10 Warning Signs that You are Living Beyond Your Means

To live beyond your means simply means that you are spending more than what you can afford. Statistics show that a great majority of employees nowadays are living from paycheck to paycheck without any kind of financial cushion. While we all deserve to spend our hard earned income, spending beyond our earnings and racking up debt in the process is a recipe for financial disaster.

To live beyond your means is to spend more than you earn.

It is quite easy to fall prey in this age of consumerism. A wide range of consumer goods are available everywhere from the malls to the supermarkets and even online stores. With heavy promotion by the media coupled with the support of the banking system through their generous credits to consumers; living beyond your means is so easy to do these days.


Source:   thecliftonsmith


The FOMO (fear of missing out) and YOLO (you only live once) mentalities brought about by social media only made matters worse. These mentalities have become the new norm that they have dictated the spending habits of many. While it gives you satisfaction in the present, it gives disservice to your future well-being.

Before it is too late, here are some key indicators that you are living beyond your means and it is time to scale back on your spending immediately:

1. More than 15% of your Income Goes to your Car

Have you heard of the 20/4/10 Rule?  The 20/4/10 Rule keeps your finances in check when it comes to purchasing a car. The rule says if you are going to buy a car, make at least a 20% downpayment. In addition, the terms of payment should not exceed 4 years and that your monthly amortization should not exceed 10% of your monthly earnings. If you cannot follow these rule, it simply means you are buying a car that you simply cannot afford.

20/4/10 Rule in Auto Loan: 20% Downpayment, 4 years Maximum Term, 10% of Income Limit for Monthly Amortization

If you add up all other transportation expenses like fuel, maintenance costs, insurance and your monthly amortization; the total should not exceed more than 15% of your income. If your monthly transportation expense goes beyond that, you are simply living beyond your means.

2. More than 30% of your Income Goes to your House

Housing is the largest expense of most households. Most people dream of a big nice house thinking that they are buying an asset. However, most people don’t realize that their  primary home is no longer considered an asset but rather a liability.

Unless you have a way of lowering your monthly expenses on other parts of your budget, you will find yourself in the poverty cycle if you are spending more than 30% of your income on your house. The allure of a bigger and better house will become a financial problem.

Now, calculate what percentage of your monthly income goes to your housing expenses. Housing expenses include your monthly amortization, real estate property taxes, association dues, house insurance, maintenance costs and utilities. If the amount exceeds more than 30% of your monthly income, you will be much better off finding a less lavish home that will fit your budget.

3. Overdue Notices Fill Up your Mailbox

If you have been receiving late payment, overdue and disconnection notices, or worse you find your utilities constantly disconnected; then that’s clear sign that you are living way above your means. Your monthly budget should include payments for bills and utilities. If you can’t pay for them then it is time to reevaluate which ones are necessities and which ones you are better off without like cable subscription for example.

4. You Borrow Money from Others

If you find yourself borrowing money from friends and relatives or take out personal loans to pay your bills then that is a clear sign that you cannot afford your current lifestyle.  Ideally, your income should be enough to cover your day-to-day expenses.

5. You Constantly Worry About Money

You are constantly worried about money, even with small expenses. You have been having sleepless nights. You get into strenuous discussions and arguments with your spouse. Your health is already affected.

It is normal to worry about your finances every now and then but if you are constantly experiencing these things on a daily basis. Then, it is so obvious that you have money problems.

6. You have No Savings / Emergency Fund 

No matter how much you earn, you still find yourself struggling making ends meet. You live on paycheck to paycheck. There is no money left each month for savings. You have no emergency fund.

Your total savings should be at least six months worth of your monthly expenses.

Savings are needed for future use.  An emergency fund is for unexpected and unfortunate events like unemployment, illness, disability or simply for car repair purposes. Ideally, your family should have enough money saved to cover at least six months worth of your living expenses.

7. You have Rising Credit Card Balances

If you are one of those people who only pays the minimum amount due on your credit card balance every month, then that’s a sign that you are living beyond your means.

Ideally, you should only charge what you can pay off at the end of each billing cycle. Unfortunately, many people have severe problems with credit card usage. If you don’t pay the total amount due on or before your due date, your outstanding balance will charge additional interest rates and fees, and these are carried over every month causing your debt to balloon month after month.

Click here for some tips on how to get out of credit card debt.

8. You Never Set A Budget

If I ask you questions about your budget like how much do you spend on food each month and you have no idea what the answer is, then you have a problem. A written budget is one of the first and most important steps towards financial freedom. How will you know if you are living within your means if you have no idea where your money is going?

Having a plan and keeping a journal can prevent money leaks and help you live within your means. Make a plan and start a budget now.

 9. You Run Out of Money Before your Next Paycheck

Do you find yourself short of cash long before the next payday?  If you do, then that is another sure indicator that you need to downgrade your lifestyle.  Your paycheck should be enough to cover your expenses for the period.

10. You Shop / Vacation on Credit

Credit is good when used wisely. It is very convenient because you don’t need to pay in cash for the total cost of an item or service right away. It is fine to avail of zero percent installment offers just as long as you are sure that there are no hidden charges. The rule of thumb is that your payment terms should not exceed the total life span of the item that you are buying.

Credit card payment terms should not exceed the life span of the item you are buying.

It is a whole different thing for trip purchases. Yes, you can go on that well-deserved vacation only if you have saved enough for it. Make a plan to save money for that dream vacation.


Save money for your dream vacation.


You can use your credit card for protection. Like for example, some credit card offers free travel insurance if you book using their card. All other vacation expenses should be paid in cash. You can also use your credit card during vacation but for emergency purposes only.

If you are one of those people who loves taking vacation all on credit, then you are living beyond your means.

If you score at least four and above, then take it as a warning sign that you are living beyond your means. You have two options, either you increase your income or downgrade your lifestyle.  But whatever your choice is, it is best that you start learning financial literacy now to avoid finding yourself in the same situation later on.




One thought on “10 Warning Signs that You are Living Beyond Your Means

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s