11 Signs You Are Living Beyond Your Means
In choosing a lifestyle, you should always pick one that you can actually afford. Neglecting to assess your financial capacity will cause living beyond your means. If not monitored, you can end up in the pits of debts in a matter of months.
In a 2019 Consumer Debt Study by Experian, it showed that the total consumer debt in the US is $14.1 trillion, with an average personal debt of $90,460. These figures only show how much people struggle to achieve financial freedom.
If you still don’t know where to start the change, you should first look into your personal spending habits to see what needs improvement. To help you dissect those, here are the signs you are living beyond your means:
1. You have increasing credit card balances.
Spending via credit is quite a norm these days. But these little plastic cards can put you in debt traps in no time if you entirely rely on it for every purchase you make. You are spending more than what you earn when you cannot pay off balances yet continue to add balances.
Carrying a balance every month will hurt your credit score, most especially if you continue to have a poor payment history. Having below 600 credit score can only mean one thing—you are not a responsible credit card user. And this kind of score lessens your chance to obtain additional credit limits, so always pay on time and spend carefully to get a good credit score.
2. Only 5% of your income goes to savings.
When you have little to nothing saved every month, it demonstrates a life of living paycheck to paycheck. It is crucial to allocate at least 10 to 20 percent of your income to savings as you never really know what’s to come in the next months. Having savings can save you from unforeseen troubles that could literally happen anytime!
3. You have no emergency savings at all.
Do you completely relish your paycheck every month until nothing’s left for emergency funds? Well, it’s time to change that since the ideal savings you must always have on hand is 6 to 9 months worth of your monthly income.
The purpose of having emergency savings is to save you from financial perils if you lose your job, contract an illness, or need to make a big purchase in the coming months. If you have nothing saved at all, you need to rethink your monthly budget and start allocating savings to it.
4. You rely on your credit too much.
Total dependency on your credit card is the cause of your ballooning credit card balances. It’s easy to be living beyond your means when you have a credit card on hand that can buy you anything even with no cash on hand. The absence of money leaving your hands makes it easier to spend more than what you can afford. Remember, when you use a credit card, you are just increasing the debts that you eventually need to pay off at your next billing period.
5. You run out of funds before your next paycheck.
This sign says it all—you are spending more than what you can afford. If you always find yourself in this situation, chances are, your spending habits worsen due to the lifestyle you are trying to attain.
6. You don’t have a monthly budget breakdown.
The lack of a budgetary plan manifests recklessness over financial decisions. It paves the way for unplanned purchases and impulse buys. When you don’t break down the incoming and outgoing funds, you cannot monitor your financial activities.
People who don’t create a budget tend to be afraid of making one because they don’t want to unveil the poor financial practices they make. To help you set up your budget tracker, you can benefit from this online personal finance course, Beginner Guide to Creating Your Personal Finance Tracker.
7. 30% of your income goes to your mortgage.
Whether you are on a mortgage or renting your house, you shouldn’t be spending more than 30% of your monthly wages. Going above it just means you are going for a house that’s way beyond your capacity. Ideally, you should settle for housing that will cost you less than 30% to be able to afford other priorities like bills, food, transportation, and savings.
8. You are leasing things you cannot afford.
Leasing gives you an illusion of owning things at a lesser price since you are basically using them as if you own them. However, you are only throwing away money for renting something you can rather invest in. This includes an expensive car you cannot afford, which you’d rather lease than loan. You are paying to drive a car that’s never going to be yours, which is illogical when you need a car in the long run.
9. You don’t save for retirement.
A typical money mistake for adults is forgetting to save for retirement. The Economic Policy Institute (EPI) reported that nearly half of American families have no retirement account savings at all, including IRAs and 401(k)s.
If you neglect to have a retirement plan, you are depriving your future self of a secure financial status. So if you haven’t been planning your retirement, it’s time to start saving for it.
10. You spend your money right away.
Do you spend your money at lightning speed when your paycheck arrives? Chances are, if you do this, you are not thinking well enough where everything must go. You should be able to draw the line between a need and a want before making a purchase. You should prioritize your savings, bills, and essential needs before buying that pair of shoes you saw on the discounted rack recently.
11. You let social media influence your spending habits.
Social media has a significant impact on your purchase decisions. What and who you follow on social media tend to represent the kind of lifestyle you aspire to have. And when you fancy a thing they own, you are more likely to purchase it since there is a “seal of approval” from people you follow online. This then results in living beyond your means since you are influenced by people who are way more affluent than you.
If you checked off multiple items on this list, it’s time to redeem yourself from the pits of debts. You should start rethinking your financial decisions and stop living beyond your means. To help you set up successful personal finance management, here are some best-reviewed personal finance online courses from Skill Success you can take up: