Agnes Kowalski, a wealth therapist at Agnes Kowalski Inc., in Ajax, Ariz., has come a long way after years of being perilously close to running out of money—thanks to her own toxic financial habits.
"In my 30's, I found myself maxed out on credit cards, in debt and never making enough to cover my cost of living - always living beyond my means," says Kowalski. "As a therapist, I knew this had roots in the subconscious, I simply didn't feel worthy of more. It wasn't until I did the deeper work that I was able to start making six figures and saving it, buy a house and support my family."
Kowalski is hardly alone.
"We live in an instant gratification driven world right now, so if people want something, they don't hesitate to buy it."
A new study from CreditLoan.com shows that 86% of Americans say they've been broke in the past or are currently broke. Yet, according to the report, despite not wanting to live a penniless lifestyle, almost none of the 1,000 survey respondents were willing to cancel their cell phone or Internet plan to save money.
Why the financial dysfunction among so many Americans? And how did so many people wind up in a "penniless lifestyle" in the first place?
"We live in an instant gratification driven world right now, so if people want something, they don't hesitate to buy it," Kowalski says. "People also rarely handle actual physical money, which creates a disconnect... it's easier to spend money you can't see."
"It's also a matter of people buying into the "YOLO" (you only live once) mindset because it's a way to cope with the stress and anxiety of everyday life," she adds. "Even an improving economy isn't going to make people so much happier that they'll start being more conscious about their relationship to themselves or to money."
A big part of the penniless lifestyle problem is a widespread inattention about money and budgeting among U.S. adults, experts say.
"Many people have financial troubles due to the fact that they don't know where their money is going," says Alysha Olson, a Wisconsin-based financial coach. "Spending money without a plan can lead to overspending and creating a lifestyle beyond your means."
"In addition, in an age when many loans are offered to appeal to a low monthly payment, many people find themselves in cars, personal loans, or even furniture and appliances they cannot truly afford but purchase based on a low monthly payment or 0% financing offers," she says.
The way out of the penniless lifestyle is simple, says Olson—just create a household budget and stick to it. "Build a budget for every month—before the month begins," she adds. "That's the best way to create financial prosperity. As an author, John Maxwell says: Tell your money where to go, instead of wondering where it went."
There are mitigating factors to going broke than simply not paying attention to money or bypassing a budget, even though those are big issues.
"Life situations still happen and can get people bogged down with debt or just plain broke," says Dawn-Marie Joseph, founder of Estate Planning & Preservation, in Williamston, Mi.
"Divorce is also at an all-time high and that can really tip the scales in someone's finances. Student debt is also a challenge that not just recent grads are dealing with but many people in their 40s are still paying college loans."
Yet no matter the reason for living on the edge of being broke, the best way out really is having an effective personal financial plan, including having an emergency fund at the ready.
"It really comes down to those who have a financial plan and those who don't," says Brett Anderson, a wealth manager at St. Croix Advisors, LLC, in Hudson, Wis. "Basically, even spending and occasionally splurging is just fine—within a set plan."
"But if you don't have assets set aside for retirement, a rainy day, and other things that are important to you, you will quickly become consumed by your finances," Anderson notes.