FTC: This post is not sponsored and I am not a financial advisor. All thoughts and weird opinions are my own.
Okay we are four months into 2019 and I’m checking in on your money… just like you should be checking in on your money as well. You know all those New Year’s Resolutions you made back around January 1st. Go to the gym more often, eat cleaner, get more sleep, save more money. How many of those have you been keeping up with?
And no I’m not judging you if you said none… but I am secretly judging you a bit! The good thing about falling off the bandwagon, is that you can always get back on. So as we enter this spring season with a new sense of purpose, and finally enough sunlight to allow us to live our best lives, let’s refocus our money goals. Let’s make sure that the last three quarters of 2019 make both ourselves and our pockets proud.
In order to refocus on the right goals, we need to make sure we are prepared to walk down the right path. This means analyzing what we are doing well, and what we are doing that can use some improvement. If you find yourself falling into any of these 15 behaviors, don’t panic… that’s what I’m here for! To guide you (and my damn self) back to the right side of money usage.
10 Warning Signs You’re Living Beyond Your Means
1. Spending Money Before You’ve Earned It:
We’ve all been guilty of this, I know I have for sure. This is when you are waiting on a bonus or overtime check from work so you spend a little extra in anticipation that you’ll be able to pay off your purchase when that money comes in. The most common occurrence of this is expecting a certain amount back from income tax returns, and balling out before you’ve even done your taxes. This is a clear sign of poor money management, and judgement. Things happen, checks get delayed, and miscalculations often occur. Do not spend money you do not have simply because you think “the check is in the mail”.
2. Using Credit Cards For Vacations/ Bills:
If you’re using your credit cards for bills… that’s one thing, but also putting your vacations on your credit cards is a whole different ball game. I’ll start with the bills part first. No one likes paying bills.. and I mean no one. Not even the rich enjoy paying what they owe. Most bills don’t allow you to pay with credit cards, because you’re really simply paying off one debt with another line of credit. Thus never getting rid of the debt, just moving it around. But, bills like car insurance, cellphone, internet…etc can be paid with credit cards. Unless you are just trying to earn points and you are paying off the credit card bill at the end of the month, this is a bad money practice.
Same goes for booking vacations. If you book your trip on a credit card, and are still paying off that trip months after you have returned, then you are definitely living beyond your means. Traveling is in my top two of favorite things to do, beat out only by sleep. So I know how important it is to scratch that travel itch. Instead of putting yourself into temporary debt for a vacation, set up a sinking fund and save for the trip of your dreams.
3. No Emergency Fund:
You need an emergency fund! YOU NEED AN EMERGENCY FUND!! YOU NEEEED AN EMERGENCY FUND! How many more times can I tell you this before you just trust me! It is for your own good. There are very few things in life that are promised/bound to happen… but emergencies… those are sure enough almost always a possibility to occur. Think about the last 5 years in your life… have you had an emergency or two that you needed some sort of money to help you resolve? No? Think about the last 10 years… the last 15 years… and if you can’t think of not one single emergency you’ve had in the last 15 years… trust me when I tell you.. you’re probably due for one really soon.
The point is, you don’t want to dip into your savings, or have to borrow the money due to a financial inconvenience that sprung up on you out of the blue. That is what your emergency fund is for. You should aim to have at least 1,000 dollars in your emergency fund. And if you’re torn between whether to book a vacation, or throw that money into your soon to be started emergency fund, you know which choice gets my vote.
4. Spending Without Saving:
There are things in life that we simply just always have to buy. As a new homeowner I realize that those mandatory purchases now include toilet paper… because much to my surprise homes just don’t come with a steady flow of toilet paper like at my parent’s house. Besides that, things like food, gas, and household supplies are regular purchases that just have to be made.
This means that you will have to spend a certain amount of money, no matter what. When making these mandatory purchases you should always be looking for the best prices, and was to get money back. If this means making sure you purchase products to store food/ keep it fresh longer than do so. For me this means shopping for online deals at a lower price and earning cash back using sites/apps like Ebates and Dosh. I swear by these two mostly because I can use them in tandem. Both are free to use and give you sign up bonuses when you make your first purchase or connect your first card to the app.
5. No Retirement/ Using Your 401K
Once you’ve created and funded a pretty stocked emergency fund, and your savings accounts are in good shape, you want to start focusing on your retirement fund. Look into your employer to see the different types of retirement or pension plans that are offered. It is in your best interest to get involved in these retirement plans as early as possible as most will offer some sort of matching amount. This means the earlier you get started the more money the company will input for you.
The pitfall that you want to avoid, is borrowing or withdrawing from your 401K plan if you do have a retirement already set up. You see… your savings and emergency funds should already be stocked and used before you turn towards your 401K. Withdrawing your 401K plan early (before 59.5 years old) will result in a penalty and income taxes. If you borrow on your 401K, you will essentially earn less on whatever rremaining amount is left, and most of the time because of the payment plan that is automatically withdrawn from your check you will stop adding more money into the pot. It will become too difficult to make the repayment and regular payment.
Trust me, use your emergency fund and savings account first (especially for a downpayment on a home) before poking into your 401K.
6. Making Minimum Payments
If all you can make are minimum payments on all of your debts, then you aren’t making a dent in your debt at all. This will extend the life of your loan for the most part (up to 25-30 years in some cases) and you will end up paying way more than you borrowed. Look for ways to adjust your budget to give yourself some more wiggle room to make bigger payments directed directly at the principle amount.
7. 30% Or More Of Income Goes Towards Your Home
If 30% of your income for the month goes towards your home, you are certainly in way over your head and have too much house to handle. If more than 30% goes towards your home, how are you even surviving? Owning a home, or even renting an apartment is such a huge responsibility on your finances in the first place. Having more than 30% of your income go for simply your housing, makes it nearly impossible to have other aspects of your life be balanced. That means your bills are probably next in line, leaving far too little left over for saving and basic necessities like eating. There is nothing wrong with moving into a smaller apartment, or smaller house in order to extend the life of your budget/income.
8. Running Out Of Money Before The Next Paycheck
This means you are living paycheck to paycheck, and probably way more stressed than you deserve to be. Living paycheck to paycheck makes it impossible to have an emergency fund or save money for fun things. If you aren’t even making it to the next paycheck that is a clear huge sign you are living beyond your means and have to really itemize your budget to see where your money is going. This can be resolved a few ways. Adding in a few extra side hustles to increase your income for the month, or diminish aspects of your budget that you have control over. Are you paying over 100 dollars for internet and or cable. That can be cut. Is your car insurance really high? You can call and have them re-evaluate your insurance policy to see where the price can be cut. Look at the purchases you make on a daily and weekly basis. That Starbucks swipe is showing up one too many times? Good we’ve identified an area that can be improved upon! Living paycheck to paycheck doesn’t have to be your way of life, but it will take a bit of work to make a more manageable shift.
9. Your Debt Has Not Diminished In Over A Year
If you’ve been making payments for the last 12 months and your debt has not decreased at all, that is a problem. (see # 6 to refresh your memory) If you are paying more than minimum payments and still not seeing your debt decrease, that may be that your are adding in new debts as you decrease others. Also a huge no no! We want to always be moving closer and closer to a zero balance to increase our net worth.
10. You Spend Your Paycheck Right Away
If you can’t wait for your next paycheck and find yourself spending it on the day you get it, that is a problem. Especially if you spend it all right away, or spend it on non valuable things. I’ve seen many people spending a check and a half on the latest iPhone release. UNBELIEVABLE! You worked all those hours to blow it in five minutes! I think not! Consider itemizing the items that you need to buy for the month and seeing which check (if you get paid weekly, bi-weekly, monthly… this will be different for you) pays which bills/ and makes which purchases.
If you found this helpful don’t be afraid to share with a friend, family member, or nosy neighbor!
Until next time,
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Hey there! I’m Melissa, co-founder of Trials n Tresses, natural hair and beauty lover, binge tv watcher and lover of life. When I am not creating content for TNT, I’m busy teaching the future of society.