7 RULES OF FINANCIAL FREEDOM

CHAPTER 11--BEING BROKE AND BEING FINANCIALLY DISORGANISED

Have you ever wondered why some people earn a reasonable income yet constantly struggle to pay their bills, while others with modest earnings appear to manage their responsibilities more effectively?

Have you ever received money, spent what seemed like a reasonable amount, and

suddenly discovered that there was almost nothing left?

These experiences raise an important question: Are you struggling because you genuinely

do not have enough money, or because you have not developed an effective system for managing the money you receive?

Although these two situations can look similar, they are not the same.

Being broke and being financially disorganised are two different financial challenges.

Understanding the distinction can help you identify the real cause of your difficulties and take more appropriate steps toward financial stability.

BROKE

Being broke generally means having little or no money available to meet your immediate needs and financial responsibilities.

A person may be broke because their income is too low to cover essential expenses.

Another person may have lost a job, experienced an emergency,

or encountered circumstances that significantly reduced their financial resources.

Imagine someone who earns $5000 monthly but needs $7000 to cover reasonable essential expenses.

Even if this person carefully plans every dollar, the income shortage remains $2000.

No amount of budgeting can eliminate that gap.

The person may reduce certain expenses, seek assistance, negotiate some bills, or look for additional income.

However, the fundamental problem is that available resources are insufficient for the person's essential needs.

This distinction matters because financial hardship should not automatically be interpreted as evidence of irresponsibility.

People can work hard, make sensible financial decisions, and still struggle because of unemployment, low wages, illness, family obligations, rising prices, or limited economic opportunities.

Being broke is therefore not always a reflection of someone's character, intelligence, or discipline.

Sometimes, it is a difficult financial condition that requires practical solutions, support, and better opportunities.

Financially Disorganised

Financial disorganisation occurs when someone lacks a clear, consistent system for managing income,

expenses, savings, debts, and financial responsibilities.

A financially disorganised person may earn enough to cover their essential needs but still experience repeated financial difficulties because their money is not managed intentionally.

For example, imagine someone who earns $4000 monthly.

Their essential expenses amount to $3200, leaving $800 before other spending and financial obligations.

Without a plan, they might spend $500 on unnecessary purchases, $200 on entertainment, $100 responding to unplanned requests, and additional amounts on things they had not intended to buy.

When rent, debt repayments, or other important expenses become due, the money may no longer be available.

The problem is not necessarily that the person's income was insufficient from the beginning.

Instead, spending decisions were made without considering the full picture.

Financial disorganisation can also involve forgetting payment deadlines, failing to track debts, mixing business and personal funds, spending emergency savings on non-essential purchases, or having no clear financial goals.

The encouraging news is that many organisational problems can improve when a person develops better financial habits.

However, this does not mean everyone who earns a seemingly reasonable income should be able to meet every expense.

Individual circumstances differ, and income that appears sufficient to one person may be inadequate for another.

The Major Difference Between Being Broke and Being Financially Disorganised

The central difference lies in the relationship between available resources and financial decisions.

Someone who is broke may carefully manage their money but still lack enough to cover essential needs.

Someone who is financially disorganised may have sufficient income for their essential responsibilities but repeatedly struggle because they do not plan or manage their money effectively.

Of course, one person can experience both problems simultaneously.

Consider two individuals.

The first earns $5000 monthly and spends $4,500 on essential expenses. Their income leaves little room for savings, emergencies, or unexpected costs. They maintain a budget, avoid unnecessary purchases, and make careful decisions, yet they remain financially vulnerable.

The second earns $10,0000 monthly but does not track expenses, regularly purchases things on impulse, and fails to reserve money for major bills. Despite earning more, they frequently run out of money before the month ends.

The first person primarily faces an income challenge. The second may have a financial organisation problem, although their complete circumstances would need to be examined before reaching a firm conclusion.

Their situations require different solutions.

The first person may benefit most from opportunities to increase income, access appropriate support, reduce unavoidable costs where possible, and protect themselves against emergencies.

The second person may benefit from budgeting, expense tracking, better spending decisions, and a more deliberate financial plan.

Before trying to solve a financial problem, identify what is actually causing it.

Why Some People Remain Financially Disorganised

Financial disorganisation rarely develops overnight.

It often grows through repeated habits that appear harmless at first.

One common cause is spending without tracking expenses.

When people do not know how much they spend, they may underestimate the cost of everyday activities.

Another cause is lifestyle pressure. People sometimes spend money to impress friends,

maintain appearances, or imitate lifestyles they cannot comfortably afford.

Social media can make this problem worse by constantly presenting expensive holidays,

designer clothing, luxury vehicles, and other visible signs of wealth.

Some people respond by spending money they should have used for essential responsibilities or future goals.

Another challenge is the absence of financial education.

Many people were never taught how to prepare a budget, calculate their net worth,

understand interest, manage debt, or build an emergency fund.

Others avoid reviewing their finances because the numbers make them uncomfortable.

They would rather ignore an unpaid bill than confront the reality of their situation.

Unfortunately, avoiding financial information rarely makes a problem disappear.

The first step toward improvement is not perfection. It is the willingness to understand your financial situation honestly.

Know Which Problem You Are Facing

If you frequently struggle financially, begin by asking yourself a few important questions.

First, is my income enough to cover my essential needs?

Calculate your necessary monthly expenses, including housing, food, transportation, utilities, healthcare, and other unavoidable responsibilities. Compare that amount with your reliable income.

If essential expenses consistently exceed your income, you may be facing a genuine income shortfall.

Second, do I know where my money goes?

If you cannot explain how you spent most of your income, you may need a better system for tracking expenses.

Third, do I regularly run out of money because I spend on non-essential things before paying important bills?

If the answer is yes, prioritising expenses and preparing a budget may help.

Fourth, do I have a plan for emergencies, debt repayment, and future expenses?

If not, you may benefit from creating a financial plan that reflects your circumstances.

Finally, ask whether unexpected events or external pressures are affecting your finances.

A sudden medical bill, job loss, or increase in living costs can disrupt even a well-organised budget.

These questions are not intended to make you feel guilty. They are designed to help you identify the problem so you can choose a realistic response.