14 Warning Signs That You're Living Beyond Your Means - Life's Little Pleasures and Struggles

15 Shares

Living beyond your means has become so easy and common these days, especially since we live in a time when buying on credit and overspending has become the norm. If someone is living beyond their means, they’re spending more money than they can afford – the money they don’t even have. If someone is living within their means, they’re sticking with a sustainable budget and not overspending.

But just because overspending and carrying credit card’s debt seem so normal nowadays doesn’t mean you aren’t doing a real harm to your current and future financial well-being by following the trend. You must live within your means to attain financial freedom and avoid unnecessary stress.

If you’re now wondering whether you’re living beyond your means or not, we have got some examples to help you figure that out easily. Here are 14 red flags that you’re living a lifestyle you simply can’t afford and what you should do fix that.

1. You carry a balance each month on your credit card

It’s not unusual for you to use a credit card as your primary method of payment these days. “Credit card companies offer all kinds of incentives to motivate consumers to use their cards,” says T. Michelle Jones, a vice president at Bryn Mawr Trust in Philadelphia. “It has become a way of life for many who no longer carry cash in their wallets.” And there’s no harm in doing so — and reaping those rewards points — as long as you’re paying off the balance in full each month.

Ideally, you should only charge on your credit card what you can pay off at the end of each month. But if you carry a balance month to month, you’re surely spending more than you can afford. Get yourself back on track in the next few months by cutting back your expenses and doubling or tripling the minimum payment due, and start carrying and using cash when you shop.

2. You’re only making minimum payments on your credit cards

One sure sign you’re living above and beyond your means is that you can only afford to make the minimum payments on your credit cards. Racking up credit card debt is never a good financial practice, especially if you’re doing it at a rate that makes catching up almost impossible.

In case of necessity, the occasional big purchase on your credit cards is fine if you’re able to pay it off soon. But if you find yourself regularly buying things that take months or even years to pay off, you should definitely slow down, bring some lifestyle changes, and reel in your budget.

3. You pay your regular bills with credit cards

This is one of the clear warning signs that you’re living beyond your means. When you can’t pay your bills with cash from your paycheck, and instead use credit cards to pay your regular monthly fixed bills such as utilities, phone bills and insurance bills, your finances is messed up! It’s a trap many people easily fall into. They “float” their lifestyle with credit cards.

Are you guilty of accumulating more debt every month from paying your regular monthly bills? Do you find yourself transferring balances from one card to another? If you’re doing so, and already feeling the stress, it’s high time you cut back on your expenses, embrace simple living and frugality, live within your means, and improve your financial health.

4. You run out of money before your next paycheck

Now, this might not automatically signal that you’re living beyond your means. Maybe you’re underpaid, living in an expensive area, or have some other uncontrolled circumstances putting you in this situation.

But if you earn good money and still run out of money before your next paycheck, and don’t know where your money is going, that’s a big sign that you’re living beyond your means. A lot of times you may be unnecessarily upgrading your lifestyle or just overspending because you feel easily bored, which causes you to barely squeak by every pay period.

Take a step back, look at your paycheck, and track your expenses to see where your money is going every week or every two weeks. You may discover that there are areas where you can cut back and spend less.

78% of full-time workers said they live paycheck to paycheck (CNBC). And people who live paycheck to paycheck often believe they can’t save money or spend less because their lifestyle has become a habit. However, there are typically at least one or two small areas you can cut back and save money.

Related post: How to Stop Living Paycheck to Paycheck

5. You have little to no savings in your emergency fund

If you don’t have an emergency fund in place, and you rely on credit cards for emergencies, you’re definitely living beyond your means. Many people subconsciously believe that credit cards are for emergencies, and it’s a trap that many of us fall into far too quickly. If this has happened to you, know that 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. Part of the reason you need savings is to pay, in cash, for those inevitable emergency purchases, like if your car dies or you get hit with a high medical bill. Putting these kinds of expenses on a credit card or financing them with a loan will continue the cycle of living beyond what you can afford.

You might be living beyond your means if:

You currently don’t have an emergency fund
You’re not putting aside any money consistently from each paycheck to build an emergency fund
Your emergency fund cannot cover at least 3 months of living expenses

This is why it’s critical to track your overall spending, find where you’re making mistakes, and start to correct those bad money habits.

Not everyone is going to be able to save a big percentage of their income, but try to save 5-10% of each paycheck to gradually build your emergency fund. Instead of constantly shopping for all your latest wish-list items, consider redirecting some of that spending to make sure you’re saving up enough to be financially secure. After one year of working on your savings plan consistently, you’d be surprised to see the amount of money you have managed to put aside.

Related post: An Emergency Fund and Your Peace of Mind

6. You have stopped saving for your retirement (or aren’t saving at all)

Unfortunately, when money is tight, too many people start neglecting their retirement funds. But unless you plan on working for the rest of your life, planning for retirement should be at the top of your list when it comes to how you allocate your income.

Not everyone is able to save for retirement even with their sincere intention to do so. Life happens, and many also struggle to provide for their families and put food on the table. So the thought of putting some money aside for retirement is usually an afterthought for them.

But for those people who are taking expensive vacations, always getting the latest gadgets, or upgrading to a newer and nicer vehicle every few years, but haven’t saved for retirement — you’re living beyond your means.

I’m not against treating yourself and splurging occasionally (I actually recommend it so that you don’t feel deprived), but only if you’re already saving for a healthy emergency fund and also for your retirement. Then by all means, upgrade to the latest vehicle and go on a nice vacation.

One thing that can be helpful for getting back on track is coming up with a sustainable budget. Budgeting doesn’t mean depriving yourself of everything, but rather finding a smarter way of spending your money that still allows for reaching your financial goals.

7. You’re using credit card to pay for your vacation

Speaking of using your credit card to pay for large purchases, using it to cover your vacation expenses without being able to pay it off on time is another sure sign you’re living beyond your means. The typical vacation in the USA costs $1,145 per person. So a family of 4 would need to spend $4,580 for a nice vacation. But 40% of Americans don’t even have enough money to cover a $400 emergency!

Since most vacations will cost far above any paycheck, paying for them using a credit card, especially with high interest rate, is a dangerous idea that could cost you dearly in interest payments. So, if you’re still paying off the cost of a trip several months after you’ve gotten home – you should ask yourself: Is it worth it?

Instead, consider setting aside a small amount of money in a savings account each month for your next vacation. Plan your vacation ahead of time based on your affordability, and then start saving for it. By making regular small deposits into your travel fund, you can watch it grow into something that can easily finance your next dream vacation that you and your family deserve to have.

8. Making your monthly payments on time is a struggle for you

Mortgage/rent, bills, debts — all of these things demand monthly payments, and if you’ve recently started falling behind, it could be time to rethink how your money is being spent. Look back over your spending for the last month and track all your expenses. Are there a lot of unnecessary money wasters? Things like frequent dining out, entertainment purchases such as movies or games, and impulse shopping that you could have avoided?

If you don’t seem to have the money for your essential things and services, but are constantly impulse buying for instant gratifications, it’s time to change the situation so you can take better care of your finances and manage it well.

9. You don’t have a realistic budget in place

Another warning sign if you’re living beyond your means is that you don’t have a proper budget. Yes, having a budget is that important! No matter how financially rich or poor you are, a budget is almost always a necessity for all income groups. A realistic budget can help you figure out where your money problems are and what you can do to improve your financial situation.

Without a budget, even if you have a very good monthly income, instead of saving money, you will most likely overspend and end up being broke. Because saving money has very little to do with the amount of money you earn. It needs you to develop some healthy financial habits. Creating a budget is one of them.

When you create a realistic budget, you can track your expenses, live within your means, and don’t tend to overspend. Then, you only buy things you can afford, and won’t add more to your debt. So, work on setting a budget you can reliably stick to — one that allows for paying your bills, working toward your financial goals, and still splurging every once in a while on the fun stuff without breaking your bank.

10. You buy things you can’t afford to pay for upfront

Buying things you can’t afford to pay for is detrimental to the health of your finances. When you buy what you don’t need or what you can’t afford, you basically steal from yourself. For some people, buying things out of budget might be a necessity depending on their situations. If that’s the case, try to find a way to regularly set aside some of your income to pay for those things with cash.

But if you repeatedly find yourself purchasing things that you can’t afford to pay for upfront, you need to be careful and hold yourself accountable for that. If it’s just a matter of splurging on expensive wish-list items, just remember: there is no way anything you buy will make you as happy as a well-earned sense of financial security.

11. You’re trying to keep up with the Joneses

Many of you are familiar with the phrase, “Keeping up with the Joneses”. If not, it simply means that you’re trying to match or surpass what your friends, family, colleagues, or neighbors have. You constantly compare yourself with them, want to have what they have, and you try hard to impress the people around you who seem to “have it all”.

This phrase has been around a long time! But nowadays with social media, we have quicker access to everyone’s possessions, homes, traveling, cars, or apartments. Many people buy things, and then immediately share that on social media to either seek validation or to impress others. Thus, causing others to feel the pressing need to keep up with their friends – simply to fit in.

But this is what gets you to live beyond your means, start making poor financial choices, and also puts you in unnecessary debt. Instead of comparing your life to others, learn to appreciate what you have and be happy with that while you work towards what you want (it should be something that can add value and meaning to your life), as you can comfortably afford it. Do what gives you long-term pleasures instead of going for instant gratifications that often make us regret our decisions.

While making financial decisions, you have to do what is right for you and not be influenced by the many temptations that surround us. Don’t make your life harder trying to impress others whose approval or envy doesn’t matter at all. Make the best of your situation, and focus on what truly matters to you.

Remember that just because someone appears to have it all, doesn’t always mean they are able to afford it. If you could take a close look inside the Joneses’ homes and bank accounts, you might not always get an enviable picture.

Related post: How to Be Content With What You Have

12. More than 30% of your income goes to your mortgage payment

Many times, we bite off more than we can chew, which can cause us some sort of serious financial stress. We all want more and then some more, until “more” becomes something we can’t manage anymore!

If you’re currently paying half or more than half of your monthly income on your mortgage payment, that’s an obvious sign that you’re living way beyond your means. Generally, you should not spend more than 30-35% of your monthly gross income (take-home pay) on your house payment. Obviously, the lower the percentage the better. The same goes for renters.

Research shows that the average person can pay 30% or less towards housing and still enjoy a reasonable standard of living. So give your budget room to grow. If you stay around the recommended percentage, you’ll find that you have enough breathing space in your budget to cover your other expenses and not have things be too tight financially.

Also ask yourself a few important questions before you spend too much on a house and fall into the trap of living beyond your means:

Are you getting married soon?

Are you planning on having kids?

Do you want to go back to school?

Are you a one-income family?

Do you have enough savings in your emergency fund?

Are you planning to change your career soon?

Do you want to retire early?

Think about these things before you commit to a larger mortgage and end up being broke or financially vulnerable.

13. You avoid your bills

Let’s be honest, when you know you owe money and you don’t know how to pay it off, it can be really hard to face the bills. But when you’re trying to fix your financial mess, this is usually the first step. Missing payments might be a sign of living beyond your means or not managing your finances well. It can also affect your credit score and create further problems.

Instead of avoiding the bills, come up with a plan to conquer them. You have to face and deal with these stressful financial issues if you’re trying to improver your situation. Get a clear idea of how much money you owe and to whom you owe. Then, come up with a plan to pay them off as soon as you can. With the help of a budget and mindful spending, you’ll be able to start your journey towards financial freedom.

14. You’re losing sleep over money

Whether it’s the stress of unpaid bills or just living paycheck to paycheck, your financial health will often affect your physical well-being as well. If you don’t simplify your financial life and learn to manage your finances well – by living within your means – your life will eventually get complicated and very stressful.

Fortunately, you have the power to fix that. Take a hard look at your finances so you can identify where the problems are. Then get on a path to fixing them, and make a promise to yourself to practice better financial self-care.

When you choose to live within your means, you have freedom to make choices that support your lifestyle: you can save if you want, spend if you want, or give if you want. It’ll allow you to sleep better, carry less stress, and live a more calm and relaxed life.

Final thoughts

Living beyond your means is something that can happen to anyone with any level of income. It doesn’t matter if you belong to middle class or upper middle class or to even a higher income group, you can still overspend, live beyond your means, and jeopardize your finances. Have you not heard the story of millionaires drowning in huge debt and going bankrupt? Or those who never made more than $50,000/60,000 a year live comfortably with good savings in their retirement funds? I’ve heard and seen plenty!

If you find yourself living above or beyond your means, it’s your mindset that can make the difference. Don’t let yourself become a victim of overspending only because our society tells you that you need more. If you find a few or all of the above warnings a constant in your life, then you probably need to make some mindful lifestyle changes. Changing your habits and lifestyle might seem difficult initially, but you’ll soon find it’s totally worth it.