7 warning signs that you're living beyond your means

Do you ever feel like no matter how much money you earn, you're always living paycheck to paycheck? If so, there's a strong chance your lifestyle isn't one you can actually afford.

Here are seven warning signs that you’re living beyond your means, and the steps you can take to get back on track.

1. You’re carrying a credit card balance month-to-month 

Credit cards are a great way to earn rewards, pay for emergency purchases when things are extra-tight and build a strong credit history. Unfortunately, they also make it far too easy to fall into the spending trap. In fact, 41% of Americans are currently digging themselves out of credit card debt⁠ — with 7% doubting they’ll pay it off in their lifetime.

If you have an outstanding balance on one or more credit cards and you’re only paying the minimum payment each month, you may end up carrying this balance for years while paying hundreds of dollars (or more!) in interest.

How to fix it: Luckily, there are many ways to escape your growing credit card debt. For starters, try to doubling down on your monthly payments or pay more than the minimum amount. If you're drowning in interest fees, consider consolidating your debt or transferring your balance to a 0% APR credit card.

2. You stress about paying your bills 

No one likes paying bills, but if you’re losing sleep over your bills, you need to take a step back to review your monthly budget and spending habits. Bills should be fixed into your budget and you should be able to pay them easily without any stress or nail-biting involved.

How to fix it: Take a long look at your monthly budget to find ways of cutting back. Cancel subscriptions you never use, trim impulse purchases and tighten the belt in any other way possible.

3. You can’t save 5% of your monthly income 

Financial experts recommend putting 20% of your monthly income into savings, or even more if you can swing it. At the very least, you’ll want to stash away 5% of your monthly take-home pay to fund your retirement and other big-ticket financial goals. If doing this leaves you with little or no money at the end of the month, you’re living beyond your means. Savings aren’t lagniappe — they're a necessity that should be fixed into your budget.

How to fix it: If moving money into your savings account puts you in a financial bind, fix the problem by trimming  expenses and restructuring your budget to include a minimum of 5% for savings. You can start by taking a hard look at habits that cost you way more than you realize.

4. You don’t have emergency and rainy-day funds 

You’ve heard the old adage “what can go wrong, will go wrong.” Unexpected expenses, like car damage, medical bills or your AC going out in the middle of summer, can absolutely destroy your monthly budget. If you're constantly spending more than you earn, you're gambling on the assumption that nothing will go wrong. Having an optimistic outlook is great, but the reality is that emergencies can’t always be avoided. Having at least $1,000 of emergency cash set aside can help take the financial sting out of having to pay for unwelcome emergencies.

How to fix it: Start building your funds now by putting away as much as you possibly can each month. Take it a step further by opening multiple savings accounts through your credit union or bank. It's a guaranteed game changer.

5. Your mortgage payment eats up more than 30% of your monthly income 

Most financial experts agree that your monthly mortgage payments should not exceed 30% of your take-home pay (after taxes). Take a few minutes to do the math. If your mortgage is more than 30% of your income, you may be in over your head.

How to fix it (option 1): Look for ways to boost your income. Seek a raise or promotion at your current job, freelance for hire or find a side hustle to bring home extra cash. Research shows that switching jobs is the quickest way to boost your salary.

How to fix it (option 2): Alternatively, you can scale back your mortgage payments by considering a refinance. Many homeowners refinance their mortgage to secure a lower interest rate. Crunch the numbers carefully and see what you have to gain from refinancing. If you can reduce your interest rate by at least 2%, then it’s worth it.

6. You lease a car you can’t afford to buy or finance 

Leasing lets you live the life of a high-roller without the huge bills. The problem is that many people can’t really afford their leases. You might be covering your monthly payments, but if you can’t do that while also putting money into savings and meeting your other expenses, your car is too expensive.

How to fix it: Downgrade your vehicle to one you can actually afford, or take advantage of the excellent auto loan rates offered by your credit union. 

7. Your financial decisions are influenced by your friends’ spending habits 

Thanks to social media and the hyper-sharing culture it introduced, the pressure to keep up with your rich friends is stronger than ever. If you find yourself making financial decisions — from what kind of footwear to buy to where you vacation — based on your friends’ choices, you’re likely spending more money than you can afford.

How to fix it: If you find yourself constantly wondering how much money your friends have, our top-viewed article, fighting the urge to keep up with your rich friends, might help to change your mindset. Ultimately, its better to focus on your own financial goals, not the spending of others. One person's wealth doesn't make you poor. The next time you feel the creeping feeling of jealousy, remind yourself that there is plenty of money and success to go around.

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