Warning Signs That Consumers Are Living Beyond Their Means

In American society, consumers hold a lot of debt. It’s common for people to wind up living beyond their means, spending more money than they are taking in. Unfortunately, this all-too-common spending habit can place people in a difficult situation.

Overspending has become normalized but that doesn’t mean it isn’t dangerous. Overlooking financial dancers and neglecting long-term goals can be deeply problematic. Read on to find out about a few of the most common signs that consumers are living beyond their means to avoid this issue.

Living Paycheck to Paycheck

People who make enough money to cover their basic living expenses but still live paycheck to paycheck might want to take a step back and start tracking their expenses. There may be ways they can cut back to start saving more for emergencies and eventual retirement. Visit King Of Kash to get more advice about how to keep track of living expenses and cut back on unnecessary spending.

No Emergency Fund

Everyone should have an emergency fund. Experts recommend having enough money put aside for a rainy day to cover at least three to six months of living expenses, or sometimes more. However, most people have little to no money saved aside for emergencies.

People who haven’t started saving yet don’t need to get overwhelmed. There’s no need to put everything aside all at once. Start by trying to sock away 5-10 percent, and keep things consistent. After about a year, almost anyone can have a small rainy-day fund that will cover basic necessities should an emergency come up or a job fall through.

No Retirement Savings

Just like every American should have some money put aside in an emergency fund, every worker should also be saving for retirement. For some families, there’s already little enough to go around.

It makes sense that parents can’t save for retirement while simultaneously ensuring that their children have stable housing and enough food to eat if they aren’t working well-paid jobs. There’s also a class of over spenders that prioritizes immediate gratification over retirement savings, though, and they’re the ones who are typically living beyond their means. Before upgrading to the latest iPhone or luxury vehicle, or planning the second expensive vacation of the year, workers should put aside as much as they can for retirement.

Constant Worry About Paying Bills

People who are working full-time but constantly stressing out about how to pay bills often find themselves in this position because they are living beyond their means. Again, this warning sign is only applicable to those who make enough money to pay for basic living expenses but spend too much of it on discretionary purchases. Reducing discretionary spending and setting aside money from each paycheck to go towards paying bills can make a big difference when it comes to keeping those financial woes at bay.

Making Minimum Payments on Credit Cards

Most Americans have credit cards, but not all of them use their personal lines of credit responsibly. People who can only afford to make minimum payments each month wind up racking up tons of debt and often find themselves unable to catch up. Debtors who find themselves constantly making huge, unnecessary purchases on their credit cards that take months to pay off should slow down their spending so they can prioritize financial stability.

No Way to Tell Where the Money Is Going

People who overspend often do so almost compulsively, with little to no attention to where all that money is going. They can benefit substantially from learning how to budget money and keep track of personal finances. Knowing how all that hard-earned cash is getting spent is the first step toward identifying and eliminating unnecessary expenses and saving more for things that really matter.

Paying too Much for Housing

First-time homebuyers and renters moving to new cities or states often find themselves biting off more than they can chew when it comes to housing costs. Homeowners should try to spend no more than 30-35% of their gross income on mortgage payments, and renters should cap their housing costs below 40% of their income.

Housing costs are higher in some places than in others. There’s usually no need to move out of state to find more affordable options. Living with a significant other or a roommate to split the bills can help.

Credit Scores Are Taking a Hit

Having a good credit score is incredibly important. It determines how much purchasing or borrowing power consumers have when they want to make big purchases and impacts the interest rates they get when they take out loans. If a consumer’s credit score is dropping dramatically, that’s a warning sign that can’t be ignored.

There are multiple factors that affect credit scores. Taking on exorbitant debt or failing to pay bills on time are the two primary culprits behind plummeting scores. Request a credit report, see why it’s dropping, and take the time to fix the situation now. In most cases, setting a budget and paying bills on time is enough to send falling credit scores back up, though in others consumers may need to work with credit repair companies.

Keeping Up With the Joneses

Just about everyone in America has heard the phrase “keeping up with the Joneses.” It refers to spending too much money to give the appearance of a lavish lifestyle that matches that of neighbors, friends, or others in a consumer’s social circle. This form of overspending has always been a problem, but social media has made it even worse by exacerbating people’s fear of missing out.

When people find themselves comparing their financial situations to others, they should try to remember a few key things:

  • Worrying about what other people think doesn’t make anyone happier.
  • It’s always better to ignore others and stay focused on personal goals.

The Joneses might be struggling just as much financially and be just as compelled by feelings of needing to prove something.

The Bottom Line

The only way for those living beyond their means to start saving money and becoming financially stable is to identify and curb overspending. Every debtor’s situation is a little different, so there’s no one-size-fits-all solution to getting personal finances under control. However, identifying the problem is always a good place to start.