It is very easy to live beyond your means with easily available credit cards, loans and the ever-growing social pressures thanks to the Internet.
Living beyond your means in simple terms is spending more than what you are earning. Doing this month after month can rack up some serious debt. Credit cards and loans have become the norm and is often being misused to buy things that you don't really need, to live a lifestyle that you can't really afford. Social pressures and the fear of missing out are very commonly the reasons behind this. Here are 7 warning signs that you should look out for to ensure you live a lifestyle within your means - 1. You have no emergency funds. Setting aside money each month to meet your financial emergencies of the future is an important part of being financially independent. If you find yourself with little to no savings for an emergency fund, you could be facing a crisis in terms of a financial emergency. The future is unpredictable and living only for the present will definitely cost you in the future. Related - How to create an emergency fund! 2. You are not saving at least 10% of your income in hand. Only when you save a part of your income can you set aside money for a rainy day. At any point of time, your aim should be to have enough savings set aside to cover six to nine months of living expenses. Cut back on things that you spend on in the short term, to be financially independent over the long term. Looking for ways to save more money? Click here. 3. You are borrowing from friends or taking out loans to pay bills. If you are taking on more debt to pay existing debt, you are only putting yourselves deeper into a debt trap. Not to forget the interest that you would be required to pay on the loans as well. The problem, however, might also lie with the choices that you have made. For example, you could be paying too much on rent living in an area that you can't afford. Or you could be buying a new phone on a fixed 2 year plan when your current phone works perfectly fine. 4. You are leasing a car you cannot afford. A major financial red flag is leasing a vehicle you cannot afford to buy outright. If you can’t own it, don’t lease it. Also, If your lease payment leaves no room for savings or other essentials, you are only renting a temporary lifestyle that may end up with you spending way more than what you would have if you outrightly purchased the car. Alternatively, you could save even more by opting for a cheaper mode of transportation, if available and help in contributing towards a greener environment.
5. You are carrying a balance each month on your credit cards. Credit cards are useful for building credit, earning reward points, cashbacks and can help you out in an emergency. These are the incentives credit card companies offer you as well. However, it is very easy to misuse them and buy things that you don't need. If you are unable to pay your credit card bills in full at the end of the month, you are spending more than you can afford. You then, get hit with interest rates and the debt just piles up. Related - 7 unhealthy habits that are costing you money! 6. You are afraid your friends will judge you. Your financial constraints prevent you from having that expensive night out but you do it anyway for fear of missing out on social events with friends. Apart from this, many others buy things to post on social media and seek validation. You may feel the need to keep up with what your friends are doing and buying. This is what gets you to overspend, start bad money habits, and put you in unnecessary debt. 7. You have never set a budget. Having a budget is one of the best ways in making sure of living within your means. You can have a budget written down or set up in an expense-tracking app on your phone. Take into account your income, expenditure and savings goals. Not having a budget will more than likely lead you to overspend, cause you a great deal of stress and even guilt. Related - The 50/30/20 rule when it comes to Budgeting!
The Ultimate Guide To Getting Your Finances Back On Track is a book that aims to help the user in being smarter about their finances. This guide contains seven sections - Financial Goals, Expenses, Savings, Income, Loans & Debts, Budgeting, and Investments. Each of these sections explains everything you need to know about Personal Finance in simple terms. By the end of this book, you will have learned the fundamental principles that will help you in maximizing your income, decreasing your expenses and increasing your savings that will overall kickstart your process of truly building wealth.
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