9 Warning Signs You’re Living Beyond Your Means
It’s easy to get caught up in the urgency of the moment and overspend.
The problem is, when it becomes a habit, you will find yourself in a nasty debt cycle – unable to achieve financial freedom.
Even worse, many people who are living beyond their means aren’t fully aware they’re doing so.
Not sure if this is you? It might be time for a rude awakening. Look through this list of warning signs and see if you need to make changes to your spending habits.
1. You Avoid Looking at Your Bank Account
Does the idea of looking at your bank account online stress you out, so you avoid it at all costs?
When you live within your means, you don’t have to worry about your bank balance. You can withdraw money without worrying about getting hit with an insufficient funds fee because you know exactly how much you have to spend.
What to do instead: Instead of fearing your bank account balance, look at your bank account daily.
See where your money goes. Does it go to impulsive buys? Does it go to groceries? Alcohol?
Examine your spending habits, identify problem areas, and eliminate problematic purchases.
2. You Have a Hard Time Paying for Essentials Each Month
If you are having a tough time paying for essentials like power, you are likely living beyond your means.
This can be a hard pill to swallow, but you likely need to use less water, keep the lights off, and consider not turning on heat or air unless you have to.
If your paycheck isn’t enough to cover the rent and utilities after you cut back, you may need to move to a smaller place that’s more affordable or look for a roommate.
What to do instead: Create a budget based on your income and essentials. Make sure you set aside money for utilities when you get paid.
Take care of the basics before even thinking of going on a spending spree.
3. Your Paycheck Is Spent Before It Hits Your Bank
Do you have so many bills that you don’t have money left over from your paycheck to enjoy it? This is a clear sign you are living beyond your means.
You work too hard for your money just to scrape by.
What to do instead: Start tracking your spending. Whether you write down your spending in a journal or a spreadsheet on your computer, log where your money goes.
And, it goes without saying, immediately cut back on discretionary spending.
4. You Only Pay the Minimum on Credit Cards
Be honest: Do you pay off your credit card every month or carry a balance?
Good money management means only paying with a credit card when you know you can pay off the balance at the end of the month.
If you find yourself only paying the minimum balance month after month, you are definitely living beyond your means.
If you don’t start paying over the minimum, you will spend way more than you planned to in the form of accrued interest.
What to do instead: Create a plan today to pay off more than the monthly minimum. Cut discretionary spending and divert that money to your debt. Also, put away your credit cards until you get your balance back to zero.
5. You Pay Your Bills Late
Do you have to wait until you have money in your account to pay your bills? If you are paying bills late, not because you forget, but because you don’t have the money to pay them, you are living beyond your means.
What to do instead: Set up due-date alarms on your phone and utilize your monthly budget to pay your bills.
If possible, set up automatic payments that will come out of your checking account, so you don’t have to worry. Also, you will avoid late fees.
6. You’re Paying Overdraft Fees Each Month
Overdraft fees cost around $35 per transaction. Let’s say you pick up Starbucks on the way to work, go out to lunch with your coworkers, and then stop by Target on the way home.
If you don’t have enough money in your account to cover these small transactions, you will find yourself paying more than $100 in overdraft fees. If this happens regularly, you are living beyond your means.
What to do instead: Use a budget app so you know when you are close to spending money you don’t have.
- Related: How to Stop Impulse Purchases
7. You Don’t Invest in Retirement Each Month
The most important rule of financial freedom is to invest in yourself. You do this by paying yourself first. If you don’t have enough money to contribute to a retirement plan each month, you are living beyond your means.
If you can’t afford to save for the future today, your future self will suffer.
What to do instead: Enroll in automatic payroll deductions for retirement, so you never have a chance to spend it.
8. You Have Nothing Left at End of the Month for Savings
Do you have an empty savings account? Do you find yourself unable to save for big purchases because you have no extra money at the end of the month?
If so, this is a sign you are living beyond your means. It can be easy to neglect saving when you are trying to make ends meet.
But that can be a big problem if an emergency happens. If you don’t have any money saved, you won’t be able to cover the cost of car repairs or doctor’s visits.
What to do instead: Add savings to your monthly budget. Make a commitment and stick to it.
9. You Spend More Than 30% of Your Monthly Income on Housing
Sure, you want a home you are proud of. But that doesn’t mean you should live in a home you cannot afford.
A quick and easy way to know if you are spending more than you can afford on your home is to determine what percentage of your monthly income goes toward housing expenses.
If you spend more than 30% of your monthly income on housing, you live beyond your means.
The official term for spending more than 30% on housing is cost-burdened.
Don’t live cost-burdened. Find a mortgage you can afford.
What to do instead: Look for housing you can afford based on your income, not your dreams.
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About the author Michelle Salater
Michelle Salater is a freelance finance writer with a passion for personal finance education. When she’s not in front of her computer, she’s reading biographies and exploring remote areas of the world. She also freelances for Wooster Media Group LLC.
