American financial literacy entrepreneur and businessman John Hope Bryant in his famous quote had said that: “There is a difference between being broke and being poor. Being broke is a temporary economic situation, but being poor is disabling frame of mind, and a depressed condition of one’s spirit, and we must all vow to never, ever be poor again.”
So what exactly is the difference between being broke and being poor? Do they have any common ground at all? Does one follow from the other? And more importantly, what should one understand and learn from these differences in order to not become any of them? In my opinion, there exists two very specific differences between being broke and being poor.
First, the Question of ‘Resource’
Whether you are poor or broke, the resulting situation is that you do not have cash for your day to day expenses. But, the crucial question is – ‘Do you have the resources available to improve your financial situation?’ If your answer is no, then you are poor. But if your answer is yes, then you are just broke.
For example, you are a student who’s sharing a flat with classmates, eating boiled cabbages and trying to make ends meet. You suddenly have to pay an added sum for some examination, or let’s say pool in for the part of the balcony which needs repair! Kaboom! You have no cash left!
However, if you get up the next day morning with a major illness, you do have health insurance to get yourself treated. Or if you get thrown out of the flat, your parents might fund for another space. In short, you have resources available to improve your financial condition. You have the backup which would not let you fall into an abyss in case of any ordinary emergency. For people who struggle to make ends meet for the basic needs in life and who do not have an option to get out of the financial condition they are in, are plain poor.
Common sense tells us that the first, if not taken seriously, can lead to the latter.
Second, the Question of ‘Help’ or the ‘possibility of it’
And this is the most important part really… Being poor isn’t something you can help. It requires a major economic and social upheaval which is not really in one individual’s hands. But ask yourself this – Being broke is something that you can help, right?
We think we are in the ‘poor ship’ while we are actually in the ‘broke ship’ most of the times! A bit of personal finance planning and inculcating good financial habits is all that is required to keep yourself from going broke all the time! The first crucial step is realizing this difference, the rest is easy. Follow these below mentioned personal finance tips religiously, and voila! You will never be broke again!
- Make a monthly budget of income & expenses – List all your inflows and outflows (keep mainly the essentials with only a buffer for travel and modest entertainment allowances like movies, dining out, etc.
- Pay bills on time – Electricity, mobile phones, credit cards, make a calendar, pay them all on time to avoid paying late fees
- Avoid overspending with credit cards – This is exactly what pushes you to the ‘broke ship’ next month with a similar chain reaction for subsequent months, so STOP it right now! Say No to Impulse buying!
- Do not neglect long-term planning – That professional course, buying a house, retirement plan, etc. Just sit down with a paper and atleast jot down what you need to plan for and then plan it out!
- Make a contingency plan – All months would not be rosy. Sudden emergencies are always round the corner. Make a contingency plan and keep a part of your money away for it.
- Stop redundant spending – You are paying cable charges as well as for live streaming account, paying for mobile internet as well as the laptop wi-fi. Get a grasp on these redundant spendings and you’ll save a lot more!
- Take advantage of deals & discounts – Have something to buy or a service to avail, check on the internet whether there’s a deal or discount being given on it by someone. Make it into a habit and you’ll end up buying a lot more stuff with lot less money!
- Do not neglect product maintenance – Regularly spending money in maintenance works out to be far cheaper than spending money on one time repair. Make it into a habit.
So what are you waiting for? Start RIGHT NOW! A month down the line and you’ll well be on your way to never being broke again!