7 Signs You’re Living Beyond Your Means and How to Fix Them
In the age of plastic spending and mobile payments, it’s easier than ever to buy stuff you can’t pay for right away while supporting a lifestyle you can’t really afford.
Here are seven red flags that might mean you’re living beyond your means and the steps you can take to manage your debt!
You’re Carrying a Credit Card Balance from Month to Month
Credit cards are a great way to earn rewards, pay for emergency purchases when things are extra-tight and build a strong credit history. Unfortunately, though, they also make it far too easy to fall into the spending trap. If you have an outstanding balance on one or more credit cards and you’re only paying the minimum payment each month, you can end up carrying this balance for years while paying hundreds of dollars (or more!) in interest. The fix: Try to double down on your monthly payments and/or make one extra payment each month instead of paying just the minimum amount. Stop using your card until the debt is paid off.
No one likes paying bills, but if you’re losing sleep over your bills, you need to take a step back to review your monthly budget and spending habits. Bills should be fixed into your budget and you should be able to pay them easily without any stress or nail-biting involved. The fix: Take a long look at your monthly budget to find ways at cutting back. Cancel a subscription you never use, trim impulse purchases, start brown-bagging it at work more often or tighten the belt in any other way possible.
You Can’t Save 5% of Your Monthly Income
Financial experts recommend putting 20% of your monthly income into savings, or even more if you can swing it. At the very least, you’ll want to sock away 5% of your monthly take-home pay to fund your retirement and any other expensive purchases or events you might need to pay for in the future. The fix: Again, you’ll need to trim your expenses and restructure your budget to include a minimum of 5% for savings.
Unexpected expenses, like a household repair or extra tutoring for your child, can disrupt your monthly budget and really set you back—unless you have some way to pay for them. Ideally, you’ll want to have an emergency fund to cover major unexpected expenses, like a job loss or a medical emergency, and a rainy-day fund for small expenses you can anticipate, like replacing an aging appliance and sending your child to summer camp. The fix: Start building your funds now by putting away as much as you possibly can each month.
Your Mortgage Payment Eats Up More Than 30% of Your Monthly Income
Most financial experts agree that your monthly mortgage payments should not exceed 30% of your take-home pay (that’s after taxes). If your mortgage is more than 30% of your income, you’re in over your head. The fix: You have two choices here: Find ways to boost your income or Scale back your mortgage payments by considering a refinance.
Leasing lets you live the life of a high-roller without the huge bills. The problem is that many people can’t really afford their leases either. You might be covering your monthly payments, but if you can’t do that while also putting money into savings and meeting your other expenses, your car is too expensive. The fix: Downgrade your vehicle to one you can actually afford.
Your Financial Decisions Are Influenced by Your Friends’ Spending Habits
Thanks to social media and the hyper-sharing culture it introduced, the pressure to keep up with the Joneses is stronger than ever. If you find yourself making financial decisions—from what kind of footwear to buy to where you vacation—based on your friends’ choices, you’re likely spending more money than you can afford. The fix: Stop looking over your shoulder and keep your eyes on your own life and your own wallet. If your friends have expensive tastes, try to be the budget-conscious influence in the group. You may just start a new, financially responsible trend!
If you’re in over your head, Day Air Credit Union can help! Stop by today, our financial experts will be happy to help!