Living Beyond Your Means? Here Are 10 Signs

Living beyond your means

Do you spend time wondering where your money goes or feeling that you don't have enough? Sometimes higher spending can creep up on us without us realizing it. First, it's a new couch, then a new apartment. Then, to keep up with our job demands, we begin to eat out every day. Those little expenses turn into big ones, and before you know it, you're living beyond your means.

Since it starts slowly, it can be challenging to recognize the signs. Lifestyle inflation is an easy habit to develop. However, if you're beginning to wonder if you're living beyond your means, we've got some examples to help you figure it out. Plus, we share ideas for how to change this pattern and take control of your money.

1. Your housing costs are too high

Depending on where you live, some rental and mortgage costs are higher than in other areas. However, just because that's true doesn't mean that spending too much is a good idea. How can you tell if your housing costs are too high?

The general rule of thumb is not to let your mortgage or rent be more than 28% of your income before taxes. It works because it keeps you in a safe range for most budgets. Remember, these costs can vary if you own a home rather than rent one. Owners tend to pay more for maintenance and taxes, so don't forget about those extras.

If you find that your housing costs are too high, you might consider downsizing or finding a way to increase your income. A side hustle or house hacking (renting out part of your home) might provide you with the means to breathe within your budget. That way, your home costs don't become too much to handle. If you stay around the suggested percentage, you'll find that you have enough money to cover your other expenses and not have things be too tight financially.

2. You use credit cards for emergencies because you have no savings

There is a trap that many of us fall into far too quickly, and that is the idea that credit cards are for emergencies. If this has happened to you, you aren't alone. Bankrate discovered that if there was an emergency that costs $1,000, only 40% of people could pay for it with savings.

Although it might seem like the right thing to do at the time, the fact is, credit cards have to be paid back - with interest. If we use them for emergencies, we're just delaying the inevitable, but with a heftier price tag. So, how do we stop relying on credit cards to save us from unexpected costs?

The answer is an emergency fund. A great goal to start with saving $1,000. Once you save that amount you can then aim to have enough saved to cover expenses for a few months. If you do this, you can use your emergency fund instead of credit to cover anything unexpected, like car problems or income loss.

3. You drive a car you cannot afford

Leasing or buying a car is something almost anyone can do regardless of your credit or savings. It does however come at a cost, which is in interest, the ongoing depreciating value of the car, and of course the maintenance expenses.

A big mistake many people make is buying a car they cannot afford and that sometimes costs more than their annual income! And before they know it, they are stuck with a car worth much less than they paid and a huge monthly car note bill. A good rule of thumb, if you are financing a car, is to spend no more than 10% of your income. You should also consider buying a used vs new car as you can save yourself a ton of money this way.

4. Fun comes before important expenses

Do you find that you have money to go out with friends on the weekend but don't have cash on hand for car repairs? This is a classic instance of living beyond your means. A way to tell if this is happening is to think about your current spending situation and to do a financial health check. 

Look back over your purchases for the last month. Are there a lot of unnecessary money wasters? Things like excessive eating out, entertainment purchases such as movies or games, and online shopping? After this, look around at the rest of your life. Do you have home repairs to make that seem unaffordable? Or perhaps you're struggling to pay utilities or internet bills.

If you don't seem to have the cash for these essential things but are constantly impulse buying from your favorite store, it's time to change the situation to take better care of your money.

5. Your retirement plan is not what it should be

Retirement plan? What's that? You live for the now. While impulse buying can be fun, if you don't save anything for your future, you're bound to find yourself in trouble later. Yes, you should always take care of basic necessities and current expenses.

However, there are ways to do this while also planning ahead. You can't work forever, and the time will come when you want to retire or have more money in the bank. It's best to let compound interest help you out by giving your cash time to grow.

You can save for retirement in many ways, and the sooner you start, the better. Don't worry if you feel that you aren't where you'd like to be with investing. You're better off beginning where you're at. Looking at your 401(k) or IRA options should help.

6. You don't budget and wonder where your money goes

If it seems that you're always looking at your bank account, wondering where your last paycheck went, you're not alone. But you might be living beyond your means. Not being sure how you spent money so quickly are signs that it's time to take a second look.

Budgeting help when living beyond your means

If you want to get your money organized, a budget is the first line of defense. How do you get started? Begin by listing your bills and expenses one by one and marking down how much each one costs. Then plan out where you want your money to go and make yourself stick with it. Although it might seem restricting, you're giving yourself more freedom. If you want to see a real application of this, check out our article with an example of a budget.

7. You don't prioritize insurance when you can afford to

Sometimes a sign of living beyond your means is not taking care of critical things that help you. Many employers offer health, dental, and vision options. If you aren't sure, talk to the HR department for suggestions. If you find that your employer doesn't offer insurance, there are still ways to help yourself cover health costs. You can ask your co-workers and friends for recommendations about insurance.

If employer health insurance is not something you have access to, another option to help with costs is to start adding money to a savings account to aid you with unexpected health costs. A health savings account is a good tool for this. However, this should be done with insurance, not as your only means of protecting yourself against medical bills.

If you’re unemployed or self-employed, it's worth exploring the Government's healthcare marketplace. You may be able to get an affordable based on your income and on the size of your household based on the Affordable Care Act.

You may also be able to qualify for free or low-cost coverage through programs like the Children’s Health Insurance Program (CHIP) if you have children under the age of 19 who need to be insured. Medicaid is another program that could help, depending on your income.

8. You make good money but spend everything you earn

It's possible to work a lot of hours, make good money, and still feel that you don't have enough. It usually happens when you don't save much or any of what you make, but instead, spend everything that comes into your account. The majority of people in America live on a paycheck to paycheck basis.

It's easy to feel trapped due to expenses, especially when you're just maintaining a lifestyle and not growing wealth. You can fix this by cutting back on unnecessary purchases or ones you won't miss much, like subscriptions or unused gym memberships. Get creative and find ways to save. From there, you can begin to invest, save money each paycheck, and make some progress.

9. You pay for bills and expenses late

Missing payments might be a sign of living beyond your means or not controlling your finances. It can affect your credit and create problems quickly. Here's how to avoid it.

How to not miss payments

First, find out when each of your bills is due each month. Then, write down every single one in a planner or on a calendar where you will see it all the time. It gives you a visual reminder, so you don't forget. From there, opt for direct deposits or online payments for anything you can. This gets your bills paid faster.

However, there's another side to this coin. Maybe you are missing payments due to not having enough money. If you find this to be true, do a financial evaluation to create a plan to catch up on your bills. It would help if you got your expenses down to the basics—home, food, car, insurance, phone, and anything else that's necessary. Then get rid of everything else. If it still isn't enough, consider working a side job to help cover your basic needs.

You might also try changing the dates you pay your bills, opting to pay everything at once. It can help if you struggle with overspending because it ensures that your bills get paid before other expenses add up in your account.

10. You play the comparison game

Perhaps your neighbor gets a brand new purse or pair of shoes. Then, your friend buys a larger, more expensive house. You then feel that you should have what they have, even if your situations are very different.

Comparison can lead you down a dark path quickly because there is no point where enough is enough. It's always one more thing and one more thing. Instead of comparing your life to others, choose to be happy about what you do have and work towards what you want, as you can comfortably afford it. Remember that your journey is not anyone else's, and because of that, you can be excited about your own life without looking at what others have.

You can take control of your finances

If you discovered that you are living beyond your means, how do you stop this cycle? Begin by thinking long term instead of short term. Ask yourself if what you're buying now will help you in the future, and begin saving and investing regularly.

From there, realize that spending tons of money isn't as great as you'd think. Although it can be fun for a while, the stress of living beyond your means will eventually outweigh the excitement of "having it all." If you have a lot of money questions, reading and researching is a good place to start. Also leveraging an accountability partner to keep you focused can make all the difference.

Living beyond your means is something that can happen to anyone. What matters is what you do once you realize it. Changing your habits and lifestyle might seem difficult initially, but you'll find it is worth it. Begin budgeting, saving, and investing. Once you see some progress toward your goals, you'll be on your way to living a much better financial life!

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