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Ever had a colleague that does the exact same job as you, but rolls into work in a brand new car, seems to have a new outfit every single day, eats out five times a week, and thought, how the hell can they afford all this?
Well, chances are, they can’t.
Let’s take a look at the facts…
- 78% of workers live paycheck to paycheck every month
- Almost 25% of UK adults have no savings to fall back on
- The average household is more than £15,000 in debt
So, if you find yourself constantly looking around you wondering why everyone else you know can afford new cars, new clothes, holidays, and countless other activities when you’re living frugally and without doing any of those things, I’ve got news for you. Those people are probably living beyond their means.
Those people are probably going into debt every month, maxing out their overdraft, and living paycheck to paycheck.
Now, sure, some of your friends are probably just doing well for themselves. Maybe your colleague is on a much higher salary than you (if you do the same job, just ask! Not talking about our salaries only benefits the bosses).
The majority of the time, however, if you’re not quite sure how someone can afford to spend their money the way they do, that’s because they’re spending money that’s not theirs.
Living beyond your means is an easy habit to get trapped in. Especially when social media flaunts luxurious lifestyles every 3 seconds. So, how do you really know if you’re living frugally – or constantly living beyond your means? Below, I’ve compiled some tell-tale ways to figure that out.
Pssst..! While you’re here, make sure you’ve unlocked your free access to The Wallet Moth Freebie Library, which is absolutely full resources all designed to help you start building a life that works for you, including free cheap & healthy meal planners, printables, a minimalist declutter checklist, and so much more!
1. You rarely save anything each month
If saving anything from your paycheck is an afterthought or something you rarely manage to do, you’re probably living beyond your means.
In an ideal world, you should be able to save 10% of your income (after tax) every month. I recommend arranging a direct debt to take that percentage of your income the day you get paid and send it to a savings account. That way, you don’t even have a chance to miss the money that’s gone – and are building up a nice savings pot automatically each month.
2. You’re constantly living paycheck to paycheck
If you’re always counting down the days until your next payday and scrimping pennies to get by, you’re probably living beyond your means.
Your life should not be dictated by your paycheck. Having a budget that allocates an accurate percentage of your income not only to rent and bills, but also to your food bills, transport and fuel costs, leisure/entertainment expenses, child care, savings and investments, and any other fixed expenses you have will ensure you can always afford what you need.
Living paycheck to paycheck can refer to people who have no extra money to put into savings each month or people who borrow money in order to last until the next payday. Although there are always exceptions, many people wrongly assume they don’t earn enough to save any money – it’s simply a shift in how you think about your money that is needed.
3. You are always in your overdraft
If you go into your overdraft every month or consistently max out your credit cards, you are probably living beyond your means.
Your overdraft should be a safety net for unexpected incidents and emergencies – and even then, you should have your own emergency fund to immediately enable you to get out of your overdraft. If you treat your credit cards and overdraft allowance like your own money, this is a sign that you need to make some drastic changes to how you spend your money.
4. You borrow money for big expenses
If you take out loans or find yourself borrowing money from the bank, friends, or family for big expenses like holidays, you’re probably living beyond your means.
Being able to enjoy life and take a break with a well-deserved holiday if something everyone should be able to have – but not at the cost of a loan that simply adds to your long-term money worries. Whether you’re borrowing from friends or family (which can lead to awkward conversations) or taking out a loan (which can be a massive financial stress), sacrifice those treats now in order to be able to afford them without worrying in the future.
5. You struggle to afford essential things each month
If you can’t afford food, toiletries, and other household essentials each month, you’re living beyond your means.
Anyone who has been a student in the past will think back almost nostalgically about the days where you lived off of 99p ramen with pride. However, if you’re still struggling to buy your household essentials (toiletries, healthy, fresh food etc) as an adult with a job, something’s got to change.
6. You’re in debt – and only just paying back the bare minimum each month
If you’re in debt, and only able to afford to pay back the interest each month, you’re probably living beyond your means.
Going into debt is unavoidable for some, whether that’s getting a mortgage or taking out student loans. However, formulating a debt-repayment plan that you can stick to each month should be an absolute priority. Debt simply takes away from your net worth each month, so paying it off should be one of the first things you address each month.
7. You feel nervous when you go to check your bank balance
If you avoid checking your bank balance because you have no idea how much you’ve spent this month, you’re probably living beyond your means.
Someone with their finances organized and on-track will have a good estimate of how much they have in their bank account at all times. If you find yourself getting nervous to check your account because you have no idea how – or what – you spent your money on this month, getting into the habit of tracking your spending could be instrumental for changing that.
8. You haven’t given much thought to your future financial goals
If you haven’t thought about your finances long-term, you might be living beyond your means.
Have you got a retirement fund you pay into each month? What about an ISA, or investments? What about simple savings account for emergencies, or for bigger financial goals like buying a house or starting a family one day? These should all be things that you at least think about and, ideally, start planning for. Put your money where you want your future to go.
9. You’re guilty of compulsive spending
If you spend your money spontaneously and mindlessly, you’re probably living beyond your means.
Learning how to adopt a more minimalist lifestyle was absolutely essential for helping me to identify how damaging mindless spending can be. Learn how to frame your priorities in life, and adapt your spending to put those things first.
10. If you lost your job today, you wouldn’t be able to pay the next two months rent
If you lost your job today (for whatever reason), would you be able to pay your next rent bill? What about the month after? If the answer, is no, you’re probably living beyond your means.
Ideally, you should have a minimum of three months of your income in an emergency fund, at least. If you don’t have anywhere near that, commit to adjusting your spending so you can start building up a savings pot for emergencies and unexpected costs.
11. You spend more than 30% of your total income on rent
If you spend significantly more than 30% of your income on rent each month, you’re probably living beyond your means.
This is a tough one for people living in areas with a very high cost of living (hello, London), but the general rule of thumb is that you should spend no more than 30% of your income on rent. If that shocks you, it may be worth looking into typical accommodation costs in your area and considering how practical moving into a more affordable place would be (or, if increasing your income is feasible).
If any of these points have resonated with you, don’t worry. Recognising that you may need to change your habits towards money is the first step to actually improving your lifestyle.
Where to go from here
So, what now? If you know you are living beyond your means, the following resources are all great starting points to start living a more mindful, frugal lifestyle that ultimately works for you.