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What is living above your means?

“Living above your means” means that you’re consistently spending more than your income. However, it isn’t always about flashy purchases or luxury items. Sometimes, it’s the subtle shifts in your lifestyle that lead to financial strain.

Today we’re not talking about how to avoid this – I already have articles on that topic. This is a look at those sneaky signs that you might overlook.

So here’s how to know if you’re living above your means.

Signs your living above your means

#1: Struggling after an upgrade

Upgrading your lifestyle can include many things like buying a bigger house, a fancier car, or even enjoying more conveniences – but it’s crucial to consider the impact of these purchases on your financial well-being.

Even if an upgrade enhances your life in some way, it shouldn’t be at the expense of your financial peace of mind.

If you find yourself worrying about money or living paycheck to paycheck after an upgrade, this might be a sign that you’ve taken things a little too far and stretched your budget to the limit.

Before the upgrade, you were comfortably paying your bills. However, the shift to something larger or nicer now pushes you to the financial edge. Even if you’re managing the new monthly payment, you might have a constant worry about money in the back of your mind, or maybe you’re worrying about money to a new degree. If so, this is often an indicator that you’ve gone from being comfortable to living at or above your means.

#2: You don’t know how much your life costs

One subtle way people end up living above their means is by not keeping track of their spending. It’s easy to overspend when you don’t have a clear picture of where your money goes.

Some areas where you might lack awareness include groceries. If you don’t meal plan or shop with a list, you might not realize how much you’re actually spending on food each month. It’s easier to make little impulse purchases when there isn’t a list – and these items can add up quickly.

Likewise, if you’re not keeping an eye on your fuel expense, you might be surprised at how much you spend on transportation. Dining out can quickly spiral out of control, too, if you don’t set personal limitations.

In your mind, you might only be spending $150 a month eating out, or $100 on miscellaneous purchases. But in reality, it could be double or even triple that amount. If you don’t have a clue as to how much you’re spending or a plan: How do you know that you’re not overspending?

It becomes nearly impossible to gauge whether you’re staying within reasonable limits or going overboard. Some might say, “Well, I’m paying my bills, so it’s not a problem.” But that’s not entirely true, and my response to that is: But are you saving? Can you handle an emergency? Are you chipping away at credit card debt?

#3: You have a poor savings rate

You might also be living above your means if you’re saving less than 5% of your income and you don’t have a real emergency fund.

In other words, you have money for everything else. So if someone calls and says, “Let’s go out to eat, let’s go shopping, or let’s book these plane tickets,” you’re ready to head out the door.

Yet, when it comes to saving for the unexpected or the future, there isn’t much of a safety net.

You should absolutely have fun and enjoy new experiences, but you should also prioritize the important stuff, and saving money is one of these things. Just because you have money to do something doesn’t necessarily mean you can afford it.

To afford means being able to enjoy something without negative consequences. In other words, it means being able to enjoy life without compromising your financial well-being. If you can take five vacations a year and eat out three or four times a week, there’s no reason why you shouldn’t have at least a three-month safety net.

#4: You’re using a credit card for non-essentials

…and you’re carrying those balances from month to month.

There’s nothing wrong with using a credit card. Many people, including myself, use credit for the majority of everyday purchases. You can build your credit score and get something back in return. But the key here is only charging what you can afford and not carrying a balance from month to month.

One of the most responsible ways to use a credit card is to purchase items that you normally buy and then pay off the balance in full each month. You can use it for daily expenses, bills, and extras – nothing wrong with that.

However, if you’re pulling out your card to pay for things like eating out, clothes, electronics, and even travel, and you’re carrying these balances – meaning you can’t afford to pay them off, or you’re waiting to pay them off with future money – this is a red flag. There’s a 99.9% chance that you’re living above your means.

Living above your means FAQ

How do you tell if someone is living above their means?

You can spot someone living beyond their means when their spending consistently surpasses their earnings. Signs include frequent borrowing, reliance on credit cards, or difficulty covering essential expenses. People in this situation often prioritize short-term desires over long-term financial stability, leading to a cycle of debt and financial stress.

How do I stop living above my means?

To stop overspending, make a budget that fits your income. Cut out things you don’t need, save more, and avoid buying things on a whim. Find ways to earn extra money, like doing side jobs or negotiating for better pay. Stay focused and keep an eye on your spending to stick to your budget and avoid falling back into old habits.

What are the consequences of living above your means?

Overspending can lead to serious consequences like piling up debt, feeling stressed about money, and struggling to save for emergencies or future plans. It might even push someone towards bankruptcy, strain relationships, and cause mental health problems due to financial stress. Beyond just financial health, overspending can take a toll on overall well-being and happiness.

What does “living above your means” mean?

“Living beyond your means” means spending more than you make, usually relying on credit or loans to keep up a lifestyle you can’t afford. This can lead to debt, instability with money, and make it hard to reach your long-term financial goals. It shows a lack of planning and self-control with money, which can cause problems both now and in the future.