6 Signs That You're Living Beyond Your Means

“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.

Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:

You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.

Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.

You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.

You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.

This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.

Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.

Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.

You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck – because I’d already run out of money before it arrived. This is a very stressful way to live.

You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.

You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second – getting into more debt to pay for other debts. Not really a sign of financial health.

Have you ever experienced any of these symptoms? What have you done about them?

Image by Steve Woods