own spending habits. Are you purchasing things because you need them or because you want them? Many people overspend in an effort to appear respectable.

If you can reasonably label yourself as broke, there is hope for you. Some of your debt might be out of your control, but a large portion of it isn’t. It is time to make saving a habit, too. Don’t wait to have enough to start saving, because you will never have enough.

This is a habit that needs to be created for the future’s sake, and it can start with putting aside only 1 percent of a total income. After putting aside that saving money, take a moment to make a budget and stick to it.

Final thoughts…

The status of your bank account is not a fluke. If you take a good look at your spendings, you might find that you’re not the poor person you thought you were. Instead, you might just be broke. Even if you are poor, generational poverty can be also be stopped. Don’t tell yourself that being either is permanent. Both of these are difficult situations. However, they are the ones you can deal with. Self-awareness and financial literacy are key. You can’t just let yourself adhere to the same spending habits as before. Instead, you need to be diligent and dedicated.

A few dollars and the right attitude can make all the difference.

I hope you have found this post interesting and informative. Be sure to share it with your friends and family so they can also spot the difference between being broke and being poor.

Author: Michelle Laurey

Michelle Laurey is Wisconsin born and raised, daughter of two Beatles fans. Recently she started writing about the world that surrounds her, and her life’s experiences. She likes to explore new places, fat cats and the smell of books. When not writing or reading, she enjoys binge-watching “Billions” episodes with her boyfriend and tries to embrace her new “Profit first” mentality.

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