8 signs you're living beyond your means

[M.D. Holloway]

Great article!

8 signs you're living beyond your means
Can you afford your lifestyle?

By Natasha Burton

.Living beyond your means is pretty easy to do these days, especially since we live in a time when buying on credit — and having a YOLO mentality — has become the norm. But just because it seems normal doesn’t mean you aren’t doing a real disservice to your current and future well-being.
Here are eight red flags that you're living a lifestyle you simply can't afford — and how to get back on track ASAP.

You Let FOMO Dictate Your Spending

We all know how crappy it feels to miss out (or be left out) of fun social events due to financial constraints. But don't let your FOMO (fear of missing out) dictate your spending.
"This can be as innocent as going out to eat when you’ve already exhausted your restaurant fund for the month, or as extreme as paying rent you can’t afford in order to keep up with your friends," says Ruth Soukup, author of Living Well, Spending Less: 12 Secrets to the Good Life.

While you don't need to give up your entire social life, it is important to take a look at your motives for spending (because you don’t want to miss out or because you want to keep up with everyone else in your friend group?) — and find cheaper ways to get quality time with your pals.

You Carry a Balance on Your Credit Card
It's not unusual to use a credit card as your primary method of payment. "Credit card companies offer all kinds of incentives to motivate consumers to use their cards," says T. Michelle Jones, CFP, Vice President at Bryn Mawr Trust. "It has become a way of life for many who no longer carry cash in their wallets." And there's no harm in doing so — and reaping those rewards points — as long as you're paying off the balance each month.
But if you carry a balance month to month, you're spending more than you can afford. Get yourself back in the black in the next few months by doubling or tripling the minimum payment due, suggests consumer spending expert Andrea Woroch, and start carrying cash when you shop.

"People always spend more with plastic because it doesn’t feel like real money," Woroch explains. "Dishing out actual dollars makes you think twice about an unnecessary purchase. Plus, if you’re tempted to buy something and don’t have extra cash, the time it takes you to go to the ATM will give you enough time to rethink!"
You're Not Saving at Least 5 Percent

Everyone should save 10-15 percent of their total income. But if you can't save at least 5 percent — even while paying off debt — this could be a sign that you're living beyond your means, says Ed Snyder, CFP, ChFC, of Oaktree Financial Advisors, Inc.

Woroch agrees, noting that any kind of savings counts here, whether it's in a cash account or a 401(k). "Everyone should have savings, and you should aim to have six to nine months of living expenses set aside at all times," she says. "If you feel you can’t save any money, you are spending on items and services you probably don’t need. Pay yourself first."
How to do this? Give up things in the short term to be successful in the long term, says Snyder. "If you cut back each month and don't go out to eat, or to the movies, or whatever it takes for you to spend less, you will have more money to save."

You Have No Emergency Fund

Part of the reason you need savings is to pay, in cash, for those inevitable emergency purchases, like if your car dies or you get hit with an excruciatingly high vet bill. Putting these kinds of expenses on a credit card or financing them with a loan will continue the cycle of living beyond what you can afford.

Ritter suggests trying build an emergency fund of about $2,500 — that way, you at least have a cushion when an unexpected expense crops up. "Try to do this within six months, and set aside as much as possible each month toward the goal," he advises. "This is not your total emergency fund. It is simply a place to start."
You're Leasing a Car You Can't Afford

A major financial red flag is leasing a vehicle you cannot afford to buy outright or finance, says investment advisor and Registered Financial Consultant Carlos Dias Jr. "If you can't own it, don't lease it," he advises. "Essentially you are renting a temporary lifestyle that will end and may require you to put down more money that you could have applied to owning a car.
Woroch agrees, noting that your luxury car lease may actually cause you to struggle in other areas of your life. "If you can’t make that payment while also putting away savings and paying your necessary bills comfortably, it’s time to downgrade your vehicle," she says.

You Don't Have Any Money Left at the End of the Month


"People who live paycheck to paycheck often believe they can’t save money or spend less because their lifestyle has become a habit," Woroch says. However, there are typically at least one or two small ways you can cut back. (Like trading a pricey cable bill for Netflix, which is only $8 a month and can be split among friends.)

An easy way to jump-start savings and become more conscious of your spending decisions, according to financial expert J. Money of Budgets Are Sexy, is to enact a no-spend month.
"Allow yourself to spend money only on the bare necessities for 30 days — rent, bills, groceries — and cut out everything else," he says. "No clothes shopping, no eating out, and especially no Amazon binges. Nothing puts your finances in check more than a consumption detox."

You've Paid an Overdraft Fee

Overdraft fees are another sign that you're spending money you quite literally do not have. To avoid getting dinged for overdraft charges (or attempting to take out cash from an ATM only to get be notified you don’t have enough), take a tip from R. Joseph Ritter Jr., CFP, of Zacchaeus Financial Counseling, Inc., and use the cash envelope system to control your spending.
Divide expenses into categories that make sense to you — groceries, beauty, going out, and so on — and put cash in an envelope for each category. "When the cash [in a particular envelope] is gone, don't use a credit or debit card," he says. "Stop spending!"

You've Never Set a Budget

"Having a written budget is one of the most important steps to financial freedom and living within your means," Jones says. So if you've never set financial parameters for yourself — and you're not filthy rich — chances are that you need to take an honest inventory of your income, spending, and savings goals. Not doing so will only cause you a great deal of stress, uncertainty, and even guilt, says certified money coach Ashley Feinstein, founder of Knowing Your Worth.

"I recommend that every client keep a money journal for at least a couple of weeks to get conscious about where their money is going," she explains. This exercise can help you track not only what you're buying, but also how and when.

Brooklyn, NY-based financial planner Stephanie Genkin adds, "Challenging a client to go 'all cash' for a month can be a wake-up call for someone who is not mindful or is in denial about his or her overspending." Once you get a sense of your own patterns and habits you can work toward setting a realistic budget that allows you to save and spend more wisely.

You Might Also Like:
9 Money Experts on Their Biggest Financial Fails
How I Stopped Worrying About Money and Learned to Love My Budget
6 Ways to Cut Your Monthly Bills

[onewhippedpuppy]

Good stuff. I like the Dave Ramsey philosophy, "live like no one else so you can live like no one else".

My brother-in-law and his wife make nearly 50% more than my wife and I do, and they are broke. Two junk cars, one still with a loan. Small house not big enough for their family but in a fancy neighborhood, I believe he has a second mortgage and is heavily leveraged on it. Takes money out of his 401k. Carries a balance on multiple credit cards. EVERYTHING is financed - tv, furniture, etc. They barely get by making what is very good money for the midwest. It's really sad to watch, my wife has tried to give him advice but I don't think they are willing to make sacrifices. The funny thing is, he thinks we are "rich" because we can do things that we want to do. Guess he doesn't notice our relatively common clothes, paid for cars, house that we totally remodeled, or meals at home every night.

[KFC911]

My take: If you're living beyond your means....get MEANER

I keed....PPOT is loaded with fiscally responsible folks imo....maybe that's how we got here

[ckelly78z]

My BIL is big into living beyond his means. He's a cop that works his 40 hours and picks up every bit of overtime, and every paying detail he can get. My inlaws were just at his house on vacation (South Florida) and could not believe the shape that the house was in. It is a hoarders paradise but not with junk, but with new items bought and paid for with good intentions, but never used, or used and forgotten. There was no place to sit down inside the house, and only a narrow pathway through all the rooms.

I am truly amazed that he sold one of his motorcycle to me, and another one to my FIL (he still has 4 more in the packed garage) I really think it's the first time in his life that he ever sold anything. He admittedly has about 500 guns with a matching hoard of ammunition that he brings up to my house out in the country to shoot. Last time he was up here he brought his brand new Barrett BMG 50 cal sniper rifle, with a couple hundred rounds, and about 20 other spoons of varying price and deadliness including a fully auto mac 10 that reeled off 20 rounds in about 2 seconds.

He is about $150,000 in debt and getting further every day, but won't sell anything. with all the overtime and details, he was making about $105,000 a year, but the overtime dried up and the younger guys are getting all the details, so he hs taken a $50,000 a year hit to his pay and is drowning slowly in debt.

We have mentioned DaveRamsey.com several times to him, but he is too proud to admit there is a problem.

[Linderpat]

hmm, I thought there was going to be something with a little more depth and insight. Great article for a 17 year old. If anything in it was a revelation to anyone reading it, then that person is in deep ***** trouble.

[GH85Carrera]

Originally Posted by Linderpat

hmm, I thought there was going to be something with a little more depth and insight. Great article for a 17 year old. If anything in it was a revelation to anyone reading it, then that person is in deep ***** trouble.

Yep.

I know a friend that lived like that. He was leveraged to the max. He had a few fancy Rolexs, drove a Turbo 911, lived in a huge house in a exclusive area, he owned a twin engine aircraft and took frequent vacations to Europe. Then his business slowed down a little and everything collapsed. He was bankrupt and had to move in with his mom and sell everything he had.

[onewhippedpuppy]

Originally Posted by Linderpat

hmm, I thought there was going to be something with a little more depth and insight. Great article for a 17 year old. If anything in it was a revelation to anyone reading it, then that person is in deep ***** trouble.

I think what you meant to say is, "then that person is the average American."

[biosurfer1]

The no emergency fund thing is scary. I like to have at least 18 months sitting in the bank and some of my friends think I'm crazy to have that much and not do anything with it. Is it likely my wife and I will both lose our jobs at the same time? Very Doubtful, but "very doubtful" won't pay the bill if it does happen!

[onewhippedpuppy]

My layoff last year was a non-issue because of a strong emergency fund. Nobody cares about fire extinguishers until there's a fire.....

[GH85Carrera]

A real estate friend of mine sold a house that was a foreclosure. The owners had a water heater go out and that started the cascade that brought them down. No more credit and they could not afford a new water heater. They both had money for cigarettes and wine but not for a water heater. I was amazing to me.

[beepbeep]

Why oh why use credit card at all?

Delayed paying and incentives to credit shopping lead invariably to: 1. spending more than planned 2. missing the payment sooner or later which means extra income for the CC issuer.

I only use CC when paying for job-related stuff (trips etc) which I do not want to shell out myself until I get it back.

[onewhippedpuppy]

The aforementioned BIL frequently calls me with car issues. Last week it was his leaking A/C, which he can't afford to fix. He has a 2000-ish Dodge Dakota with around 200k that leaves a visible trail of blue smoke in its wake, I keep telling him that it's not long for this world.

I really wish he was the sort of guy that you could have an honest conversation with, but he's more about trying to project a certain image. I'd love to help, and he has enough income that with a few years of sacrifice he could easily right the ship.

[VincentVega]

Why oh why use credit card at all?

They pay you to use it, be smart with credit and the reward programs are great. Add in consumer protection and great documentation and that's why I use credit for just about everything.

[Rick Lee]

Originally Posted by beepbeep

Why oh why use credit card at all?

Delayed paying and incentives to credit shopping lead invariably to: 1. spending more than planned 2. missing the payment sooner or later which means extra income for the CC issuer.

I only use CC when paying for job-related stuff (trips etc) which I do not want to shell out myself until I get it back.

My credit cards more than pay for themselves. I've probably sold $1100 worth of miles in the last year and paid maybe $150 in annual fees. I've never missed a payment date because I set them up online well in advance, plus I get email reminders 10 days out. They do still hit me with a finance charge about once a year, even though I never carry a balance. I call to complain and they waive it. Seems a little shady to me and that they're just seeing what they can get away with. But they always waive it when I call. What's the downside? In my case the credit card companies are only making their money on the merchant fees at those places I shop. I don't mind letting others pay for my convenience. It's not like any grocery, gun or music store is giving out cash discounts.

[911 Rod]

How come everyone has a BIL that spends like a drunken sailor?

Mine says when I die my kids will be rich and when he dies he will have had a great life.

[Tervuren]

Originally Posted by Linderpat

hmm, I thought there was going to be something with a little more depth and insight. Great article for a 17 year old. If anything in it was a revelation to anyone reading it, then that person is in deep ***** trouble.

You must run in a very small circle.

[biosurfer1]

Originally Posted by 911 Rod

How come everyone has a BIL that spends like a drunken sailor?

Mine says when I die my kids will be rich and when he dies he will have had a great life.

Mine says when I die my kids will be rich and when he dies he will leave a financial burden on his kids after trying to take care of their broke father with failing health.

Fixed it

[sugarwood]

Originally Posted by Linderpat

hmm, I thought there was going to be something with a little more depth and insight. Great article for a 17 year old. If anything in it was a revelation to anyone reading it, then that person is in deep ***** trouble.

LOL, I had a similar reaction to a different article a friend recently sent me.
Note this person is in his mid 30s.

Subject: Really enjoyed this article
6 Harsh Truths That Will Make You a Better Person | Cracked.com

My response:

Have a useful skill? Be interesting?
Seems pretty self-evident for anyone older than college age.
I assume that is the target audience for this article.

[sugarwood]

Originally Posted by 911 Rod

How come everyone has a BIL that spends like a drunken sailor?
Mine says when I die my kids will be rich and when he dies he will have had a great life.

To play devil's advocate, he might have a point.

[Noah930]

Originally Posted by sugarwood

To play devil's advocate, he might have a point.

He has a point up until the time something unforeseen (job loss, medical disease, physical injury, natural disaster, stock market crash, etc) happens and he doesn't have the financial reserves to hold the fort. Then he'll lose the house, sell all the toys (or maybe he doesn't even own them now), file for bankruptcy, and go through all that.

Some of us would rather be as prepared as reasonably possible. Some of us don't mind living life on the financial edge.

Agree with RickLee regarding credit cards. I use them for nearly everything. But I always pay them off in full every month. As long as I have some semblance of financial discipline, why is that a bad thing?