Being aware of these signs can save you lots of money woes in case of a cash emergency.
There are a few key indicators that tell you are living beyond your means, whether you always seem to come up short on cash or consider yourself financially responsible. Being aware of these signs can save you lots of money woes in case of a cash emergency [3].
You only consider monthly payments when purchasing a car.
A car is likely one of the most expensive items you will ever purchase, but just because you can afford a monthly auto loan payment does not mean you can afford a car. Consider the duration of the loan instead. You are shopping beyond your true budget if the loan is longer than three years and you won't own the vehicle outright at the loan's conclusion.
You couldn't live without your job's income for at least six months.
Adding up how much you make each month then multiplying the amount by six is the minimum you should have stashed away in an interest bearing, insured deposit account. Earmark it solely for emergency needs because you never know when life's uncertainties will strike, like illness, unemployment, disabilities or family emergencies.
You've paid an overdraft fee in the last year.
You are living beyond your means if you have to rely on overdraft protection to float your lifestyle.
You've exceeded your credit limit.
Exceeding your credit limit is bad for a number of reasons: your future interest rates will be sky high on new lines of credit, you have to pay over-limit fees and your credit score is lowered. Lenders will know you are in over your head, and you should, too.
You vacation on credit.
You really cannot afford a dream vacation [4] if the length of your getaway is shorter than the time it takes for you to pay for the purchase. Start saving for vacations well in advance, and be realistic about “extras” like parking, tips and baggage fees.
Are you living beyond your means? How did you realize you were spending too much? Share your story with our readers in the comments section below.