There are many guides out there meant to help readers get rich.
But today, we want to guide you through the process of going broke as quickly as possible.
While almost no one claims to be actively attempting to bankrupt themselves, some peoples’ actions would suggest they are.
Going broke is very simple. In fact, it’s much easier than getting rich. Even if you’re already very wealthy, these financial habits will help ensure you’re completely broke in no time!
In this article, we will go over the most common habits that lead to financial ruin.
How do you become broke?
You can go broke through any series of decisions that are financially irresponsible. Let’s look over some common processes.
1. Listening to the wrong people.
This can include friends and family, and often does.
Some people are absolutely clueless about money. But of course, they don’t want to feel useless when a friend or family member is in need of advice.
They may advise you that irresponsible spending is justified or not a serious problem. They may also advise you to invest in sketchy investments as a way to be able to spend frivolously without worrying about it.
It’s always best to second-guess major financial decisions!
2. Improper use of credit.
This is a very serious one and a reason that we’ve discussed a lot here.
Improper uses of credit include:
- Using credit unnecessarily
- Not managing debts effectively
- Ultimately, ending up paying significant sums in interest repayments
Over time, debt cycles can become vicious, eating up ever-larger portions of your disposable income.
So, if you want to go broke, start using high-interest credit irresponsibly.
3. Ignoring your reality.
This can happen in the context of spiraling debt as well.
If you have multiple credit cards and just pay the minimums off, those approximately 20% interest rates can put you in a situation where you’re stuck for years.
In addition, ignoring the budgetary restraints of your income can lead to going broke.
Overspending and treating yourself too often when you really can’t afford it is a great way to become broke in a year.
4. Overleveraging.
Downsizing is financially easy. But living in a home that is too big for you can make you broke.
A house is an asset with a value that does normally appreciate over the years. But a larger house means pricier:
- Mortgage payments
- Property taxes
- Utility bills
- Maintenance costs
5 Smart Tips to Avoid Being House Poor & 7 Strategic Ways to Get Out
5. Just plain spending too much.
If you’re trying to go broke, just choose the more expensive option whenever you can.
Don’t get a used iPhone or an inexpensive new smartphone. Just ignore your budget and get the newest iPhone, brand new, every time. Of course, never go to a thrift shop or flea market for anything. Buy the luxury brand and buy it new.
If you want to not go broke you need to make sacrifices here and there.
You may have to cut costs in certain categories, while “treating yourself” in just a few. But since we’re trying to go broke, it makes more sense to just buy the best of the best, in every category, whenever you’re about to purchase anything.
What is the quickest way to go broke?
The fastest way to go broke is actually very simple, as it applies to all the choices we’ve covered. Simply forgo your financial discipline and responsibilities.
- If you want to go broke, just say “no” to financial discipline.
- Lie to yourself about the state of your finances, spend more than you can afford, and take out more debts than you can afford.
- Live beyond your means and buy nice things for yourself and luxurious gifts for others.
In terms of forgoing financial responsibilities, the fastest way to grow broke is to not budget. Without a budget, you have no limits that stop you from overspending. This then leads to other issues, like not being able to afford everyday expenses and ending up in debt.
Strong budgeting skills and discipline are the best path to bettering yourself financially. So, if you want to go broke, just release yourself from any and all budgetary restraints.
What happens if you go broke?
If you go completely broke and can’t find a way out, you will be left with only bankruptcy as a way out. We’ve covered the types of bankruptcy in this article.
If you declare bankruptcy, you will lose control over all of your assets. You will have some time to pay parts of your debt down over time. But you may lose certain assets, as per the rules of Chapter 7 or Chapter 13 Bankruptcy.
Regardless of which chapter of bankruptcy you declare, your credit score will be destroyed and you will find it extremely difficult to use credit. Bankruptcy declarations stay on credit reports for 10 years.
Conclusions on Going Broke
Obviously, we don’t want you to actually go broke! We just want to underscore how little you have to do to get there. It’s actually scary how quickly people can lose everything financially.
If you want to go broke, you have a very simple task.
You just need to forgo all the financial responsibilities you have. That means simply refusing to build a good budget, and spending and going into debt as you please.
Editor’s note: This article was originally published Dec 1, 2023 and has been updated to improve reader experience.
