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Whether you are just short of cash or financially crippled, you might casually describe yourself as being either “broke” or “poor” when speaking to a friend about your situation.
Words matter though, and there is a big difference between being broke and being poor.
In many cases, most people are broke.
They overextend themselves either by living beyond their means or temporarily losing their income.
Being poor is an entirely different thing and the hardships that come with it are real.
In fact, if many broke people saw what life is like as a poor person, they would quickly realize they are not poor.
In this post, I am going to walk you through the differences of being broke vs. poor so you can get a better idea of where you stand financially,
From there, I’ll share with you some resources to end the struggle you are in and improve your finances.
The Difference Between Being Broke vs. Poor
What Does It Mean To Be Broke?
When a person is broke, it means that they don’t have enough money or access to credit to either meet their current living expenses or to acquire the miscellaneous things that they want in life.
In many cases, people that are broke don’t follow a budget and as a result, spend more money than they make.
- Related: Click here to learn about the 50/30/20 budget
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Depending on their situation, being broke can be either stressful or simply inconvenient.
And in most cases, it is a temporary situation.
Emotional Aspects Of Being Broke
It’s terrible to be broke.
When you hit a dry spell with your cash flow, you see the world in an entirely different light.
At the very least, you may be embarrassed because you find it difficult or impossible to maintain the standard of living to which you have been accustomed.
You may not be able to do the fun things you are used to doing with your friends.
You may have to decline invitations to weekend getaways or vacations.
Being broke means that you just don’t have enough money to do what you want when you want to do it or to buy what you want when you want it.
It is frustrating to have to tell yourself no when you see clothes, shoes, toys, or a car that you want because you don’t have the resources to say yes.
Or worse, you will try to keep living a comfortable life by going into debt.
If you aren’t careful, your embarrassment and frustration can encourage you to slip into anger, self-pity, or depression.
You can help control the emotional impact of your temporary insufficiency of cash flow by keeping everything in perspective.
The good news is that being broke is a temporary financial hardship.
There is light at the end of the tunnel, and it often happens that being broke is a transitional period that leads to a more comfortable situation.
Financial Aspects Of Being Broke
Being broke is a serious situation.
You are obliged to pay your rent or mortgage. You have to buy groceries. You must pay your utility bills, car payments, and meet your other financial obligations.
When you are broke, though, it’s usually a short term situation and you usually have resources to help you create a bridge from your current situation to a more comfortable one.
Depending on the severity of your situation, here are some resources that you probably have if you are broke.
- You can reduce your expenses by eliminating or cutting back on discretionary spending
- You can borrow money from family or friends
- You can take out a 401k loan to help you get by
- You can take advantage of your connections to access money or perhaps a better-paying job
- You can sell some of your possessions
- You can ask your family or friends for a temporary place to stay
- If you have a home or other assets, you can use them as collateral to borrow money
As dark as the world looks when you are broke, you have a safety net and the solace of knowing that your strapped cash-flow situation is not permanent.
How To Overcome Being Broke
Changing your financial situation from being broke to building wealth is a lot easier than if you are poor.
This is a key difference between the two.
For starters, you have a much better foundation for which to build off of.
You just need a little guidance to help you get over the hurdle.
The first step is to change your spending habits and get your spending in control.
Ideally this can be done by following a budget.
But for now, you could get by simply with tracking your spending for a month.
Learn where you are spending your money.
Is it on things that you can easily cut back on?
For example, if you are spending a lot of money going out with friends, can you reduce this expense a little?
Once you make the basic cut backs, then take the time to understand what you value.
What things bring you joy or happiness? Are you spending your money on these things or in other areas?
For example, if you get joy laying on a white sand beach and not eating out, you would be better off slashing your dining out budget and putting that money towards vacations.
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This is a real eye opener for many people.
By doing this simple trick you can reduce a lot unnecessary spending.
From there, you need to start saving money every month.
Even if money is tight and you can only save $5 a month, make it a habit.
Over time the money you save will grow into large amounts thanks to compounding.
Finally, you want to grow your wealth.
You can do this by either increasing your pay at your current job, getting a second job or side hustle, or both.
Having a larger monthly income will allow you to pay off debt if you have any and will help you to save more money every single month.
Here are a handful of posts that will help you break free from living broke and start to live a life of wealth.
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By following the advice of reducing spending and building your savings, after a few months of income, you should see your situation improve.
What Does It Mean To Be Poor?
When a person is poor, they are living in poverty.
Poor people experience financial hardship every day because these tough times have become embedded as a part of their way of life.
Their status seldom changes with the passage of days, weeks, months, or even years.
Being poor is a semi-permanent state.
Emotional Aspects Of Being Poor
If you are living in poverty, it is a constant struggle to simply get by.
Yours is a seemingly never ending battle to put one foot in front of the other because of the emotional weight that your life threatening condition has placed on your shoulders.
Poor people live with fear and isolation.
They are often scorned by rich people that are higher up on the socio-economic ladder.
They are blamed for being poor as if it had been their choice because they are lazy or degenerate.
Because of the conditions in which they live, they often fear that social workers will separate them from their loved ones.
Among the most tragic aspects of living in poverty is the sense of insecurity.
Every day, impoverished people must worry about or deal with the challenges of food, health, and housing security.
Where will the next meal come from? Will I be able to feed my children? What if I become ill, or a member of my family becomes ill?
Where will I find money to pay the doctor or hospital or to buy medicine? How will I find money to pay the rent? Where will I find a house for my family if I fail to find the money?
These are just some of the questions the poorest people ask themselves on a daily basis.
Financial Aspects Of Being Poor
Poor people typically have no safety nets.
They can’t put money away because they don’t have enough to cover their regular expenses even if they work multiple jobs.
There are no extraneous costs to cut. There are no clear paths to greater earnings.
There are no friends, family members, or a network of people to loan them money or introduce them to valuable resources.
It is true that some people manage to climb out of poverty, sometimes into tremendous wealth.
But these stories are rare and under the best circumstances, it is extremely more difficult than it is for others.
How To Overcome Being Poor
As I mentioned above, climbing out of poverty and into tremendous wealth is rare.
But this doesn’t mean you can’t climb out of poverty and live comfortably.
You might not become ultra wealthy in the future, but your financial life will be completely different from where it is today.
So how does a poor person change their circumstances?
You have to take advantage of opportunities in life for starters.
Every day when you wake up, you choose your attitude for the day.
The sooner you can develop a mindset of wealth, the sooner you can begin to make positive changes to your life.
Stop telling yourself you are a poor person and start believing you have wealth.
It might sound crazy now, but changing from a poor mindset to a rich mindset works wonders and adds a level of peace of mind to your life.
Next, you need to seek out government help.
It is there for a reason, to help bridge the gap between your income and expenses.
You should familiarize yourself with the poverty guidelines put out by the Health and Human Services Department.
This will give you a good understanding of where you fall.
Next, reach out to the appropriate agencies in your state.
You should be contacting them for help with the following.
- Food stamps
- Low income housing
- Employment assistance
This is just a short list to start with.
From there, reach out to your utility companies.
Many have programs for low income families to help them pay their bills.
Finally, read my post on surviving on minimum wage.
It will give you some additional details on the resources above as well as more tips and tricks to help you break free from poverty.
A Simple Way To Tell If You Are Poor Or Broke
While the above examples make it clear for many if they are truly poor or simply broke, some reading this still may be unsure.
Here are a few more examples to help bring you clarity.
You are a broke person if:
#1. Your cash flow situation is temporary
#2. You have resources to help you bridge to a better situation
You are a poor person if:
#1. Your food, healthcare, and housing insecurity are semi-permanent
#2. You have no resources readily available to alleviate your condition
There is no shame in being poor or being broke, but it is shameful to consider these words to mean the same thing.
They are very different and the way in which you emerge with improved finances is very different as well.
I encourage you to take the time to understand the actual difference between the two.
Doing so will allow you to start attacking the issue head on so you can change your financial situation for the better.
It won’t be easy and it will take time, but the journey is well worth the effort.