Spending Beyond One's Means
Living beyond your means is pretty easy nowadays, especially since we live in a time when purchasing on credit has become the norm and ever so easy. However, remember that although it seems normal, it definitely is causing more harm to your current and future well-being.
Here are a few warnings that you are living a lifestyle you simply cannot afford- and how to get back on track as soon as possible.
1. Don't allow fear to dictate your spending. We know how terrible it feels to miss out or be left out of enjoyable social events due to financial constraints. But remember, social events should not take priority over whether you can afford it or not – under no circumstances allow 'fear of missing out' make you spend more than you can afford. You don't have to give up on your social life, just find other affordable ways of spending time with your friends.
2. Credit cards have become a way of life for many who no longer carry cash in their wallets. There is no harm in using credit cards and collecting the reward points as long as you are paying off the balance each month. But if you are accumulating your outstanding balance month to month you are spending way more than you can afford. In such situations, before it gets too late, start paying double or triple the minimum amount in the next few months to get you back in comfortable territory. 'People always spend more with plastic because it does not feel like real money!'
3. You should save at least 10 to 15 percent of your total income. If you are a dual income family you can save more. However, if you realise you are not being able to save even 5 percent after paying your debt, this could mean you are living beyond your means. Saving is an integral part of our lives, and in my humble opinion, a MUST. I have learnt from past mistakes. Cut down on your expenses such as things you can do without, for example eating out, buying expensive things, going on holidays etc. - remember, giving up things in the short term will help you become successful in the long term.
4. At the end of the month, you realise you have no money left. People who live from payday to payday often think they can't save money or spend less because their lifestyle has become a habit. However, there should be at least one or two ways you can cut back. Allow yourself to spend money only on the bare necessities for a month –rent, bills, groceries, children's school fees (if you have kids) – cut out on everything else, like eating out, clothes shopping etc. Very soon you will notice your finances are in check!
5. YNAB-- (You need a budget) Having a written budget of your income and expenses is one of the most important steps to having financial freedom and living within your means. It allows you to create a spending plan for your money thereby ensuring that you will always have enough money for the things you need and things that are important to you. Following a budget will also keep you out of debt or help you work your way out of it if you are currently in debt.
6. If you have no emergency fund, you need to build up a fund for any kind of emergency that may crop up. There could be a sudden illness, which might require hospitalisation, and we all know how much bills accumulate for a few days of hospital stay. Or, you or your spouse may lose your job all of a sudden. An emergency fund serves as a backup and is a must have. So many unforeseen things can happen -we must remember never to take anything for granted.
'Do not save what is left after spending, but spend what is left after saving.' – Warren Buffet