Five Warning Signs You’re Living Beyond Your Means
Knowing your limits can be tricky, but knowing your financial limits can prove even more difficult. From avoiding set budgets to less than frugal spending on frivolous items, the possibility that you are living beyond your means could be more likely than you think. Here are a few things that could indicate a too-lavish lifestyle.
- You Have Never Used a Budget
Budgets might sound old-fashioned, but they are unequivocally useful to maintaining financial stability. If you have brushed off the use of a budget as too much work or silly, but you find yourself in debt more often than not, then perhaps it is high time you utilize budgeting. It is as simple as listing what you tend to spend your money on, perhaps narrowing it down to your necessities with a small portion for “fun”, and dividing your monthly income into each category.
The hard part is maintaining the budget, which you should do by keeping a record of what you spend in each area and taking care to stay within your set boundaries. If you have never made a budget, you might not be keeping as close of an eye on your finances as you should.
- You Constantly Carry a Balance on Your Credit Card
In today’s age, credit and credit cards are the norm. With the ease of which someone can increase a credit line, it is no wonder than people so often spend frivolously. What you must remember about credit cards is that that is money that you still owe. If you cannot pay off your credit card balance in full month after month, then perhaps it is time to examine your spending habits and figure out what you can eliminate so you can finally pay off that balance that haunts your credit score. It’s possible you have expenses that aren’t completely necessary, and also things you can do yourself. For example, common culprits could include cable tv add-ons, paying for premium lawn service, or perhaps a mobile home cleaning service. While valuable and often part of your long-standing lifestyle, you might find it helpful to reevaluate your expenses line-by-line to determine the difference between a “need” and a “want.”
- You Do Not Have an Emergency Fund
Life is fickle, and the absence of an emergency fund can prove detrimental to your livelihood. If you spend all your money going out to eat every night, or buying superfluous items you have no real use for, then what happens when there is an accident? If you cannot or do not set aside a little bit of money every month for an emergency fund in case the worst should happen, you need to step back and make sure you start saving for whatever may come.
- You Have No Money Left at the End of Each Month
In a vein similar to the creation of a budget and maintaining of an emergency fund, if you find yourself broke at the end of each month this is one of the sure five warning signs you’re living beyond your means. You need to drastically reduce your spending. If you have no money by the month’s end, you are not even living paycheck to paycheck, but worse. A budget and an emergency fund could help to offset this possibility, but the fact remains a zero balance at the end of the month is a sign that you need to truly re-evaluate daily spending.
- Over 28% of Your Monthly Income Goes to Your House
Financial analysts and experts agree that mortgages and rental payments should comprise less than 28% of your monthly income. If the number is higher, your place of living is probably beyond your financial means. If this is the case, you will need to examine your options and figure out what will be best for yourself in the long run.
There are other warning signals that could indicate financial distress, but these are typically agreed to be the major red flags. If any of this applies to you, it may be time to take a good, long look at your finances and your lifestyle.