It’s not always easy to see when we’re living above our financial means. It might feel like your spending habits are healthy and normal, but living above your financial means can lead to debt and an inability to deal with costly emergencies in the future.
There are some signs, however, that should tell you if you’re living above your means. Here are four of them.
- You struggle to save money
Having a healthy amount in savings account makes it easier to prepare for the future and enjoy the expensive things in life. Saving, however, is difficult for all of us.
If you struggle to save money, however, this could be a sign that you are living above your financial means. Not everyone has a high enough income to save much, but everyone should try to put aside savings each month – even if it’s a tiny amount. If you can’t do this, it could be a sign that you’re overspending elsewhere.
- You live paycheck to paycheck
Living paycheck to paycheck is a frustrating and stressful experience. And a lot of us are doing it. One report found that 56% of Americans are living paycheck to paycheck.
For some people, living paycheck to paycheck is a sad necessity. If your paycheck, however, should be plenty to live on but you’re still finding yourself broke before the month is up, you’re probably living above your means.
- You never pay off your credit cards
Lots of us have credit cards. Ideally, we use them for purchases, increase our credit rating, and pay off the balance at the end of the month. If you are using credit cards on a regular basis and are unable to pay your balance come the month’s end, this means you are living above your means.
The thing about credit card interest is, even though it’s great buying stuff on a credit card if we don’t pay off the balance we end up paying more for every product we buy with them. If you are using credit cards to buy products you can’t afford, you may find yourself getting into deep debt.
- You’re trying to keep up with wealthier friends
It’s never easy seeing friends buy things we can’t afford. And if our friends invite us out to restaurants and bars or encourage us to buy the same products or live in the same neighbourhood as them, we can easily find ourselves overspending.
If you’re spending money you don’t have in order to keep up with your friends, chances are you are living above your means.
What to do if you’re living above your means
Changing our spending habits is difficult, but if you’re living above your means it is better to tackle it sooner than later. Here are some tips to start living within your means:
- Treat savings as a bill: Rather than seeing savings as an optional expense every month, start treating them like you would any other bill and prioritize saving over unnecessary spending.
- Review your spending: If you’re always going out for meals with friends or buying clothes with your credit card, it’s time to review your spending. Figure out where the unnecessary spending is happening and eliminate a portion of it.
- Be honest with yourself: Admitting to yourself that you are living above your means is sometimes the hardest step, but it needs to be done. Once you’re honest with yourself about your finances, you’ll find it much easier to improve your budget.
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