Are you living beyond your means? Here are 10 warning signs of living beyond your means that will cause you to stay in debt.
10 Signs You Are Living Beyond Your Means
Are you tired of living paycheck to paycheck? Do you wish you could get out of debt once and for all? Do you feel like early retirement is a fantasy?
If you answered yes to any of these questions, chances are you are living beyond your means.
Learning to live below your means doesn’t mean living an extremely frugal lifestyle or becoming a minimalist.
What it does mean is that you’ve probably lost control of your finances. But the good news is that it’s never too late to get them back under control.
It takes a little sacrifice but the sacrifices are short-term that will eventually lead to long-term financial success and a better life.
I mean, if I told you that you can get out of debt, retire early, and still afford to shop at Target and dine out with your friends… wouldn’t that be worth it?
First, let’s take a look at what it means to be living beyond your means and how to change that.
Here are 10 warning signs that you are living beyond your means.
How do you know if you are living beyond your means?
1 – You have no budget
The absolute biggest mistake you could possibly make. If you don’t budget your money, you don’t really know where your money goes. Which means you never know how much money you have left.
And if you don’t know how much you have left, its a slippery slope to overspending every month.
So the first thing you need to do is create a budget!
2 – You Have no Emergency Fund
Dave Ramsey will tell you that you always need to have an emergency fund of at least $1,000. But I think this is way too low.
$1,000 for an emergency fund is the bare minimum. Think about it. What “emergency” do you know of that costs $1000 or less? If you have major car problems, need a new AC unit, or a major medical bill… $1,000 will get you nowhere.
Now think about if you have NO emergnccey fund. Not even that $1,000!
If you can’t find ways to save up at least a minimum of 3-6 months of your total monthly bills, you are definitely living beyond your means.
The general rule of thumb is that you should be setting aside at least 5-10% of your monthly income for savings. If you can’t afford to do that, then try taking a look at things in your budget you can cut to save money.
3 – Your House Payment is more than 30% of your income
This counts for mortgages and rent alike. Any money that you spend on housing should be less than 30% of your income.
If your housing budget goes over that amount, it’s time to take a look at where you live and what you really need.
If you live alone, do you really need more than 1 bedroom? Do you really need the latest upgrades? Can you downsize or get a roommate to help offset costs?
4 – You Don’t Pay Debt Off Every Month
If you are only paying the minimum amount of your credit cards, you are for sure living beyond your means.
Credit cards should only be used in case of an emergency or to get some really cool incenctives like airline miles or cash back.
Not paying off your credit cards every month is a sure sign you are spending more money than you make. And it’s time to tighten that budget.
Keep Reading: How To Use Your Credit Cards Responsibly
5 – You Run out of money before your next paycheck
I have to admit I am guilty of this more times than I would like to admit.
If you are running out of money and resorting to using credit cards until your next payday, you are clearly living beyond your means and need to find ways to cut back.
Or even worse, if you get paid every two weeks and run out of money during week 1… and have over a week to go before your next payday… you are in critical need of reworking your budget.
Think about it this way. If you have money left over in your account when the next payday arrives, it’s extra money!
That extra money can go towards paying down debt or building savings.
6 – You Charge Your Travel
Vacations are super important to me. I could never give up traveling. But that doesn’t mean I can just charge a vacation when I feel like it.
Using your credit cards to pay for a vacation is a giant sign you are living beyond your means.
There are so many ways to realistically save money for a travel fund. Without tapping into your monthly budget too much.
I use the Southwest Credit Card to build points for free airline miles (but pay it off every month!) and find creative ways to save money for hotels.
It is possible to be on a strict budget and still go on vacation.
7 – You Pay Bills Right At Their Due Date
One sign you are overspending and don’t have a great budget is when you wait until the last second to pay a bill.
If you are living within your means, have a good budget, and don’t overspend, then you should be able to pay your bills as soon as payday arrives. Not when the bill is due.
8 – You Monthly Loans are more than your house payment
Take your car payment, your student loans, and any other monthly debt you have and add it up. If that amount is more than your housing, you are definitely living beyond your means!
If this is the case, you need to reevaluate several things in your life. Do you need to refinance your student loans? Do you need to downsize your car?
In no way ever should your monthly debt payments be more than what you pay for your house.
(Note: This does not include monthly payments like cell phone or utilities This is strictly your monthly DEBT payments).
Keep Reading: How I Paid Off My Student Loans Super Fast
9 – You contribute the bare minimum to your retirement account
If your company contributes 4% to your 401k and you contribute 4% to match it, chances are you are living paycheck to paycheck and can’t afford to contribute any more than that... amiright?!?
In reality, you should be contributing as much as you can to your retirement accounts. AND you should really have more than 1 retirement account.
Don’t just settle for the typical 401k your employer offers you. Find other ways to invest in your retirement.
10 – You Borrow Money
If you are borrowing money from anyone, I’m going to just insert a facepalm right now.
Borrowing money of any kind is a big fat no-no.
Even if it’s from friends or family, or a loan from a bank. If it needs to be borrowed, you cannot afford it!
So think twice before borrowing any money. Find ways to earn money fast or take a good hard look at what you need that money for in the first place.
Are you living beyond your means?
If you are seriously tired of living paycheck to paycheck and watching your debt grow, it’s time to sit back and look at your lifestyle. Living above your means is so easy to do when we see so many things we want to have.
Trying to keep up with the people around you and live a certain lifestyle can be the biggest downfall to living within your means.
If you have a hard time resisting temptation, then learn how to turn off social media and find creative ways to stretch your budget.
But at the end of the day, it really means you either need to start spending less money or make more of it.
If you are living beyond your means and tired of being in debt, don’t panic! I have several solutions for you to get out of debt by following these simple tips and learning how to live within your means without depriving yourself!