In today’s consumer-based society, living beyond your means is easier than ever before. With online shopping, instant delivery, and easy credit; retailers encourage you to buy in excess anytime you’d like!
The people most likely to over spend are the ones who don’t budget. They haven’t realized the limitations of their income nor all the different types of expenses they have to pay. Without this understanding, they’ll emotionally spend and splurge to no end, draining their bank accounts in the process!
When you’re living beyond your means you’re spending more money than you make. As it continues, you’re taking on and digging yourself into debt. To make matters worse, you’re unable to save, invest, or make strides towards your long-term financial goals as well!
Life is short and if you’re like most people, your dreams are of the utmost importance. You’d like to realize them sooner, rather than later. To ensure you can, you first need to determine if you’re living above your means.
Here are 9 warning signs that indicate you may be living beyond your means. By steering clear of them, you’ll have the opportunity to build independent wealth and live on your terms!
One sign that you’re living above your means is living paycheck to paycheck. Even though you may be able to pay your bills on time, you’re unable to get ahead. In some cases, the income you earn today is paying for purchases that were made months or years ago, too. Due to this, you’re not only stuck in debt, but you’re also wasting money on interest!
While most people living paycheck to paycheck can make ends meet, they’re unable to save. Without savings, they won’t have any sort of security and are likely on the brink of financial hardship as well!
Nothing shows that you’re living beyond your means more than by carrying credit card balances. They show you’ve been making purchases with money that you didn’t have. Now, to pay them off, you must spend your future working!
On top of that, credit cards have high-interest rates. By carrying a balance, the amount you pay back compounds higher, making it more difficult for you to become debt-free. Also, if you happen to get behind, you’ll get charged late fees and potentially incur hidden costs which can damage your credit!
If you carry credit card balances, paying them off is one of the best money moves you can make. Not only will you earn a risk-free rate of return, but your burn rate falls, too!
Carrying high credit card balances usually accompanies falling credit scores. Even if the bills are getting paid on time, your credit rating can still take a tumble.
One of the primary factors that determine your credit score is your credit utilization rate. This metric shows the percentage of your available credit that’s getting used. Once it reaches a certain percentage (~30%), your scores begin to decline. However, once you start repaying your debts, the utilization rate falls and your scores will rise!
Another strong indication that you’re living beyond your means is paying overdraft fees or getting charged for having non-sufficient funds. These penalties occur when you don’t have enough money in the account you want to use or are spending money you literally don’t have. As a result of this financial mismanagement, you pay unnecessary fees!
To an extent, paying these needless fees may also indicate some level of financial insecurity. You may be forced to choose which bills you are and are not going to pay. In some cases, you might even be juggling bills or robbing Peter to pay Paul!
Whether you accept them or not, emergencies are going to happen. It’s not a matter of if, but of when. Without emergency savings, a sudden large expense or layoff can leave you in the middle of a personal financial crisis!
Regardless of your net worth, you need to have rainy day savings and an emergency fund. With both, you’ll have a margin of safety to cover any future financial problems that arise. On top of that, they’ll give you peace of mind while also improving your sense of financial wellbeing!
According to Debt.com, almost 20% of Americans admit to not having a budget, even though they realize that they should!
Without a budget, how will you know if you’re going to live above or below your means? You won’t because you haven’t organized your finances or established a way to save!
In addition to creating a budget, you should track your spending. It will show which of your monthly expenses are within and outside of your set parameters. Using this information, you can consume consciously which helps to ensure your spending doesn’t get out of control!
Like being unaware of your spending, not knowing your net worth can be a signal that you’re living above your means. When you’re oblivious, you won’t know whether you’re creating wealth or falling deeper into debt!
For many people calculating their net worth is an eye-opening experience. It may be the first time they realize they’re using their income to buy liabilities, instead of assets.
Without assets, you won’t achieve financial freedom. Instead, you’ll be dependent and handcuffed to a job you need to survive!
Unfortunately, many people decide to delay saving for retirement. Most often, they claim they will once they’re making more money. But even as their incomes rise, they end up spending more because they haven’t established the financial discipline that’s needed to save!
Not saving is clear evidence that you’re living beyond your means. It shows that you’re so focused on instant gratification, that you haven’t given any thought to your future!
By not saving for retirement, you’re choosing to work longer. On top of that, you’re going to have to save more money than you would otherwise!
Do you worry about paying bills on time, making ends meet, or even keeping up with the Joneses? If so, this is another sign that you are or will be living above your means.
Sadly, some people spend money they don’t have on things they don’t want to impress people they don’t like. While they may look rich and wealthy on the outside, in reality, they’re far from it!
For many people, money is a constant source of stress. They worry about making more of it, spending it, and if they’ll have enough money to retire.
However, money doesn’t have to cause you to worry. By understanding your financial situation and taking steps to improve it, you can begin feeling at ease!
It’s important to understand that living beyond your means isn’t just detrimental to your finances. It affects other areas of your life as well. For instance, it can lead to arguments about money that strain your relationships and cause you stress. If this continues, it may also take a toll on your health which is concerning since that’s one of the things that money can’t buy.
Whether they realize it or not, many Americans are living above their means. They’re spending and consuming to such an extent that they’re unable to save or work towards their dreams!
But, that doesn’t have to be you. By choosing to live on less than you make, you’ll save and be in greater control of your financial future, instead of putting it at risk!
Which of these warning signs indicate that you’re living beyond your means? Comment below.
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