8 Signs You’re Living Beyond Your Means and What You Can Do About It

Living beyond your means or spending more money than you make is common among people who haven’t spent time learning about personal finance. 

Most of us have all had experiences where we’ve earned more money which we think allows us to spend more money.

But, without knowing exactly how much you’re earning and how much you’re spending, you can easily fall in the trap of spending more than you earn.

If you are living beyond your means, debt or some other form of borrowing (like from family/friends) is required to fund those purchases.

Essentially, you have to come up with a way to fund those purchases and since you’ve spent all of your earned money, you need to borrow money. 

The problem is that it may not feel like it in the moment if you don’t know how much you’re earning and how much you’re spending. 

Here are 8 Signs You’re Living Beyond Your Means:

• Credit Card Balances Are Not Paid Off Monthly
• Credit Card Balances Are Increasing
• Falling Behind on Bills
• Not Putting Money into Retirement Investments
• Don’t Have Money to Cover an Emergency
• Over-Drafting Checking Account
• Don’t Keep Track of Spending
• Using Financing to Purchase Items

Credit Card Balances Are Not Paid Off Monthly

The number one sign that you’re living beyond your means is when your credit card balances are not paid off each month.

If you’re unable to pay your credit card balance in full every month, it likely means you’re spending more than you’re earning.

An exception may be an emergency that required you to use your credit card. 

But, if you’re unable to pay off the balance quickly you may need to change your spending habits. 

Credit Card Balances Are Increasing

If you already have a credit balance and it is increasing you’re likely living beyond your means.

You may have a balance due to previously living beyond your means or an emergency which required you to pay using credit. 

But, if those balances are not falling and instead, growing, it is the result of you borrowing more money than you’ve earned to cover your expenses. 

Falling Behind on Bills

If you’re having difficulty paying you bills it likely is due to living beyond your means.

You’ve already spent all your money on other stuff so when a bill comes due you’re unsure how to pay it.

If you don’t have cash in the bank to pay off your bills you’re living beyond your means. 

You’re Not Putting Money into Retirement Investments

If you’re not saving money and investing it, you’re likely living beyond your means.

While investing is not an expense, it is a necessity if you would like to retire comfortably.

If you have a goal of retiring, you must account for contributions to retirement accounts. 

You may be breaking even each month, spending just as much as you earn, but you’re missing out on the opportunity for your money to grow through investments. 

You Don’t Have Money to Cover an Emergency

If you had an emergency that cost $1,000, how would you pay for it? 

What about if you had a $5,000 emergency?

Some people will build emergency funds to cover emergencies while others may simply be able to pay straight out of earnings. 

Simply building an emergency fund does not mean that you’re not living below your means. 

You should also ask yourself:

If I had to put this emergency on a credit card, how long would it take me to pay it off?

While an emergency fund creates a cash cushion and a sense of security, it doesn’t reflect how you are managing your money.

You’re Over-drafting Your Checking Account

Has your bank account gone into the negative? 

If so, there’s a strong likelihood that you’re spending more than you earn. 

When you charge more to your debit card than you have in your bank account, you over-draft the account. 

Generally, if you’re not mindful of how much money you have and your spending, this can easily happen. 

You Don’t Keep Track of Your Spending

Do you have a budget or keep track of your spending?

Keeping track of your spending is a key to making sure that you’re living below your means or at least spending the same amount as you earn.

When you don’t know how much you’re spending it’s easy for you to spend too much money.

You may be concerned that you’re overspending but without actual awareness of how much you’ve spent, you’re more likely to still make another purchase. 

You’re Using Financing to Purchase Items

Most of us have to take out a mortgage to pay for a home and some of us have received financing to purchase a car. 

But, what about all those other purchases like furniture, technology hardware (phone, computer, etc), and appliances?

A lot of companies will offer financing options so that you make a monthly payment for the item.

Some of these options can be great where you don’t pay any interest on the item — it’s basically an interest free loan. 

But, typically financing options require that you pay interest on the item that you’re financing.

If you cannot afford to make purchases without using credit, it’s a sign that you’re living beyond your means. 

You should ask yourself before you make the purchase:

Could I buy this item in-full right now if I wanted?

Using the interest-free financing takes advantage of your ability to put the money somewhere else and earn a return, like a high-yield savings account.

But, when you using financing that requires paying interest you’re not only possibly living beyond your means but you’re also essentially paying more for the product.

Think of it as just another credit card that you’re using to make the purchase.

What Can You Do About It?

Just because you’re living beyond your means right now doesn’t mean that you can’t make changes to improve your finances. 

So, here’s what can you do to regain control of your finances:

• Create a budget and set spending goals
• Keep track of your spending
• Create a plan to pay off credit cards and financing

Create a Budget and Set Spending Goals

If you don’t have a budget, create one as soon as possible. 

While the goal of a budget is to help you spend less in the areas that you want, it also helps you simply start thinking about your money.

On the surface, a budget is about matching your earnings with your spending and saving. 

But, psychologically you’ll begin to think more about your money by simply creating, reviewing, and recreating a budget each month or quarter. 

You’ll also set spending goals with your budgets which will then push how you’re spending your money further into your consciousness. 

Check out some of our posts on budgeting:

• Simple Budgeting for Beginners
• What is a Budget?
• 5 Reasons You Should Be Using a Quarterly Budget

Keep Track of Spending

Keeping track of your spending is a great way to spend less money. 

There are popular web applications (like Mint) that will keep track of your spending if you link your financial accounts to the website. 

You can also simply write down all of your transactions as they occur.

And, you really only have to focus on a certain set of transactions.

You already know what your essential expenses like housing and utilities are going to be so you’ll just need to focus on those expenses that can change every month. 

Create a Plan to Pay Off Credit Cards and Other Financing

As long as you have credit card balances or financing on smaller items, you’re living beyond you means. 

Why?

Because, you haven’t paid off those items yet. 

The difference between these items and a mortgage or even car financing is that in theory you could sell the house or car and pay off the loan.

So, you want to create a plan to pay off those debts which means that you’re going to have to spend less than what you make.

Check out our posts on debt:

• How to Get Out of Debt | 5 Steps to Be Debt-Free
• What Debt Should You Pay Off or Pay Down First?

Final Thought

If you’ve been living beyond your means for a long time, it’s going to take you living below your means for a while to pay off all of the money that you borrowed.