Read these tell-tale signs and stop living paycheck to paycheck!
Are you living beyond your means and struggling paycheck to paycheck? According to CNN Money, 76% of Americans live paycheck to paycheck and of that, 27% of Americans have no savings at all!
When I got my first real job after college, I lived beyond my means because I felt like I earned it. I worked hard in college for 4 years, lived frugally, and depended mostly on my parents. So when I finally graduated, I wanted a nice condo, new clothes, and fancy dinners. If I had extra money each month, I’d spend it on something that I really wanted, usually clothes or Apple products. I now have a closet full of clothes I never wear and finally realized a couple years ago that I was living beyond my means.
Here are 8 Warning Signs That You’re Living Beyond Your Means:
1. You don’t have a budget.
If you don’t have a written, monthly budget then you’re basically winging it each month. A budget is essential to living within your means. You’d be surprised how much money you’re actually spending.
2. You spend over 25% of your income on eating out every month.
When I finally sat down and did a budget, I realized that I spent $800 every month on eating breakfast, lunch, and dinner at restaurants. I rationalized that I was busy and didn’t have time to cook, which was usually true. But I’ve since learned that there are plenty of healthy meals and snacks that don’t take long to cook either. What would you rather do with $800 a month?
3. You’ve missed a payment this year.
Missing payments for essentials like rent/mortgage or credit cards bills is a sure sign that you’re not budgeting carefully. Stick to your budget and prioritize your spending so you don’t miss important payments.
4. You’ve paid overdraft fees this year.
Paying overdraft fees because of insufficient funds is another warning sign that you need better oversight on your finances. Paying $10-$40 for overdraft fees, especially if you’re routinely paying these fees, can really add up. Unfortunately, many people who get overdraft fees aren’t reviewing their bank statements and don’t know how much they’re paying in fees.
5. You never save money.
If you always spend your extra money instead of saving it, you’ll always live paycheck to paycheck. As my dad always say, Life Will Happen! Your car will break down or your Air Conditioner will stop working on a Holiday (this happened to me twice!), or you’ll have another unexpected event that costs money. So, an emergency fund is absolutely essential, even if it’s just $500 to $1000 to start with. WIthout an emergency fund, you’ll have to borrow money to pay for these emergencies.
6. You buy everything you want, even when you can’t afford it.
I am guilty of this too! Even though I write a great budget, sometimes I see something that I really want. Instead of budgeting for it and buying it next month. I just buy it. And my entire budget is thrown off and I’m playing catch up. I constantly have to remind myself that unless I can pay for it with cash, I shouldn’t buy it.
7. You struggle to pay off your credit card each month.
If you use a credit card instead of using cash, you should only use the credit card if you have money set asisde to pay it off. Otherwise, you’ll continue to rack up credit card debt that you can’t afford to pay off each month. And the cycle will continue where you use the credit card to buy more”stuff” you can’t afford then pay off some of it so you can buy more.
8. You never save for retirement.
This goes back to #5, if you never save money, you’re probably not saving for retirement either. But saving for retirement right now is so important because waiting can cost you thousands of dollars. Starting early (when you’re in college or right after) and saving 15% of your income will start you on the right path for retirement.
Readers, what are some other signs that you’re living beyond your means? Please comment below.