Christian Financial Advice and Biblical Stewardship

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5 Common Warning Signs You’re Living Beyond Your Means

  • Megan Pacheco Chief Learning Officer, Lead Like Jesus
  • Updated May 29, 2020
5 Common Warning Signs You’re Living Beyond Your Means

"A budget tells us what we can't afford, but it doesn't keep us from buying it." - William Feather

Have you ever been to a restaurant and while deciding on what you’ll eat, you take a look one table over and see someone devouring a scrumptious looking meal? You know that you should have something healthier, with fewer calories, and a slightly lower price tag, yet as soon as the waitress asks for your choice you hear yourself say: “I’ll have whatever he is having.”

Sadly, so many of us approach our financial decision making the same way, and before we realize it, we have dug ourselves into a deep financial hole wondering how we get here in the first place.

Living beyond our means has become the norm. Financing our lifestyles with easily available credit is almost expected, and anyone who is living on “cash only” basis is rare species about to go extinct. Social pressures to meet certain living standards are contributing greatly to the financial instability of our families.

If you suspect that you may be living beyond your means, here is a quick checklist of five common warning signs combined with practical tips on overcoming those challenges.

1. You are constantly discontent.

Do you find yourself constantly wishing for more?  Is it hard for you to watch others upgrade to nicer cars, bigger homes, better furniture or even pricier, more prestigious private schools for children? If you’re quietly saying yes, then your discontentment may be driving you to impulse financial decision-making.  Reflect on your spending habits and evaluate whether many of your purchases are done out of true need or out of a need to fill in an internal void or social pressures. Decide today that you will no longer live to impress others by spending money you don’t have on the things you don’t really need.

2.  You can’t afford to lose your income, at least for a while.

If today you, or you and your spouse, lost your income, would you be able to survive for the next 6 months only on what you have set aside in your savings? If the answer is a definite NO, you may be overspending on today’s wants while sacrificing tomorrow’s needs. If that’s the case, take a hard look at your current spending. Do you have a spending plan or a budget? Make one. Are you fully aware of how every dollar you earn is spent? Get to the bottom of this and make sure that you assign every penny to a specific budget category. Track your spending for the next 30 days to reveal all potential “waste” areas.

Your goal should be to eventually have 6 months of your living expenses set aside and available in case you experience a complete income loss.

3. Credit is your best friend – or so you think. 

Credit has become so accessible that any college student who does not have a steady income is bombarded with offers of easy money. Do you have a revolving balance on your credit cards? Are you using one credit card to pay off another one? Is your monthly credit card balance growing instead of declining? If the answer is yes, then you are most likely financing a “beyond your means” lifestyle.

Take the next few days, look over your credit card purchases and see exactly what you are buying. Is it expensive clothing? Maybe its time to move to a cheaper clothing line or to live out this famous great depression motto: Use it Up, Wear it Out, Make it Do, or Do Without. Have you fallen for the buy now and don’t make any payments until who knows when offers? Now that the payment time has come, are you struggling?

Whatever “it” is that you are using credit for, first make a decision to stop using plastic. Create a realistic debt repayment plan and do not pick up a credit card until you have paid your balances off and are ready to be a responsible consumer.

4. You aren’t saving a minimum of 10% of your gross pay.

Saving is truly the foundation of healthy finances, yet so few of us actually save. One of the most common excuse for not saving is “I have too much debt.” What people don’t realize is that, unless saving is prioritized, debt will always be an issue.

Our goal should be to set aside at least 10% of gross annual income. Portion of it may go into a retirement fund while the rest to a regular savings account.  

While setting saving goals, focus on both short-term as well as your long-term goals. Short-term should include having an emergency fund, 6 months of living expenses, a vacation fund, a Christmas fund, etc. Your long-term goals should focus on retirement, car replacement fund, and college funds for your children, etc.

5. You spend more than 25-30% of your gross pay on your mortgage.

Buying more home than you can afford has been a common phenomenon in the last decade. Long gone are the days when 20% down payment was the minimum in order to purchase a home. No down payment and borrowing more than can be afforded, combined with a stagnant job market, has plunged too many families into foreclosures and short sales. Are you counting on two incomes in order to make your mortgage payment? Are you spending more than 35% of your gross income just to pay your monthly note? Would you be in deep trouble if you experienced a reduction in income? (going from two to one income due to job loss, having hours cut, having pay reduced, etc.) If the answer is yes, you may be paying for more home than you can afford. Here are two rules of thumb to follow in regards to mortgage payments:

  • Stay within 25-30% of your gross income
  • Are you a two-income family? Buy as if you had just one income. This way you are creating margin in case of a job loss

Living beyond your means can be overcome. It isn’t an issue of not earning enough, but an issue of reconciling your spending habits with your income. Understanding your spending and correcting waste will lead you to financial freedom!

Publication date: May 31, 2013