Understanding Being Broke and Being Poor
Experiences and observations (by financial experts and financially literate people) lend credence to the fact that most adults are financial illiterates. Financial illiteracy is the direct consequence of lack of financial education. Due to the high level of financial illiteracy (and financial ignorance) in the society, many people (especially adults) are ignorant of the true meanings of basic and common financial terms and concepts. Consequently, they often misunderstand and abuse them.
The misunderstanding and abuse also reflect in their financial attitudes. Since financial attitudes determine financial altitudes, most people are hardly able to achieve any meaningful financial success all through their adult life, despite being very hardworking, because they have wrong financial notions, and deceptive financial mentalities and philosophies. They just cannot excel in their finances because their mindsets are hostile to the accumulation of material riches and wealth.
This is why it is important that you ascertain that your mindset is hospitable to wealth creation prior to aspiring to becoming rich. Among the most unpopular financial terms that are misunderstood are the phrases ‘being broke’ and ‘being poor’. It is imperative that you understand these concepts and how they are related so that you can take advantage of the knowledge in your journey to financial success because they are neither synonyms nor interchangeable phrases.
Being broke means having no money to address immediate financial challenges. However, being broke is not the same with being poor. The reason for this claim is that you can be broke without being poor, and you can also be poor without being broke. In order to explain these, there is the need to understand the meanings of the phrase, ‘being poor’. What does it mean to be poor? There are three definitions of being poor. The definitions correspond to the three levels of poverty.
The first definition of being poor is having no money to meet immediate basic financial challenges and needs. This is the highest level of poverty. It may be called abject poverty, absolute poverty, critical poverty, total poverty, severe poverty or acute poverty. This type of poverty is most undesirable because it is unworthy of any human being. People who experience it cannot afford the basic necessities of life. It is usually the status of people in societies with irresponsible leadership.
The second definition of being poor is having little (or insufficient) money to meet immediate and basic financial challenges and needs. It may also be called mild poverty. Unlike people who live in abject poverty, people who experience mild poverty can only meet part of their immediate basic financial challenges. This is also a condition that is unworthy of any human being. It is a condition that is undesirable by every human being because it degrades an individual’s human dignity.
The last definition of being poor is having money to meet only immediate needs. This can be described as moderate poverty or modest poverty. People in this category do not have more than they need. They will move to the second level of poverty, i.e. having insufficient money to meet their immediate and basic financial challenges, once they are out of earning. This is why they must continually work and earn before they can meet their financial needs. This is the class the so-called average people belong.