Living above your means is a classic money mistake that’s all too easy to fall into. Whether you’re spending more than your budget allows, or you’re not setting enough aside to pay for the essential bills, it’s hard to see exactly where the problem began once you finally notice it.
These harmful money habits tend to sneak up, which is why we’ve created this list of 15 signs you’re living above your means — complete with our best advice for getting back on track and protecting your finances. Worried you might be setting yourself up for some bad financial surprises? Keep reading to find out.
1. You’re only making minimum payments on credit cards
One sure sign you’re living above your means is only being able to afford to make minimum payments on your credit cards. Racking up credit card debt is never a good thing, but especially if you’re doing it at a rate that makes catching up impossible. Although the occasional big purchase on your credit cards is fine, if you find yourself constantly buying things that take months to pay off, it’s probably a good idea to slow down and reel in your budget.
2. You’re using your credit card to pay for vacation
Speaking of using your credit card to pay for impossibly large purchases, using it to cover your vacation costs without paying it off is another sure sign you’re living above your means. Because most vacations will cost far above any paycheck, paying for them using a credit card is a dangerous gamble that could cost you dearly in interest payments.
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Instead, consider setting aside a small amount of money in a savings account each month. The best savings accounts offer a higher-than-average annual percentage yield, which can help you earn a little extra in interest. By making regular small deposits, you’ll be able to watch your travel fund grow into something that can easily finance your next dream destination.
3. Your savings account isn’t growing
Another sure sign you might be overspending is when your savings starts to stagnate. Making regular deposits into your various savings accounts is important, not only for the peace of mind it brings, but also in the event that you need to tap into your savings to cover an unexpected cost. Instead of constantly shopping for all your latest wishlist items, consider redirecting some of that spending to make sure you’re saving up enough to be financially secure.
4. You’ve stopped your retirement contributions
Unfortunately, it’s all too common to start neglecting your retirement funds whenever money is tight. But unless you plan on working the rest of your life, planning for retirement should be at the top of your list when it comes to how you allocate your income. One thing that can be helpful for getting back on track is coming up with a budget. Budgeting doesn’t mean depriving yourself of everything, but rather finding a smarter way of spending that still allows for reaching your financial goals.
5. You’re living paycheck to paycheck
Nobody likes living paycheck to paycheck, and yet we’ve all been there at least once. Barely scraping by on your expenses between paychecks is a sure sign you’re living above your means, and that you should consider revising where your money is going and how quickly. Skip the drama of not knowing whether you’ll be able to pay for your essentials by trying out a simple envelope budgeting method — a classic style of budgeting that ensures your most important expenses get paid for first.
6. Your money is gone, but you don’t know where
Another stressful money situation to be in (and a clear sign of overspending) is when your checking account seems to continuously turn up lower than you expected — as in, the money’s been spent but you don’t know how. One way to get around this is by using a budgeting app such as Clarity or Truebill. This app will not only help you keep track of where your money goes, but also offer helpful tips for cutting expenses and saving more toward the things that matter.
7. Your debt balance remains the same
As with your various savings accounts, when your debt balances stay the same for too long, it’s a sure sign you’re living above your means. Because unpaid debts are likely costing you in accumulated interest, delaying your payments is never a good idea. Rather than avoiding your debts, try to put a cap on how much debt you’re accumulating, then make a plan to start paying them back little by little each month. There are different approaches you can take to get out of debt, including the debt avalanche and debt snowball methods.
8. Making your monthly payments is a struggle
Bills, loans, mortgages — all of these things demand monthly payments, and if you’ve recently started falling behind, it could be time to rethink how your income is being spent. One solution is the Mvelopes app. Much like the envelope budgeting method mentioned above, this system of saving has you put aside enough money to cover your major expenses immediately after getting paid — that way, you never have to worry about being able to afford your monthly bills again.
9. You’re seriously considering a high-interest loan
High-interest loans like payday loans are a risky financial move for anyone, but especially if you’re already struggling to make ends meet. Rather than jumping right in and signing on the first loan you’re offered, take a minute to consider your options. Ask yourself why you need to take out a loan in the first place, and if there’s an alternative to the funds you need. For instance, picking up a side hustle could be a good option if you have room in your schedule. Revisiting your budget will also likely be important if you find yourself in this position.
10. You’re buying things you can’t afford to pay for upfront
Much like maxing out your credit card balance every month, buying things you can’t afford to pay for is bad news when it comes to the health of your finances. For some, buying things out of budget might be a necessity. If that’s the case, try and find a way to regularly set aside some of your income to pay for those things. If it’s just a matter of splurging on expensive wishlist items, just remember: there’s no way anything you buy will make you as happy as a well-earned sense of financial security.
11. You justify unnecessary spending
Another story so many of us tell ourselves is that we really need this new phone or that new thing for the house or a nice new dress to be happy — when in fact, we really don’t. Retail therapy (and the addictive spending behavior that comes with it) is a real problem, and it all starts with justifying unnecessary spending. Rather than continuing to come up with reasons to buy things, try and switch your mindset to start a savings habit. For this, it helps to come up with some clear financial goals and have a way to regularly track your progress. When you do so, you can change the question from “why do I need this?” to “would I rather have this or that important thing I’m saving up for?”
12. You’re avoiding your bills
Although they might seem like they’re hiding in that big pile of mail, the fact is that your bills aren’t going anywhere, and avoiding them will only make things worse. Instead of pretending they don’t exist, come up with a plan to conquer your bills. This might include things like renegotiating the monthly cost of your bills, or even coming up with a simple solution for lowering those bills. Whatever it is, start taking baby steps toward paying them off — we promise, the peace of mind will be worth the expense.
13. You’re receiving collection calls
When things go unpaid, the collection agencies start calling. This is a sure sign not only that you’re living above your means, but also that you may need to rethink how you manage your money. The first step here is to figure out what the collection agencies are calling about, and if you can afford to pay it back straight away. If not, you may need to negotiate something called a collection agency payment plan. Either way, don’t waste any time ignoring these calls, especially because the damage of unpaid debts could far outweigh the cost of repaying them.
14. Your credit score has taken a hit
After several months of taking on debt or neglecting to pay your bills on time, you can expect to see your credit score to take a pretty big hit. Again, don’t underestimate the power of a good credit score, as this number often determines your buying or borrowing power when it comes to things like big purchases (a home or car), loans, and even new credit cards. Take the time to find out why your credit score has dropped, then take the necessary steps to fix it. This could be as simple as getting a handle on your budget and ensuring you make your monthly payments on time, or as complicated as working with a credit repair company. The right option for you will depend on your financial situation.
15. You’re losing sleep over money
Whether it’s the stress of unpaid bills or just living paycheck to paycheck, your financial health will often affect your physical well-being as well. Although we often take the time to address our personal self-care, we easily forget about the importance of financial self-care. Fortunately, you have the power to change that. Take a hard look at your finances so you can pinpoint where the problems are. Then get on a path to fixing them, and make a promise to yourself to practice better financial self-care.
The bottom line
Living beyond your means is an all too common problem, and whenever you find yourself in this situation, it’s important to do the work to fix it. Although a few weeks or months might pass without issue, overspending will always catch up in the form of neglected savings accounts and unpaid debts. Don’t let yourself become a victim of overspending. Instead, work on setting a budget you can reliably stick to — one that allows for paying your bills, working toward your financial goals, and still splurging every once in a while on the fun stuff.
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