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Today, we live in a debt-driven society. It’s apparent. A lot of folks are living beyond their means, stuck in financial rut. It’s so easy to pay for ANYTHING with a credit card or credit offered from a store. Are the days of using cash long gone? Maybe not but we’re certainly inching toward that future. When is the last time you paid for something with cash?
If you think you might be living beyond your means, check yourself with these 8 warning signs and problem-solving tips to help you cope with it. Keep reading!
1. You Have NO Emergency Savings Fund
Big mistake. Everybody should have this and sadly not enough people do. Whether or not you’re in the position to save now, this should be a major goal of yours in the future if you don’t already have an emergency savings fund.
What happens if you have an emergency?
- An unexpected trip to the emergency room
- A death in the family that calls for unexpected travel expenses
- Car or house repairs that come up
These are just a handful of the MANY emergencies that can happen. Start saving. An emergency fund gives you so much peace of mind and lowers your stress too!
Solution: Save 10% of your paycheck toward your emergency savings fund.
2. You are Living Paycheck to Paycheck
A lot of people have been here including me. After I moved to a big city for college, I was living paycheck to paycheck. I grew up in a middle class household. I never knew what it was like to be without. But, I found myself being late on my bills and giving up the indulgences (like going out to eat and getting my hair and nails done) that I had grown so accustomed to, among other changes.
I was living paycheck to paycheck.
So, how did I overcome this?
Solution: Get a second job or increase your income.
This is exactly what I did. So, I was in college with 2 part-time jobs (1 full-time job could have sufficed but it wasn’t working for my current situation with my employer). Then, things started to suddenly level out. I had money to pay my bills, I was buying real food, not living off ramen and cup of noodles, and I could save again!
Signs you might be living paycheck to paycheck:
- You run out of money and have to wait until payday again
- You pay your bills late
- You are unable to save
Aside from getting a second job, ask for overtime at your current employer. Try these income-producing side hustles:
- Start a blog (start making a few hundred to thousands of dollars within your first year)
- Start an ecommerce store (my first business, generating up to $30K per month, a ton of work but worth it)
- Take surveys (easy to start, free, and start earning today-favorites are Vindale Research)
3. You Are Unable to Save 10% of Your Paycheck
If you earn around $3,000/month, that means you’re saving $300/month. If you can’t save 10% of your paycheck, then you’re not living within your means. This isn’t just your emergency savings. This includes any money you are saving toward your 401(k), IRAs, investments, and other savings.
Solution: Get on Budget to see where your money is really going every month. Try Mint app. It’s free and offers so many perks to help you track your spending and budget. You will be addicted to this app, it’s really incredible.
4.You Can’t Pay Your Bills ON Time
This is a big one. If you are struggling to pay bills on time, constantly doing payment arrangements, getting overdue notices in the mail, then this is a red flag and you should seek help.
Solution: Like in #3, get on a budget. Earn more income. Look into the app Trim. It will negotiate your bills lower to help you stress less, pay your bills on time, and increase your income (since your bill paying will be less).
5. Take Out a Loan to Vacation
If you have to take out a loan to vacation or travel (including unexpected travel) then you are not within your means. Vacations are great and an awesome way to rest, relax and reset but, if you have to take out a loan to experience your vacay, you can’t afford it.
Solution: Don’t take out a loan for vacation. Save up instead and consider vacation a reward for saving toward that goal.
6. Everyday Essentials are Too Much
If you are struggling to pay for everyday expenses like food, water, rent, this is a big warning sign. Do not ignore it. Take action immediately.
Look at your budget and see what the problem is:
- Rent too high
- Your car payment is too high
- You are spending money frivously because you aren’t tracking spending
- You aren’t earning enough
Solution: Again, the Mint App can help you find these loopholes in your spending and help you get back on track. Try it free.
7. Your Rent or Housing Payment is MORE THAN 30% of Your Pay
Your housing payment is probably the biggest expense you’ll have in the month. It should not exceed 30% of your pay. If it is, you’re not living within your means. Lower this to hit that 30% mark by…
- Getting roommates
- Moving to a cheaper place
- Increasing your income
Solutions: All shared above in the bullet points
8. You Can’t Pay Your Minimum Payments
Like your minimum credit card payment. If this is a struggle to pay, you’re not living within your means. This means you can’t pay your bills. Take action. Look at our roundup of solutions below to help!
Do you find yourself falling under one or more of these warning signs? Don’t worry, we have put together a roundup of solutions to help.
1. Create a Budget
Mentioned more than once above, creating a budget is the way to help you get a hold of your finances.
- See how much you’re actually earnings
- See how much you’re spending
- Track your spending trends
- See where you’re wasting your money (sadly, many of us do this)
This might be eye-opening for you. Just do it! Starting today, create your budget. Need help? Check out these free personal finance/budgeting apps:
2. Start a Side Hustle
Make more money to help you have more income to pay your expenses.
If you had an extra $1,000/month, how much easier would life be? You could save toward your emergency fund, pay your bills on time, have the money to go on vacation without taking a loan, and no longer stress about money.
3. Refinance your Student Loans
You can lower the interest rate on your student loans through refinancing. Recommendation: Sofi. They help refinance your student loan as well as offer financing options for your home, investments, life insurance, they’ve got it all. Check them out when you get a chance.
4. Use Cash
Get off of cards including debit cards. Try this for a while to reset. Dave Ramsey’s cash envelope system is used by thousands. It helps you use a cash budget to pay your expenses. When you have money leftover at the end of the month, it’s ext
There you go! Ever experienced any of these warning signs?
Questions? Comment below so we can continue the conversation!