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
Read MoreWhat are you doing with your extra cash this Christmas?
I’m receiving a sizable amount of unexpected income this month. Almost like a freelancer’s 13th month pay. This isn’t unusual during Christmas, where people get paid more, businesses generally have more income, and students receive money as gifts from their ninongs and ninangs. This extra money you receive is called “a windfall”.
What exactly is a windfall? A windfall is an unexpected extra amount of income or business revenue. Some examples include: inheritance payouts, Christmas bonuses, extra revenue, cash winnings, and cash gifts (the ones from relatives, not illegal ones form Malacanang hehe).
Although windfalls are common during the Christmas season, they also happen in other months during the year. Anything you receive above your average income may be considered a windfall, if the money has not been budgeted yet.
What to do with a windfall 
Most people spend windfalls by buying treating themselves or taking out their friends and family to lunch. While nothing is wrong with rewarding yourself, leaving the rewards unchecked or unmonitored often means the money will disappear sooner than you think. This is why I always have a plan for windfalls.
In case of unexpected extra income (which I usually have each month, since my income is not set in stone), I always have a hierarchical game plan on what to do with my extra money. Here’s where I stash them (in order):
- Fund for house in the farm.
- Fund for repairing my mother’s house.
- Retirement fund.
- Emergency fund.
- Travel fund.
How I divide the money into those 5 funds depends on how much my windfall is. If it’s only P5,000 or below, I usually put all of it in Fund #1, or I divide it between Fund #1 and Fund #2.
You can also do the same thing, set up a list of 3 to 5 things where you can put the windfall. Make sure your list is in order so you would know what to prioritize. Keep this list handy – whether in your budget notebook or as a file in your computer – so that you can easily refer to it before the temptation to splurge sets in. Don’t worry, you can always include “Personal Reward” in your list of windfall funds so you can enjoy that extra money a bit. Just make sure that your entire windfall doesn’t go there.
It may seem like I’m too disciplined or I’m not rewarding myself enough, but that’s not the case. Having the farm house built as early as possible will be a great reward for me. I prefer to live in the farm and have some place to retreat to when things are going too crazy in the city. It’s really all about setting your priorities based on the things you want to do and the dreams you want to fulfill.
Will you be receiving extra money this Christmas? What will you do with it?
Read MoreDiscussing saving with your spouse
Frugal Pinoy reader Allan G sent in this question as a response to my previous article on saving:
Hi there! I have never been a big spender. I earn well and I have always had. Before I got married, 80% of my money I used to help family and relatives. I was not able to save much except buy a plot of land in Cavite. Now I am married. I am still not a big spender. But my wife is. We continue to help our families the best way we can. When I talk to my wife about saving money she gets mad at me. She says I don’t earn enough so we can’t afford to save. I wonder how I can make her rethink her ways. Any suggestions?
Talking about money with one’s spouse can be a tricky subject. Money, after all, is the number one reason why couples fight. I’ve avoided this by talking to my partner about money extensively before we started living together. It also helps that we have the same values when it comes to money. But not everyone is that lucky.
There are many things you need to consider when it comes to a situation like this. Does your spouse have her own income? What does she spend on the most? What is her idea of “earning enough”? Also, is the help you offer your families really necessary? (I’ve discussed in the past how giving financial help to family shouldn’t be automatic.)
Manage your expectations. First, you need to understand that things might not go 100% your way in the end. Marriage requires compromise and adjustments – you need to find somewhere the two of you can meet halfway. Know that if any change will take place, it won’t happen all at once. Changing one’s financial behavior takes time, and this is something your spouse has to do herself – it’s not something you can force.
Be careful with your words. It’s important to remember that the health of your relationship always comes first, so make sure you don’t talk about money when you’re angry. Whenever you discuss money, it’s important to do it when both of you are rational and in a good mood. Also, be careful of wording your money problems in such a way that looks as if you’re blaming your partner. Choose “we” and “us” instead of “you”.
Learn more about her financial values. As I said earlier, it helps to know her standards about income that’s enough for you. Note that you think you earn well, while she thinks your earnings aren’t enough. What is her idea of sufficient income? What are her financial dreams? How does she define “a good life”? Ask her these questions so you’ll be able to see things from her perspective, as well as have a starting point for your future discussions.
Make it exciting. As Adie pointed out in the comments, it helps to start saving for something that excites her. Ask her where she’d want to spend your vacation this summer, then tell her that this is possible and you want to save up for it so you can give her the vacation she wants. Or, it doesn’t have to be a vacation, it could be an item she wants, a seminar or workshop she’d like to attend, or an experience she has yet to try.
Be sure to follow this up with a discussion on “Kaya naman pala natin mag-save ng kahit kaunti each month. Why don’t we do it for the long run?”
Consider additional income. If your wife really doesn’t think that you make enough money (even if you do), you can both discuss ways to add to your income. If she doesn’t have any income, ask her if there’s a business venture or work-from-home opportunity she’d like to try. You can also ask her if the two of you can start investing. By opening up the discussion on one aspect of your finances (income), it’s possible you’ll be able to talk about other aspects (such as saving) more freely.
Talk about success stories. If you have any friends, especially couples, who have financial success stories, tell your wife about it. Pick those stories that come from something similar to your own income bracket, family size, and lifestyle – it doesn’t make sense to discuss the success of the Ayalas if you’re a regular middle-class family. Your wife should know that financial success and saving is possible from your income bracket (or even from those who earn less than you do).
Discuss money in several short talks, instead of one big discussion. This is especially important inf your spouse is really sensitive about the issue. Keep your conversations light and short so she won’t feel that you are pressuring her too much.
If you want to read more articles on how to talk to your spouse about money, you can start with these three:
- 6 Ways to Follow Up that Big Financial Talk With Your Spouse @ TheSimpleDollar
- How to stop fighting with your spouse about money @ GetRichSlowly
- Getting Your Spouse to Save @ CNN Money
I hope I was able to help! 
Thank you to the other readers who chimed in, gave their own advice, and talked about their experiences with saving.
Do you have any personal finance or online moneymaking questions? If so, kindly click here for the contact form, type in your question, and I’ll answer it here at FrugalPinoy.
Photo Credit: Image from Jasper Greek Golangco from stock.xchng
Read More5 Ways to Make Saving Less Painful
Saving comes easy for some, but it’s an impossible task for others. When I ask some friends about their savings, they sometimes cringe or tell me “I don’t want to think about that!” as if I asked them about a life-threatening disease.
The act of saving doesn’t have to be difficult or painful. If done right, saving can be a wonderful thing you can look forward to each month. A few years ago, I didn’t really take saving seriously, but after implementing some techniques, it’s something I now look forward to with each paycheck.
So how can we make saving easier to do?
Automate it. Most banks will allow you to automate your payroll account to deposit monthly to a savings account. Check with your bank to see if you can do this with your payroll account. Saving can be much easier if you don’t have to remind yourself to do it regularly.
Focus on the benefits. I’m currently saving up to buy a house within the next 2 years. Of course, the way to motivate myself is to think about that house, which I’ll consider as my sanctuary. I also think of the pride of home ownership and the beauty of living in the province. This makes me wants to say “Yes! I absolutely want to put money into that dream every month!”
However, other types of savings such as for an emergency fund or a retirement fund tend to be harder. Maybe because their purpose and benefits still seem a bit abstract. For these types of savings that you aren’t particularly fond of, focus on the feeling of security you’ll have when these savings are in order. From my experience, it feels great not to worry about losing my job or getting sick because I know my emergency fund is there to catch me when financial problems arise. Plus, I just feel so free not being pressured to work super hard. That feeling of freedom and security, I wouldn’t trade for the world.
Have a mantra. During tough financial times where I was forced to live paycheck to paycheck, I used to have a mantra that I would recite in my head every time I was tempted to spend on something frivolous. My mantra was “Every time I spend on a short term want, I give up a part of a long term dream.”
Get visual. It’s also more encouraging to save if you can actually see what’s going to happen when you accomplish your saving goals. For example, if you really want to save up for a trip to Paris, you can cut up pictures of France from a magazine and place them in an area you’ll look at regularly – whether it’s on your office desk or by your bed.
Note: The visualization doesn’t work for everybody, especially those who forget that action is needed to make things happen. Some get stuck in the visualization without doing anything about it. In those cases, it’s not visualization – it’s mere daydreaming.
Reward yourself. Break down your savings goals into milestones and have a reward for each milestone you reach. For example, if you want to save P100,000 in your emergency fund, you can reward yourself for every P5,000 or P10,000 you successfully stash away for it.
Rewards are important because you won’t feel too bogged down or tired, thinking that all you do with your money is save it. Without rewards, it’s easier to fall back on old spending habits when you get too tired of saving.
How much do you save each month? What do you do to make it easier for yourself?
Read MoreOnly 1 out of 10 Filipinos save up for retirement
A recent financial IQ survey by Citibank shows some frightening results about the average Filipino’s financial well-being. According to the survey, only 1 out of 10 respondents have saved up for retirement.
only one out of 10 Filipinos is consciously saving up for retirement. The rest have some savings but don’t know if it will be enough, others have no idea at all on how much they need or have not started planning. – Agustin Davalos, retail bank director of Citibank Phils.
Personally, I’m not surprised by this. I went to my bank a few months ago and asked one of the tellers what my investment options were for my retirement savings (they’re currently in a time deposit, but I wanted to move them elsewhere with bigger returns). Her reaction? She laughed at me. She said that I was only 24 and should not be thinking about my retirement. Many people have reacted the same way.
They can laugh, but I know the facts. When I retire, I’ll probably be enjoying a nice vacation in Fiji while these people wait for “allowance” given to them by their kids, who are working full time by then.
If you’re young, the best time to save for retirement is NOW. Compound interest is your friend, people! Plus, if you’ve got a retirement savings fund when you’re 20, you have more chances to “play with it” and put it in riskier investments because you still have decades of savings ahead of you. But if you’re 50 years old, you can’t do the same because retirement is only some years ahead.
A more concrete example: my mother only started saving up for retirement 3 years ago. She’s 52. I also started saving up for retirement at roughly the same time. If we both retire at 65, she only has 13 working years left, while I have 41 years. Since I saved for my retirement earlier than she did, I will have more money to support myself then.
Odds are, I might even be supporting her to make up for the money she hasn’t saved. I do not want to do that to my kids. I do not want them to worry about my financial needs when they already have enough to worry about on their own. Because odds are, my children will need to support their own families and their own dreams. I do not want to stifle them financially. I do not want them to lead anything less than the lives they want and dream of.
If you’re not planning on having kids, or if that seems so distant to you, think about your own future. What kind of life do you want to lead when you retire? Do you think you have enough funds set aside for retirement?
Read MoreHelp Iligan and CDO
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