10 Signs You’re Living Beyond Your Means
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To live beyond your means is to spend more than you can afford to on a consistent basis. Though it’s similar concept to living paycheque-to-paycheque, it’s not quite the same. Living beyond your means refers to your behaviour and your choices with your money instead of how factors you can’t control, like the rising cost of living or stagnant wages, might affect your financial situation.
People at any income level can live beyond their means, leaving themselves vulnerable in the event they face a major, unplanned expense. If you’re not sure if that applies to you, we’ve got a few warning signs to keep your eyes peeled for.
1. You’re not saving anything each pay day
If you’re not setting aside some of your income every time you get paid, you should see this as a major red flag! Saving money is the only way to reach your long-term financial goals, invest safely, comfortably enjoy the things you love and protect yourself against the negative effects of a financial emergency. According to the popular 50/30/20 rule, if you’re saving 20% of your income each month, you’re in great shape. Now, not everyone can afford to save that much, but many financial experts say that if you can’t afford to save even 5% of what you’re earning (even if you’re paying off debt), you’re living beyond your means.
If you’re not saving enough of what you’re earning, set up your savings so they move our of your main bank account to a separate account automatically after you get paid. If you wait until the end of your pay period, you’re not likely to have much left over (if anything). Instead, if you save that money right away, you’ll be much more likely to keep it saved and have it when you need it.
You can automate your savings easily by creating a QUBER account. QUBER is a free digital savings account you can grow your savings in, separate from your main bank account. Once you have an account set up, you can start a Saving Challenge or Saving Jar that’ll move money to The Vault on the days you get paid each month. That way, you’ll be putting money aside in a location where it can grow undisturbed and gain the chance to earn cash rewards along the way!
2. If you get a raise and your situation doesn’t change
If you get lucky and get a raise, you should ideally see one of a few outcomes: your savings grow due to the extra boost, you find it consistently easier to pay all your bills or a combination of the two. If you instead find that your financial situation doesn’t improve, this is a clear sign that your spending habits are a problem. It can be too easy to let the urge to consume swallow up your extra income, but that’ll just leave you in the exact same position as you were before you got it. Instead, use the opportunity created by a raise to get ahead and save it if you can.
3. You use your credit card to cover emergencies
There’s nothing wrong with using a credit card to cover the immediate costs of an emergency if you intend to pay off that amount with money you already have saved. But, if you’re relying on your credit card to front you money you haven’t earned yet, you could end up in some major trouble if you get hit with an unexpected bill. For one, you’re being charged at a high interest rate to borrow that money, and may end up paying a great deal in fees while you’re already trying to recover. What’s worse is that you could face an emergency when you have little to no credit available and be left without any options. This would leave you in an extremely vulnerable situation, and you may need to turn to predatory lenders to help make ends meet.
An easy solution to the issue is to start building an emergency fund now. This is something we talk about constantly, but it’s importance really cannot be overstated! The act of building an emergency fund over time will provide you with a source of liquid cash to pull from in the event of an emergency, but will also remind you to live within your means as you save. If you’re looking to get started, you can easily start a QUBER 1K Saving Challenge that will help you save $1000 in even instalments over the course of the next year. You’ll also earn a $20 cash reward when you finish it successfully, which will only help you grow your fund faster!
4. You fall victim to FOMO
FOMO (fear of missing out) can be a killer when it comes to maintaining financial security. It’s been a while since many of us have seen our friends, so once it’s safe for you to do so, no one’s going to blame you for increasing your social activity. However, if you found that pre-COVID you were the type to spend a ton of money on social activities and events with friends, keep in mind that you may be at risk of way over-spending when things go back to normal. Excessive spending on entertainment is tough to justify if you’re not paying your bills in full or saving a solid portion of your income each month. Enjoy your time with your friends, but don’t let FOMO encourage you to spend more than you can afford!
5. You’re paying a fortune in bank fees
If you’re in a position where you’re living beyond your means, you’re likely missing bill payments or occasionally over-committing yourself to creditors. Actions like this can end up costing you a fortune in bank fees, like NSF’s (non-sufficient funds) or interest owed on overdraft charges. Fees like that add up quickly, making it that much tougher to get to a more stable place with your money.
If you find this is happening to you, you’ll need to think critically about how you can get to a place where you’re not getting charged constantly anymore. It’ll involve paying all your bills on time, in full if possible, and likely require you to cut way back on non-essentials until you’re out of the hole.
6. You carry a balance on your credit card month-to-month
Many people spend one pay day ahead of what they’ve actually earned and use their credit card to fill the gap. Though it’s not great for your credit score, it is somewhat manageable in times of economic stability. However, if the economy suddenly contracts (like it did at the start of the pandemic) and you lose your job or have your hours slashed, all of the sudden it can become a major problem.
If you’re living within your means, you should be able to pay off your entire credit card balance each month in full. While we all use more than that on occasion, if you’re constantly carrying a balance, you should see this as a sign that you’re spending too much.
7. You don’t have a clear idea of where your money is going
It’s next to impossible to live within your means without applying some strategy to your financial decisions. If you spend blindly for days in a row without looking at your bank records, chances are you’re spending more than you can actually afford.
A person who tracks their expenses has a clear idea of where their money is going, which means they have the opportunity to make critical decisions about spending before they make purchases. Updating your records daily will help you remember everything you’ve purchased and will likely help you avoid the temptation to spend if you know you’re already on the hook for a big bill next month.
8. You’re not investing in products like insurance (if you can afford them)
If you’re earning a good salary but you don’t have a full financial safety net created for yourself, this could be a hint that you’re too focused on non-essential spending. For example, if you’ve got any dependents, a life insurance policy will ensure that they’re well taken care-of in the event that something happens to you. If you can afford to get life insurance but neglect to because you constantly opt to spend that money elsewhere, or you need it to cover your credit card bill, chances are you’re spending too much.
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9. You find yourself comparing what you have to others constantly
If you see a person with an expensive material item you want, like a fancy car or a new watch, do your best to avoid the temptation to get one yourself! For one thing, you have no idea if that person can actually afford it or not. If they’re in debt trying to pay for that car, how enviable is it really?
More importantly, it’s just not realistic to use someone who seems to have more material wealth than you as a benchmark for your own life. There aren’t many positives that can come from that type of thinking but there are a number of negatives, like spending more than you can afford to and making yourself feel lesser-than. If a comparative thought comes into your head, try to flip it around and instead think of something you’re grateful to have. Then, move on! There will always be people who have more than you, but it’s up to you to make sure you’re not reacting to it in a way that tanks your financial situation.
10. You find your car or housing costs are too high
Finally, if you find that there’s just not enough money left to go around once you’ve paid for your car and/or shelter, this is a major hint that you’ve over-committed. This can be tough for people to reconcile with, as these expenses are two of the biggest in a person’s life and hold significance for people in many ways. However, if you’re paying more than you can afford to on one or both of these items, that means there’s that much less money to go around for all your other expenses, like food, your phone bill, Internet and more (not to mention saving). This trickle-down effect makes everything harder to afford and puts your entire financial situation into jeopardy.
According to some financial experts, it’s recommended that you try to keep your shelter costs to around 30% of the total you earn. Property owners may need to use an even lower percentage as a guide, as owners are on the hook for many more associated expenses, like property taxes, home insurance, home repairs and so on. As for cars, the ideal range is around 10% of your monthly salary. If you can stay within that range, or very close to it, you should have enough income leftover to comfortably cover your other expenses and still be saving each month.
