7 Signs You’re Living Beyond Your Means & How To Fix Them

In the age of plastic spending and mobile payments, it’s easier than ever to buy stuff you can’t pay for right away, or in other words - supporting a lifestyle you can’t really afford.

Let’s take a look at seven red flags that might mean 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 from 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. It’s a lot harder to feel like you’re spending money when all that stands between you and a purchase is a plastic card.

If you have an outstanding balance on one or more credit cards and you’re only paying the minimum payment each month, you can end up carrying this balance for years while paying hundreds of dollars (or more!) in interest. You might also be tempted to make more purchases on this card since you already have an open balance.

The Fix: Try to double down on your monthly payments and/or make one extra payment each month instead of paying just the minimum amount. If that doesn’t seem feasible, consider lowering your payments by transferring the balance to a low rate card or consolidating the debt with a personal loan. Alternatively, you can always put a block on your card or simply stop using it until the debt is paid off.

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.

The Fix: Take a long look at your monthly budget to find ways of cutting back. Cancel a subscription you never use, trim impulse purchases, start brown-bagging it at work more often or 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 sock away 5% of your monthly take-home pay to fund your retirement and any other expensive purchases or events you might need to pay for in the future. If you can’t possibly do that now, and you’re left with little or no money at the end of the month, you’re living beyond your means. Savings aren’t an extra; they are a necessity that should be a fixed part of every budget.

The Fix: Start by restructuring your budget to follow this line of thinking – Earn, Save, Spend. Make a commitment to save 5% of each paycheck and then trim other expenses to keep yourself on track.

4. You Don’t Have Emergency and Rainy-day Funds

Unexpected expenses, like a household repair or extra tutoring for your child, can disrupt your monthly budget and really set you back — unless you have some way to pay for them. Ideally, you’ll want to have an emergency fund to cover major unexpected expenses, like a job loss or a medical emergency, and a rainy-day fund for small expenses you can anticipate, like replacing an aging appliance and sending your child to summer camp.

The Fix: Start building your funds now by putting away as much as you possibly can each month. At HVCU, you can even open a second savings account just for this purpose. We even give you the option to customize the name of your account to let’s say, “Jen’s Rainy Day Fund,” as a fun little reminder as to why you’re saving.

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 (that’s after taxes). Take a few minutes to do the math. If your mortgage is more than 30% of your income, you’re in over your head.

The Fix: You have two choices here – increase your income or refinance the debt

Find ways to boost your income. You can seek a raise or promotion at your current job, freelance for hire or find another side hustle to bring home extra cash. Or you could consider a refinancing your mortgage.

Speak to a Mortgage Loan Officer at Hudson Valley CU to see if this is the right choice for you. If your mortgage is really crippling your budget, you might even want to consider downsizing to a smaller, more affordable place.

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 either. 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.

Can you afford to pay for or finance your car? If the answer is no, you’re in financial trouble.

The Fix: Downgrade your vehicle to one you can actually afford.

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 the Joneses 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.

The Fix: Stop looking over your shoulder and keep your eyes on your own life and your own wallet. If your friends have expensive tastes, try to be the budget-conscious influence in the group. You may just start a new, financially responsible trend!

If you’re in over your head, Hudson Valley CU can help! Stop by today. Our Financial Service Representatives are happy to help.