In this digital day and age, it’s easier to overspend than ever. Mobile spending is never far out of reach and plastic payments can be done in a flash. And the cost of living only seems to go up. All things considered, it’s no wonder American families are collectively 15 trillion dollars in debt right now.
The average household is spending more on housing, food, gas, transportation, and medical care than ever before. With so much unavoidable spending, more and more people are living beyond their means as well. If you’ve grown accustomed to a lifestyle that you can’t realistically sustain, this likely applies to you.
Spending money is borderline effortless. Thus, saving requires willpower, practice, and serious restraint. Of course, those things can be way easier plotted than executed. So you’re going to need a plan you can get behind. Financial experts say that if you like to shop, you don’t necessarily have to stop. But you do need a clear understanding of what you can and can’t afford. In other words, your definition of “affordable” needs to change, starting today.
So let’s talk about how to stop living beyond your means, starting with some red flags that you might be.
Signs You’re Living Beyond Your Means
If you’re living beyond your means, chances are, you’re aware of it. That’s not to say you’re not in denial about how detrimental the situation might be. Whether it relates to bills, outstanding debts, or consistent overspending, the overarching warning sign is that you’re losing more money than you’re saving every month. So first things first, are you saving any money? If so, how much?
Per UCCU, “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.”
Here are some warning signs you’re living beyond your means:
- You let how others view your financial situation affect your spending habits
- You have no emergency or “rainy day” funds
- You are unable to pay off credit cards in full each month
- You have overdue bills
- You frequently are hit with overdraft fees
- You’re leasing a car you can’t afford to finance
- Your mortgage payment is more than 30% of your income
- You have no retirement savings
How to Stop Right Now
Recognizing your excess spending is the first step to changing for the better. Once you acknowledge the problem, it’s time to take responsibility. Unless you’re willing to consistently do what it takes to live within your means, you’ll likely slip back into old habits in a slippery, seamless way.
If you’re living beyond your means, you’ve built your entire lifestyle around financial habits that will always be more harmful than helpful. In turn, changing those habits will not be easy and may even feel unnatural. So the first thing you’ll need to work on is your perspective.
Living within your means is important. And so, it’s time to approach money differently. By living on less than you earn, you’ll be better prepared for life’s curveballs. Otherwise, when money is tight, you’ll have no choice but to make your financial situation more unlivable and likely continue the cycle of debt. If you want to stop living beyond your minds, commit yourself to the process. As of this moment, saving needs to become a priority.
Prioritize Penny Pinching
To improve your financial health, aim to save money more often than not. Starting now, overspending has to stop. It might be difficult, but as someone wise once said, “nothing worth anything was ever easy.” So keep your eyes on the long-term prize.
Your financial goal must be to adjust your lifestyle in an effort to accommodate a more realistic financial situation and create financial stability. Spending less doesn’t mean your quality of life becomes lesser. In fact, the money you will save will likely bring you something spending every penny never could: peace of mind.
The good news is, there are easier ways to go about it than you might think. For instance, I like to implement “no spending” days. By decisively not spending money, I condition myself to splurge a lot less and save a lot more than I would if I bought whatever I wanted and gave into daily whims. But no matter how you go about it, you need to start by building a budget.
Get Serious About Budgeting
No matter how long you’ve been putting it off, it’s time to draw up a budget. When it comes to establishing what you can and can’t spend, it might be the most crucial and beneficial tool you have in your toolbox. Just be sure to shop around. There are a lot of budgeting methods out there, but there’s no foolproof method that works for all. Here’s a breakdown of the best budgeting techniques to get you started.
Creating a budget will help you clearly define how much money you have coming in, your monthly commitments, how long it will take you to pay off debts, and what you’ll need to put back to reach any and all financial goals. You’ll want a full overview of where you’re really at and why you’re not living within your means, so have your credit card statements and bills handy. And be ready to list all expenses.
When you add everything up, you may come to find that the total is more than your monthly income. Let this realization serve as the most concrete proof that you’re living beyond your means. Then, with your budget in hand, start the process of cutting expenses wherever you can.
When the numbers don’t add up, it’s time to try a new formula. Go over your expenses and ask yourself: which expense can I reduce right now? Which expense(s) can I get rid of? When it comes to the answer, be honest with yourself and be firm. And above all else, be objective.
Sometimes, it helps to approach your financial situation like it is someone else’s. This way, you can remove your emotional ties to your overspending. What would you tell someone in your situation? If it wasn’t your money and you were trying to help out a friend, where would you suggest cuts? Start with those.
Because bills are recurring and you must address your debts, one of the easiest places to cut back immediately is the grocery store. Maybe it’s time to go generic with certain items. If you’re dining out more often than not, it’s definitely time to start eating in. Set a grocery budget and stick to it. Also, try to shop less. Whether that means cooking more often, shopping seasonally, or buying things that last longer, cut back where you can. Once you’ve done that, put some of that money back where you might end up needing it most.
Create a “Sinking Fund”
Sinking funds are saving funds that serve specific purposes. Sometimes called “reserve funds” or “saving pots,” they’re similar to emergency funds, but less emergency oriented.
Sinking funds are there to keep you afloat when financial burdens arise that are inconvenient, inevitable, and often include unforeseeable costs. Some of these predictable and pricey expenses include vehicle insurance, holiday shopping, home repairs, and personal taxes.
By setting money aside in your sinking fund, you’ll have what you need to pay big and looming bills without dipping into your savings or funds allocated for recurring expenses. You’ll also be able to steer clear of your credit card. With that in mind, let’s move on to the next step.
Hit Pause on All Spending
Once in a while, we all spend more than we originally intended to. Sometimes, it’s an impulse purchase, and other times, we splurge when we know we’re better off saving. If you’re guilty of this on a semi-regular basis, it might be time to invoke the 30-day rule, the 24-hour rule, or another method to pause all spending.
When you feel the urge to spend money you don’t have to, implement a waiting period. This will help you save money in a variety of ways. For one, cravings are always temporary. If you wait long enough, you may lose the desire to spend the money you don’t need to. You can also return to whatever your heart desires from a more logical place. By waiting it out, you will be able to avoid throwing caution (and your hard-earned cash) to the wind and have time to consider if it’s really worth your money.
Any time you’re about to spend money you don’t really have, hit pause on all spending and step away. No matter your financial situation, living within your means is often a matter of money mindfulness. The longer you wait it out, the less likely you’ll be to overspend. If you still need to buy it in a day, a week, or a month, it’ll still be there. But the most important question to ask yourself remains: does it fall within my budget?
Give Yourself Some Wiggle Room
Creating better spending habits doesn’t mean changing who you are. Oftentimes, trying to flip a switch and be someone else will backfire, especially if it’s too much of a change too soon. If you like to treat yourself, you shouldn’t stop doing so. Cutting back and living within your means can still include enjoying yourself, and the better you budget, the more you’ll have free money for a rainy day. The trick is to budget in those treats and only treat yourself to what you can truly afford.
Spending $10 dollars on yourself can feel just as satisfying as spending $100. I’d argue that spending guilt-free money that doesn’t put a dent in the budget actually feels even better. So leave yourself some wiggle room. Living within your means should not feel like a punishment. And if you stick to the process, it will prove more rewarding than living beyond your means ever could.
Repay Your Debts
Budgeting will always include debt repayment. So know what you’re up against going in. What is the balance of the total debt? No matter how high the number, don’t fret. All debts are manageable if you put in the time, effort, and financial planning necessary to repay them.
To get the repayment ball rolling, look into the snowball method and the avalanche method. By paying off your smallest debt first and then working your way to bigger ones, the snowball method yields quicker results and will give you the feeling of making headway sooner rather than later. For those who don’t need to see instant results to feel like they’re making progress, the avalanche method works too. It tackles the most sizable debts with the highest interest first. These will take much longer to pay off, but the sooner you start, the sooner these crippling debts are absolved.
Or, if you’re looking to start very small, consider dissolving your debt with the snowflake method.
Earn More Money
We aren’t always able to change our current circumstances as quickly as we’d like. When we live beyond our means, it often affects every area of our life. You might be stuck with a fancy car you can’t afford and being “house poor” keeps you strapped for cash. Or, your credit card debt may be so out of control that cutting back on spending will never be enough to get you out of the financial hole you continuously dig.
If you find yourself in this position, getting out is not impossible. But it might be time to make more money.
For some, this might mean asking for a raise. Others may need to seek employment with better pay and better benefits. Of course, getting hired in a new role or receiving a pay bump are not completely within our control. So it’s critical to take back power over our financial circumstances where we can. If you’re allowed to in your current role, consider working extra hours. If you have extra time, look into lucrative side hustles.
Bottom line: there are plenty of ways to earn extra money out there. So be proactive. The sooner you find the route that works for you, the sooner you’ll be able to put yourself in a better financial position.
Pay With Cash
Name something easier than swiping your debit or credit card. I’ll wait. Mobile and plastic purchases make shopping significantly easier for all of us. In turn, spending more than we can truly afford to is that much easier too. That’s why more and more people swear by “the cash envelope system” as a means to get spending under control.
Here’s how it works:
- Identify all of the places your money is going
- Budget how much you actually have for each category
- Put that money into envelopes designated for each expense
- Take spending cash with you wherever you go
- Leave your credit cards behind at all costs
Carrying only cash will help you minimize how often you’re able to rationalize overspending. You won’t be able to rack up bills with swiping anymore. You’ll only be spending what you’ve set aside to spend. This will cause you to think about what you’re spending in a way that you likely wouldn’t with your card in hand. In turn, you’ll become more innately frugal through the consistent practice of it.
Always Spend Less Than You Earn
This is easier said than done, but ultimately, it’s the most crucial thing you must do to live within your means. Turn to your budget and go over where you can start spending less. While it might sound simple or trite, one of the best places to start is by finding gratitude for what you already have. Oftentimes, we live beyond our means because we seek things that we don’t have and wrongfully believe that money, on some level, does buy happiness.
The problem with that way of thinking is, you can’t put a price on peace of mind. Overspending may feel good at the moment, but in the long run, it only adds to financial stress and instability. Being buried under mounting debt is no way to live. So if you’re worried about money all of the time, it’s time to assess what you’re really gaining down the path you’re on. And more so, what you’re losing.
Ask anyone who knows what it takes to get there; few things feel better than financial freedom. And living within your means is always where it starts.