Do you know that about 64% of Americans live paycheck to paycheck? As daily life in the United States gets more expensive, you might have harder times making ends meet. The situation can be even worse if you’re trying to support a lifestyle you cannot afford. As your friends and celebrities share their lavish lifestyles online, you can be inclined to follow suit. Eventually, you find yourself living beyond your means.
What Does It Mean to Live Beyond Your Means?
When you live beyond your means, you spend more money than you can afford. Simply put, you always struggle to pay for your everyday necessities. Further, your spending habits make it hard for you to invest, save, or achieve financial freedom.
When you live beyond your means, you go far beyond your monthly spending limit. For instance, let’s say you earn $1,000 per month. If you calculate and track your monthly expenses and they add up to $1,300, then you’re living beyond your means.
Living above your means has three major negative impacts:
- You rarely save
- It leads to debt
- It damages your credit score
A financial expert will tell you that you can only progress financially by either spending less or earning more. Spending less is a more viable and sustainable route -with good reason.
When you live beyond your means, you barely save and are always in debt.
How Do You Know You’re Living Beyond Your Means?
While some signs you’re living beyond your means are too obvious for you to ignore, others go unnoticed. Here are six tell-tale signs you’re living above your means and proactive steps you should take to get back on track.
Other People Influence Your Spending
Are you easily swayed by your family or friends to spend money on things or items you’ve not planned for? It could be going on an unplanned vacation, buying the latest iPhone, or going out to dinner. If the answer is yes, then you’re living beyond your means.
Most of us will give in to other people’s influence because we don’t want to miss out on experiences and things with the people close to us. However, allowing other people to influence your spending only shows that you’re not intentional with your finances.
If you aren’t intentional with your money, it will be very hard to meet your financial goals or have a better relationship with money. Also, you’ll always struggle to make ends meet.
If people influence your spending habits, you don’t have financial discipline.
You can limit how people influence your spending in various ways. For instance, you can avoid extravagant family members and friends. Also, practice self-restraint and have financial discipline.
Cyclic Credit Card Debt
Currently, about 83% of Americans own at least one credit card. Have you ever heard about credit card overuse? It happens when you use your card for unnecessary shopping, leading to debt every month.
For example, you use all your monthly salary to repay credit card debt. Then, you shop the following month on credit.
Credit cards are good. You can use them to pay for emergency purchases, earn rewards, and build a strong credit history. However, you can easily fall into the spending trap if you aren’t careful.
A credit card can make you fall into a spending trap.
If you cannot clear the outstanding balance on your credit cards, you’ll carry that balance from month to month. You’ll end up paying hundreds or even thousands of dollars in interest.
You can fix the problem in various ways. For example, double your monthly payments. In other words, don’t pay just the minimum amount. Also, don’t use the card until you’ve paid off the debt.
You Struggle to Pay Your Bills
Do you lose sleep over bills? If the answer is yes, then you might be living above your means. In such a case, you can barely pay utility bills, rent, and the debts you owe on time.
Bills should be a major component of your budget. Hence, you should be in a position to pay them easily without any nail-biting or stress involved.
If you experience stress about paying bills, review your budget and find ways to cut back. For instance, trim impulse purchases, cancel a subscription you rarely use, or avoid unnecessary trips.
You can hardly pay your monthly bills if you live above your means.
You Have Trouble Saving
According to financial experts, you should save about 15% to 20% of your pre-tax monthly income. If possible, you can save more. Saving shouldn’t be negotiable. It is a necessity, and you should fix it in your budget.
Savings can help you a lot. You can use them to attain short-term goals or in times of emergencies. Simply put, saving money ensures you have the funds to face financial crises and build wealth. Make saving a priority if you want to plan a steady financial life.
However, if your monthly spending is abnormally high, you barely have money to save. Restructure your budget to ensure you include a minimum of 5% for savings. Further, try and trim your expenses.
You can’t save when it’s even hard to meet your monthly bills.
You Don’t Have Rainy-Day and Emergency Funds
We all experience financial distress once in a while. If you experience sudden unemployment, sickness, or major car repairs, you should have a safety net. Having an emergency fund ensures you have money at your disposal to meet unanticipated expenses. In other words, you don’t have to go for high-interest unsecured loans or borrow from shylocks.
However, you might be living above your means if you don’t have rainy-day funds. You can fix it by cutting expenses and putting more money into your emergency kitty each month.
You Live Paycheck to Paycheck
If you can barely make it through the month until the next payday, you’re living above your means. You use every dollar of your paycheck almost immediately to pay for groceries, rent, and other utilities. As a result, you’re left with very little money that can barely take you to the next paycheck.
There are three main reasons you’re living paycheck to paycheck:
- You have extremely poor financial habits
- You want to live a lifestyle you can’t afford
- You do not budget
Living paycheck to paycheck can be frustrating. You cannot achieve financial freedom if you don’t review your lifestyle and adjust accordingly.
When you don’t manage your finances, you live paycheck to paycheck.
The Final Thought
If you live beyond your means, you wonder where your money goes or constantly feel that you don’t have enough. Mainly, higher spending creeps up on us gradually without us realizing it. With time, your lifestyle becomes inflated, and you can barely support it. If you need professional help to change some spending habits and take control of your money, Contact Tetonpines Financial today. We will give you safe and secure financial guidance to help you eliminate debt and build tax-free wealth.