Signs You are Living Above Your Means

The most common cause of financial hardship is overspending. Due to credit cards and loans, people in the Unites States have the ability to live above their means, maybe without even realizing it. Below, we share ___ signs you are living above your means, and how to correct them.

You Live Paycheck to Paycheck

When it comes to finances, living paycheck to paycheck, or not even making it to the next paycheck, is the biggest indicator you are not living within your means. Struggling to make ends meet in between paychecks is NOT the only way, and is an indicator of financial stress. It often means you are overstretched, overspent, and you need a budget.

The best way to fix this problem is to create a follow a budget. Once you make your budget, if your expenses are more than your income, you need to make adjustments. Usually this means cutting out extra expenses (anything that is not a NEED is extra – think food, clothing and shelter). We have plenty of posts and tips on budgeting, check them out here.

You Have Very Little Savings

If are consistently living above your means, you most likely have little to no savings for an emergency or unforeseen circumstances. Which makes sense, as if you’re living paycheck to paycheck, you don’t have any room to save money on a regular basis. No room to save, which means no plan for unforeseen circumstances, or even for larger purchases like vacation or gifts. This leads to a vicious cycle of no savings, emergency, going into debt, then no savings again.

The best way to combat this is saving an emergency fund as fast as possible. We recommend an emergency fund between $500-$1000, and keeping it for only true emergencies.

You Pay for Emergencies with a Credit Card

As said above, without savings, there is no way to pay for emergencies. So when something comes up (car breaks down, flat tire, broken household appliance), you are forced to put it on the credit card. Again, this becomes a vicious cycle of no savings, emergency, debt, and the cycle continues.

Again, the best way to combat this is having an emergency fun and keeping it only for emergencies. Once you have an emergency fund, you can start to plan for other contingencies in your budget. At a certain point in budgeting, you will arrive where there are no more “emergencies”, only planned maintenance and replacements.

You Can’t Make It To Friday

A big indicator you are living well beyond your means is not even living paycheck to paycheck – you can’t get to the next payday without using your credit card for essentials, or borrowing money from family and friends. This is a huge indicator of financial hardship. But again, as we said above, it is not the only way to live. There is a better way! A budget is the best way to combat these financial struggles.

You’re Constantly Paying Fees

If you’re constantly paying late fees on your credit cards, bills, etc., you may being living beyond your means. Sometimes when you struggle with money, and you only have X dollars left before your next check, you need to make tough choices. That means either paying a bill on time or buying groceries. And since you can pay your bill late, you choose groceries. Or, you’re constantly paying overdraft fees because you needed gas, groceries, or diapers.

Instead, you can implement a budget. Once you have a budget, you can see where your money is going. You can see where you have a leak in your finances, and stop it.

 

Living beyond your means is a way of life, but it is not the only way. There is a better way! Having a budget tells your money where to go and what to do, and puts your money to work for you instead of letting it run away from you.

What about you? What sign of overspending did we miss? How has living beyond your means affected you? Let us know in the comments below.