Stop Living Beyond Your Means! | TOP 7 Issues

Stop Living Beyond Your Means
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Have you ever found yourself in a situation where you’re stressing about money week after week and can’t figure out why? Well, the simple answer is: you’re living beyond your means. And the simple solution is to stop living beyond your means.

But that’s a lot easier said than done, and it’s a very broad statement. Unfortunately, the majority of America does not seem to understand how much of an issue this is. So let’s take a look at some statistics.

According to a survey in October 2020 of 2,000 Americans, more than 2/3 of Americans are living paycheck to paycheck, and that number only continues to rise. This is a strong sign that most Americans need to take a step back and pay attention to this financial epidemic.

data about paycheck to paycheck

The best way to attack this issue is first to be aware of what we’re doing that’s causing the issue. Living beyond your means is the start of a downhill domino effect into a paycheck-to-paycheck life.

So how do you stop living beyond your means? It seems like something that’s a lot easier said than done. In order to put this in an attainable perspective, I have outlined the top 7 common issues that people who live beyond their means experience.

Not Having an Emergency Fund

Your emergency fund is the foundation of your financial freedom. If all else (job, investments, properties, etc.) goes downhill and no longer produces you any more income, your emergency fund is there to make sure that you don’t dig yourself further down into a hole.

It’ll take care of your mandatory expenses for a period of time until you pick yourself back up and get some steady income coming in again.

Ideally, your emergency fund should be enough to cover 3 to 6 months of mandatory expenses. By having this, you won’t be taking out loans and getting into more debt when a financial emergency arises.

If you are spending your money on unnecessary items or several nights out instead of saving some money toward an emergency fund, you are putting yourself into unnecessary financial danger.

Carrying Balances on Credit Cards

woman with credit card debtWhile I’m a big fan of credit cards, I am not a fan of irresponsible credit card use. Credit cards should be used responsibly so that you can reap the benefits of points, cash back, miles, and more. They are a tool to help you build wealth.

However, you can’t build wealth if you’re digging yourself into credit card debt. All because you’re letting your balances carry over month after month. What’s worse, the majority of credit cards compound your interest on a daily basis. This means that your interest is added to your principal (original) balance at the end of every day.

Letting these balances carry over can lead to excessive charges from your credit card issuer. If you’re in this situation, pay them off and get rid of them immediately before you dig yourself further in the hole!

Not Saving at Least 15% of Your Income

Having money saved up is as crucial as having income coming in. Saving as much of your money as possible for certain goals is vital, but a general rule of thumb by several CFPs is to save at least 15% of your income. 10% for retirement, and 5% for specific goals (emergency funds, a home downpayment, etc).

Keep in mind, this is a general rule of thumb, I’m all about making personal finance as PERSONAL as it can be. So depending on your goals, you may have a different saving requirement that needs a little more contributions. This rule of 15% is not a one-size-fits-all.

However, if you aren’t even saving the minimum, then you’re putting yourself into unnecessary financial danger. Your first saving objective should be your emergency fund, once you get that where it needs to be in funds, you can focus on other savings goals.

Remember, putting things into one-by-one steps will make everything a lot easier than overwhelming yourself with countless goals that spread you out too thin.

Loans & Borrowing from Relatives

This ties in with credit cards a bit but focuses on a broader view of borrowing money.

Asking to borrow from a relative like mom and dad might be helpful for short-term concerns. But if you find yourself continuously doing this, it might be a pointer that your lifestyle is not affordable to your means. Meaning that you are living beyond your means.

The necessity of taking other loans, such as payday loans, might also be a huge indicator that you’re not living below your means. Payday loans are one of the worst financial decisions you can make.

According to The Pew Charitable Trusts: “The average payday loan requires a lump-sum repayment of $430 on the next payday, consuming 36 percent of an average borrower’s gross paycheck. However, research shows that most borrowers can afford no more than 5 percent while still covering basic expenses”. Payday loans are simply not affordable.

In the end, it’s really as simple as this: if your lifestyle requires you to borrow money in order to afford it, then you need to reevaluate your expenses. Put yourself in a position where you can afford everything with your own income. In other words, stop living beyond your means.

Cashing Out Retirement Accounts

Retirement funds are specifically for what their name implies: retirement. If you’re taking out money from your retirement account, you run the risk of paying a penalty for taking that money out early, depending on the type of retirement account it is. You also miss out on the leverage of compound interest.

If you need to take out money from your retirement accounts to afford your life, or you simply can’t afford to contribute to a retirement account because of lifestyle expenses, then this is another sign that you are living beyond your means.

Retirement money is for retirement. Not your spontaneous vacation, not for your emergencies (that’s what your emergency fund is for), not for your poor Christmas planning, or for anything else except retirement.

Overdue Bills

This one is probably pretty obvious but you’d be surprised how common this is in America. Nothing says, “stop living beyond your means” like overdue bills do.

A mailbox and voicemail box full of overdue bill notices is not only an indicator of poor money management. It is also a painful source of stress that does nothing else but make your life distasteful.

If you constantly have notices of overdue bills, then it’s time to look at your budget (or start one), and cut back on expenses that simply don’t need to be there.

You know very well that you have some guilty pleasure(s) that you waste your money on. Start cutting them off, at least temporarily, until you can catch up on your bills and find a smarter way to put those guilty pleasures on your budget.

Minimum Payments on Debt

I know that credit cards give this option, but it’s always best not to take it. If you’re in a situation where you cannot afford to make more than the minimum payments on your debt, then it’s another big sign that you’re living beyond your means.

Paying off more than the minimum on your debt will enable you to pay off your debt much more quickly. The objective is to be completely out of debt, so why are you making the least amount of payments and slowing yourself down to that goal? Let’s get those debts paid off ASAP by lowering our cost of living.

Final Words

I know that sometimes, as individuals, we may consider unnecessary things as a “mandatory expense”. But this is a point where you have to sit down and reconsider your priorities. Is your Netflix really a priority when you can hardly afford this month’s rent?

Or is that PS5 really worth the grocery list that you need to have next week to eat? Or what’s the point of that monthly gym membership if you’re only going to the gym twice a month?

Your priorities are your food, shelter, and transportation. If you cannot (or can barely) afford those, then you need to cut back on other expenses or find ways to make more money so that you can afford the lifestyle you want.

It’s easier said than done, but making extra money is not as hard as it might seem. I’ve made a list of easy online side-hustles that you can get into to start making extra money.

If online side-hustles aren’t your thing, go ask your neighbor if they need their lawn mowed or their snow shoveled. If you’re creative enough, there are endless ways to make extra money.

If you have any personal experiences or questions for me, please feel free to leave them down in the section below! I always respond to each of you!


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36 Comments

  1. Any time I see articles or videos going over this topic I find it a bit irksome so I’ll try to share an alternate viewpoint here. Not that any of your points are incorrect, but they all are centered around the fact that an individual has extra money to begin with. Cost of living is much, much higher than what most people make in a month. When you make just barely enough to pay your bills every single month, there’s usually not anything leftover to save. These points would be seen in a less antagonistic light if wages actually matched or exceeded the cost of living. Then all of them would very much be doable.

    1. Rachel, thank you so much for your feedback and for the food-for-thought! 

      Yes, if we are talking about minimum wages as well as those wages that are not much above minimum wage, then we should take into consideration that the amount of money being made may not be enough to cover the cost of living with basic necessities, even if they are cutting out all the needless spending. For people who are under these circumstances, I can suggest three courses of action that, although they aren’t easy, they are doable:

      1. Find a way to cover their basic expenses with outside income: find a roommate, move back in with their parents

      2. Find a way to make more money: There are a number of options through which you can make extra money. (Picking up a second job, Side-hustle online, or offline like mowing lawns, plasma donations, etc.). This will also keep you away from spending money on things you don’t need if you get bored when you have free time.

      3. Learn new skills to up your pay: there are free and paid courses online to help you attain skills for jobs that are becoming higher in demand and thus, paying more than minimum wage. Due to technological advances, most minimum wage jobs don’t have much life left, so it’s essential that our generation starts learning and applying new skills that are in demand by the market. Some of these skills could even transcend into starting your own business in that specialty.

      These aren’t easy options, but if they were, people would always look at them when facing an issue like the rising cost of living expenses. Since they’re tough, people tend to look in other directions, when in fact, there aren’t many other options in other directions. 

      As I continue to grow this site, I will provide articles to give options to people on how to make some extra money. My objective with this site is to help everyone (low to high income) be better with money and become wealthier than they currently are. 

      Aside from those who make minimum wage or around that much, most people who make decent money have the same problem of not being able to afford their own life. They blame it on the rising cost of living too, but the reality is that they are simply getting themselves into lifestyle inflation. It’s important to realize that we’re doing this and cut back on our expenses when this happens

  2. This is an excellent post and one which everyone should be forced to read.  This should be mandatory teaching in school!

    Until a few years ago I was constant debt.  Credit cards being my biggest concern.  It stressed me out continuously.

    I therefore think that by giving this sound advise you have the potential of bringing peace and happiness to a lot of people.

    Keep up the good work.

    1. Haha well, I wouldn’t FORCE anyone to read this 😂 But it would help people a lot! I’m so glad you found value in this though! Thank you for your feedback!

  3. I actually had no idea that the statistics were so grim. I mean, it truly seems like an absolute epidemic, one that is even more prominent than the current Covid crisis.

    I genuinely enjoyed the tips you shared. I absolutely loved the first one. I mean, the importance of having an emergency fund is beyond crucial. I feel otherwise one is just kind of always in fear of “what if xyz happens?” Which is definitely not a healthy way to live. Personally, I think 6 months is an absolute minimum. I’ve heard people even promoting the idea of having 12 months of backup which I could also make an argument for. But beyond that, I think it’s probably a bit too overboard with this.

    I also loved the idea of saving at least 15%. Sounds like a comfortable amount. And I definitely agree with the fact that a mailbox full of invoices is a sign of poor money management. Cheers. 🙂

    1. Hello Matiss, thank you for your feedback 🙂 I’m glad this has been valuable to you today! 

  4. You have excellently highlighted these seven issues that affect our living beyond our financial capabilities. At the same time, they are great suggestions of what we can change to improve our situation. I very much agree that it is important to have an emergency fund, that it is advisable to save 10-15 percent of your monthly income, not to buy things we don’t necessarily need, and not to borrow money or take out loans we don’t know if we can pay them out.
    I once heard a statement that if we have to take a loan for something, we can’t afford it at a given moment. And I very much agree with that statement, even though today’s consumer society is geared towards wasting beyond given capabilities.
    Friendly greeting,
    Nina

    1. Today’s society is geared toward immediate gratification. If we learned to control our spending behaviors and learn to delay gratification, we would have a much wealthier society. I appreciate your comment!

  5. Aleksandra Pavlov

    I agree with you. We have to put our priorities first, not our needs. Life is very expensive, and everybody should make an effort when it comes to saving money. You make good points. I personally don’t like borrowing, I abstain from it. I am trying to never be in the negatives when it comes to credit cards. People have to stop playing themselves and try to live the right way. 

    1. Yes! I also wouldn’t be so rough on people haha, we were all brought up a certain way. But now, as adults, it’s our duty to fix the negative side of the way we were brought up 

  6. This is a great article and, as someone who has worked for a financial advisor and as a credit counselor, I will say that you are spot on.  But what to do if a person is already in trouble?  This is the advice I would give:   

    1) Make a budget for the month to figure out how much money you have left at the end of the month to work with.

    2) Call the companies (or people) to whom you owe overdue balances.  Work out a payment plan.  Many companies can go with slightly increased payments for a year or more.

    3) Have all your bills on autopay.  All of them. 

    4) Open a savings account at a different bank than the one you usually use.  This way you can’t easily move money from your savings to your checking.  Do an automatic withdrawal from your paycheck to go into that account.  $5, $10, anything.

    5) Leave your credit cards and debit cards at home unless there is a specific reason to need them, like putting gas in your car.  Consider this.  When was the last time you had an emergency so dire, it couldn’t wait until you went home to get your card?  I can’t think of even one. 

    I hope this helps!

    1. Thank you for these tips! It’s great to have someone else who has had experience in the financial world, it’s very interesting to read the advice you have to offer. Thank you so much, again! 🙂

  7. Wow! I love this article as I can relate this to myself. I used to live beyond my means!  I have realized that it isn’t sustainable and I am still in a process of rectifying my mistakes! 

    I realized around 2 years ago that I wanted  to start building wealth but, exactly as you said, it isn’t possible to build wealth if you are digging yourself into credit card debt!

    I have also started thinking about side-hustles aside my full time job. The list of easy online side-hustles is really helpful!

    1. Thank you for your feedback! I’m so glad to hear that this has been helpful! Good luck on your wealth-building journey, I’m glad that you are moving up and you made that choice two years ago!

  8. This is such an important topic and living beyond your means seem to have become part of so many people’s lives. I think a big part of the problem is that thing of “keeping up with the Jones’s”, combined with the “easy” credit that is continuously being advertised by banks and credit companies. 

    As soon as you start earning money, the pressure is on to get a credit card and spend spend spend, regardless of if you can afford it. Once you start on that slippery slope, it is a downward spiral. 

    The consumerism mindset needs to be changed and money is a topic that should be thought far more in schools. This is a great post.

    1. Yes, you are 100% right! That is a big part of it. The easy access to money from credit institutions has led to an unrealistic notion that we can have anything we want without any consequences. 

      And yes, once you reach the age, credit card institutions start coming after you to apply. We must be smart in how we accept these credit solicitations and parents should set an example for their kids so they don’t fall into these traps as soon as they turn 18. 

      I also think that running away from credit is not the answer, the only time when it’s best to stay as far away from credit as possible is when you have to self-control when it comes to spending money 

      Thank you so much for your feedback 🙂

  9. Hey Misae! Great content here. By living below our means, we can achieve financial freedom. In fact, I believe it’s a necessary condition to be able to achieve financial freedom. Being out of debt enables us to save more money for unexpected expenses or events such as job loss. We learn to live a responsible life!

    1. Yessir, very true!

  10. Thank you for these great tips. I know firsthand how paying a credit card balance with only a minimum amount will result in your suffering for the rest of your life. The interest expense compound greatly and it makes the debt become much heavier. It’s all in the past, so I won’t repeat that same mistake. Also, the personal rule of thumb for saving is useful. However, may I ask if that 15% also includes investment (such as stock or bond investment)? 

    1. Thanks for your feedback 🙂 And, it depends where you’re at in your financial journey. If you currently have no emergency fund at all, that 15% should probably be going to that so you can build that up quick! If you already have one and you’re in a situation where you can start investing, then yes! You can put it in investments like the ones you mentioned. 

      Some people might use it to build a sinking fund, which is a saving that has a specific purpose (such as buying a new house). That 15% can be used for several things, it all just depends where you personally are at this moment

  11. This is most definitely an accurate description of the problem
    many people are facing today. It is true,
    that most people forget the importance the importance
    of having an emergency fund as anything could happen,
    that would hinder your ability to earn money.
    I.e you have a sick relative, you get fired or etc.

    Thank you for this informative article,
    it goes to show the problem with many people today,
    as consumerism is making people less likely
    to save money or do other things that helps
    a frugal and less expensive lifestyle.
    Remember you don’t have to live above your means.
    I have a personal experience with consumerism,
    and that is the fact that impressing other people
    shouldn’t always be done with material means.
    I.e you should be who you are, improve yourself
    and stop worrying about impressing with nice handbags or
    other expensive things.

    Thank you for this article again,
    I most definitely enjoyed it as it raises
    a few important things that should raise awareness for everyone.

    1. Thank you so much for your comment. And honestly, impressing people isn’t something that needs to be done AT ALL, at least in my opinion. The only person you need to prove yourself to is yourself.

      I’m very happy to hear this was a good read. Thanks again for your feedback

  12. I never though of myself as living beyond my means, but boy after reading this I can certainly see that I need to make some changes.  I likes the point of saving 15% of my income.  I do not have an emergency fund, and last time we had a hurricane roll thru and I had to evacuate, I had to rely on my dad for help.  I can easily set 15 to 20% away, so I plan on doing this.  It just means less fun money which is perfectly fine.

    1. I’m very happy to hear that this article was pivotal in a way! I always appreciate feedback like this. I’m glad you’re getting started with at least 15%! Good luck on your financial journey! I’ll be posting more helpful content so stay tuned!

  13. Hi, thank you for sharing a good guide on a very relevant topic these days. It is easy to just take out the credit card and pay for something because it is so convenient. And then you forget it, until the credit card bill “pops up”.

    I think the fear of not being one of the “flock” is a driver to overspending. People do not want to be seen as someone that is not doing the same as everybody else does.

    Further, there is a lot of focus on luxury goods and luxury experiences in all the media channels. it is easy to get “blinded by the light”.

    Your advice to get control over where the money goes as well as creating a budget is central to getting ot grips with overspending. keeping diligent to the budget will help, and as such, rather quickly.

    All the best,

    Roy

    1. Thank you for your comment, Roy 🙂 and yes, I definitely agree with you on this. Keeping a diligent head in the budget will help tremendously help with getting out of the bad situations

  14. I think most people nowadays are guilty of living beyond their means. I mean it is just so easy with all the credit available. When I was growing up my Dad always told me if I can’t pay for something cash, don’t buy it. This of course excluded a house and car, but it makes sense to save and buy something rather than getting instant gratification by buying on credit and then stressing to pay it off.

    Saving 15% is difficult, especially at the moment, but I am definitely going to give my budget an overall after reading this. There is nothing worse than worrying about money all the time, and I want to retire comfortably.

    1. Good luck on that journey! Keep up the hard work on saving some money!

      And on your point of making an exception on a home or a car. I would actually go as far as to argue that a car does not qualify as an exception. Although it’s nice to drive a car that feels neat, the monthly payments (with building credit) are not worth it. 

      It’s not impossible to find an inexpensive car that you can buy in cash and that runs well. I know this because I’ve been able to do that, and others around me have as well. Just make sure to take good care of your car. Taking care of it won’t be as expensive as those monthly car payments on a new car that you took a loan for. 

  15. Hi Misael

    Your article is telling the truth. Many of us, including myself, are living beyond our means. The statistics you have availed are so heart breaking.

    Many of us are so stressed with money issues whereas it is the stress brought on us by ourselves. The 7 common issues that you talked about are spot on. Many of us do not even have emergency funds which is so sad and irresponsible on our side. I have been very much inspired to seat down and reconsider my priorities. your post has been so helpful. Thank you

    1. It makes me VERY happy to hear that! Thank you so much for your feedback 🙂 I’ll continue posting helpful content for you all!

  16. What an excellent and timely article that is truly needed by everyone struggling to manage their money. I remember being one of them many years ago, I cut up my credit cards, paid them off as quickly as possible. I made a list of all my expenses and anything that I spent money on and stopped buying things I wanted and just paid rent, food, and transport while I whittled down my debt. This took about 5 years and then I made a fresh list to live under my means and save money for retirement and an emergency fund, whilst still paying an ongoing mortgage and supporting my parents.

    I’m now comfortably retired and enjoying the fruits of my discipline and hard work. It was really worth it to not be stressing about money all my life. Terrific advice!

    1. Holy crap! That’s a lot to be taking under your belt! Seriously that’s awesome and now you’re enjoying a well-deserved retirement. I’m very happy to hear that 

  17. Those are some shocking statistics, even more knowing that almost half of those who participated in the survey were not living in that situation before the pandemic. This pandemic has made big companies sky-rocket their merchandise leaving those in need with less money in their pocket due to obligations. If there’s one thing I don’t want to do is get myself involved in any credit card situation. As long as I have what I need, not what I want, I think I can manage my expenses within my current situation. I’m taking note of these key-points so I can always go back to them whenever needed.

    1. That’s awesome! I’m glad this has been helpful. And yes, the pandemic has only made those numbers go up!

  18. Hi Misael, awesome post on personal finance. I agree that one of the biggest reasons people feel like they’re poor is because they’re spending way too much and going into debt. I’ve only recently just got my credit card, but I’ve making sure to treat it like a debit card by paying off balances right after I buy anything. I think you’re spot on when it comes down to using credit cards responsibly to reap the benefits of rewards such as cash-back. Thanks for the post!

    1. Absolutely! Thank you for your feedback 🙂

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