The world is dealing with the economic crisis today spurned by a health crisis due to the corona virus pandemic. One of the smartest things you can do today, after staying alive and healthy is managing your finances effectively and productively. If you are living above your means, you will continue to live by the dictates of external influences; and you can never be free from the financial rat race.
Our society today worships consumerism. If you have it, you have to flaunt it. And if you don’t have it, well, you take from tomorrow and flaunt it today. Succumbing to this pressure will cause you to make financial decisions that turn to hurt in the short and long run.
Sometimes living above your means can be as clear as spending more than you earn. Other times it’s not as clear. In this article, I’ll be sharing 5 signs that show you are living above your means. Here are five signs you need a readjust your money habits.
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If there is one thing you should have learned from this 2020 crisis, it’s the importance of savings. It’s never about how much you earn but how much you keep and grow. No doubt, saving cannot make you rich, but it’s the starting point for building a solid financial future.
If you can’t save at least 5% of your income, chances are early retirement won’t be an option for you, unless you’re fortunate enough to win the lottery or stumble on a briefcase full of money. We both know that you are more likely to be struck by lightning than for any of that to happen.
Conservatively, you ought to save 10 to 15% of your total income. If you earn a high income, you can save 25 to 30% of your income for investment and emergency. It’s a healthy financial habit that should be practised religiously.
Did you really buy that iPhone because you need and can afford it? Are you actively wondering if someone noticed your new wristwatch, perfume, gold chain or designer wears? A lot of times people’s extravagant lifestyles aren’t backed by their bank accounts or values. We just want to impress the next person. The problem with that is that no one cares. People often admire what you have, not because they are happy you have it, but because they wish they have it. What people do when they buy things they cannot afford is not really to impress but to oppress others; because people who are actually attracted to those things are people who don’t have them. And these people often don’t like you; you probably don’t like them either.
So, is it really worth it? The people who really care about you don’t need to be impressed by what you buy. You shouldn’t be begging for a hand out on social media from an iPhone if you are really worth one.
It is important to first analyze your motives before spending. If you allow society or friendships to influence or dictate your spending, you’ll find yourself buying things you don’t need just to be socially accepted. If this spending pattern is left unchecked, the lengths you’d go to please others will always leave you wondering where all your money went.
If you often find yourself with no money at the end of the month, it simply means you’ve either spent all you’ve earned or as is becoming the norm now, you’ve spent more than you’ve earned.
No doubt; some people struggle to make ends meet and end up living hand to mouth. But in most cases, you can do better with your earning. If you cannot manage $100, you will hardly manage $10,000.
If you are in the circle of spending all you earn or even more than you earn, you are living above your means. If you believe you are earning too little to save from, focus on investing in yourself so that you can develop the capacity to earn more. Sit down and look at where your spending goes to. You are likely to find expenses you can cut down to save some money.
Did you notice how people quickly got broke almost from the beginning of the lockdown? People don’t prepare for emergencies these days. And when emergencies happen, life happens real fast; and bad.
Asides saving for investment and retirement, you should have money put aside specifically for emergencies. This fund should serve as a precaution from borrowing or taking a loan when an unexpected expense arises. Without it, you’re likely to rack up debt. Many feel they don’t earn enough to save and build an emergency fund. It’s a legitimate claim for some, but you can always start with a little which will eventually build up to something significant. If you have the will, you will find a way to save more or earn more.
The modern world is built on borrowing. It wouldn’t have been an issue if people borrow to fund capital projects, businesses or income-generating investments. But borrowing to fund a lifestyle is exposure to potential disaster. Unfortunately, the financial world depends on people’s appetite to borrow to survive. So they encourage you to take more consumer loans, as long as you have a predictable source of income. That’s how they make money.
The problem with this is that, when you take a loan to finance a car, a home appliance or any of such consumption, you end up spending a lot more on that item over the period of repayment. So it’s not only that you are buying what you cannot afford; you are spending more to buy it.
If you find yourself borrowing to fund your expenses, even after your paycheck, you’re living above your means. When your paycheck doesn’t comfortably cater to the necessities and extras, you’re going overboard with your spending. If that expense doesn’t improve your life, career or business, doesn’t make money in future or you cannot comfortably pay for it, you can live without it. Let it go for now.
It’s no impossible to eliminate these habits. If you are really concerned about developing financial independence and protecting yourself and family from an unpredictable crisis like we are experiencing today. You must start first by living below your means and then growing your means. If you found this piece helpful, share it with someone you know that needs to hear this.
This post was last modified on August 1, 2022 3:57 pm