5 Signs You’re Living Beyond Your Means
5 Signs You’re Living Beyond Your Means
One of the most common money mistakes you can make is living beyond your means. Unfortunately falling into this trap can be all too easy and before you realize it, you’re struggling to gain control of your finances, wondering where it went wrong. Before it’s too late, here are five signs you may be overextending yourself financially.
Your Savings Isn’t Growing
One big sign that you’re living beyond your means is a lack of money being put aside to build your savings account. Many financial experts recommend saving between 5-10% of your gross monthly income for unexpected expenses. Not having money saved for emergencies can put you and your family in a vulnerable position. Take a look at your everyday spending and identify areas that may be draining your finances such as frequent dining out or unnecessary shopping, etc. Correct those spending habits and start allocating some of that money to your savings. Set reminders to make regular contributions to your savings account or set up automatic transfers from your checking to your savings accounts. You may be surprised how much you can accumulate over the course of only a few months of regular contributions.
You Only Pay The Minimum on Your Credit Cards
You’re very likely living beyond your financial means if you’re only able to pay the minimum payment on your credit cards. It’s easy to get behind on your credit card debt and stuck in the cycle of revolving debt if you’re making very little progress towards paying off your credit card balances. In a perfect world, we would only pay for items using a credit card that we can pay off in full each month to avoid paying interest. However, all too often we purchase things that are not within our price range or budget and we realize after it’s too late that we’ve overextended ourselves. If your credit card has a high interest rate, your minimum payment won’t have much of an impact on your principal balance. Focus on refining your spending to allow you to pay double or triple your minimum amount due. Looking ahead, make sure you have a plan in place to pay off higher priced items before you purchase them.
Paying Your Monthly Bills is a Struggle
No one enjoys paying monthly bills, but if you’re losing sleep and close to falling behind on your bills, this is a sign you’re likely living beyond your means. If this sounds like you, it could be time to rethink how your income is being spent. Take inventory of your recurring monthly bills, going through them one by one to identify ways you can cut back. Do you really need the premium cable subscription? Are you running your AC or heater a little too much causing your electricity bill to be too high? Don’t forget the monthly subscription services that can really add up. Identifying these budget leaks and correcting them can help ease the burden of paying your monthly bills.
Your Credit Score Has Dropped
When living beyond your means, a lot of your everyday expenses go on your credit cards and some of your bills may not always be paid on time. Because of this, your credit score may take a hit. Good credit goes a long way when it comes to making big purchases like buying a car and getting a home loan. It’s important to understand why your credit score has dropped. For someone living beyond their means, it’s usually attributed to high credit card balances and late payments, both of these which contribute significantly to your overall score. Pull your free credit report from annualcreditreport.com to understand why your score has dropped. It could be a simple fix by setting up automatic payments for the minimum amount due on credit card bills and loans, so you never miss a payment. You may also want to pay down your balances on your credit cards and lines of credit.
You’re Not Saving for Retirement
When you’re living beyond your means or simply finding it hard to make your money last through the month, saving for retirement becomes an afterthought. It’s unlikely you’ll want to work the entirety of your life, but that could happen if you are not saving for retirement. Review your budget and identify ways to save even small amounts of money towards your employee sponsored retirement plan or an Individual Retirement Account. Thanks to compounding interest, the earlier you start investing, the easier it becomes to retire on your terms. To learn more about your retirement goals and options to save, reach out to your nearest SDCCU branch and schedule an appointment to speak with a Financial Advisor.
If you see any of these signs in your own personal situation, don’t panic. Living beyond your means is something most have experienced, and sometimes it takes a call to action to motivate you to do the work to fix it. Work on establishing a budget that allows you to address your essential expenses while also allowing for money left over to save. It’s also encouraged to get a little extra help if needed. Visit balancepro.org to get further assistance with debt repayment, credit report reviews, etc.
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