People have given up that good old habit of putting money aside just in case. They buy things that they do not need and houses that they cannot pay for. They are behind on their bills and have a record level high of debt on their credit cards and loans. I don’t know what it is, but some people are no longer financially responsible. They have forgotten how to live within their means. Here are six signs that you are living above your means:
1. No Savings
If you have no savings, you are probably spending more than you can afford. With no money set aside for emergencies or retirement, you may be setting yourself up for a disaster, unless of course you win the lottery or get some kind of inheritance. Imagine if someone gets sick, your roof needs to be replaced, your house burns to the ground, or you need to take in a parent or a family member. It would be extremely hard with no savings.
2. You Are Addicted To Buying On Credit
Another sign that you cannot afford your lifestyle is when you start buying everything on credit. That is the worst sign of all. If you pay your living expenses and other things with the credit card or your checking account overdraft, you are definitely in over your head. Buying on credit is not a solution when you do not make enough money to cover your costs. You need to change your lifestyle to your income and not buy your lifestyle on credit.
3. Your Bills Keep Piling Up Out of Control
Make an inventory of your monthly bills. Check to see just how much you have to pay every month, but also check how much of what you pay you really need. The latest smart phone, state-of-the art laptop, premium TV package when you are barely at home, and many other luxuries that generate countless monthly bills that add up to an amount that you can’t afford to pay. If your bills are spiraling out of control, you are definitely living above your means.
4. You Are Not Able To Pay Off Your Credit Card Balance
You are not supposed to buy anything with your credit card that you would not be able to repay entirely at the end of the month. The fact that you pay only the minimum due amount on the credit card balance is a clear sign that your lifestyle does not match your income. The same is true when you are sending only a small contribution toward the principal balance and not towards the outstanding balance, which only increases your credit card debt.
5. Your House Eats Up More Than 35% Of Your Income
House related costs, such as property taxes, mortgage, and insurance, account for a large part of your expenses. Banks have calculated that when these costs eat up more than 35%% of your gross income, you are simply living above your means. When banks loosened their credit requirements, many people rushed into buying the home of their dreams ignoring the fact that they might not be able to afford it. When your home takes up over 35% of your gross income, it’s hard to enjoy life when such a huge portion is going towards your home.
6. You Try To Cover Outstanding Debt With New Credit Cards
When you get a new credit card with a lower interest rate to pay off an older credit card you are without a doubt in over your head in a lifestyle that drains you of money you do not have. Using a new credit card to pay for another only increases your outstanding debt in time. If you cannot pay your existing credit card from what you earn, you cannot afford your lifestyle.
Do you know anyone that is living above their needs? If so, what are doing to assist them?
Photo by Dubai Owner