Warning Signs You Are Living Above Your Means

If you are worried that your funds could be in danger because of overspending, read on for key pointers on how to determine if you are living way past what you can afford.

by Redi Mendoza, 15 September 2017

Credit card bills spiraling out of control might be a sign you are overspending.

It’s easy to spend beyond what you can afford these days because of how convenient it is to pay via credit card. Living on credit can make you spend on things you can’t actually afford. It’s very possible for you to be drowning in debt before you even know it. But even if you don’t use your credit card to splurge, there are also some other warning signs that you're living above your means—maybe even without knowing it. We’ve compiled some symptoms that your spending habits are unhealthy.

You Don’t Budget
You may think that just because you have a decent and stable monthly income, you don’t run the risk of going penniless in the future. You should have a written monthly budget that will indicate the allotment of your monthly expenditures. For example, there’s a study that says your monthly mortgage or home rental should not exceed 28% of your gross income. This means that if you have an annual gross income of PhP1,000,000, you can only spend a max of 23,000 on your mortgage or rental. Setting a budget will not only make you conscious on how you spend, it will also help you audit and adjust your monthly spending. 

You Don’t Save Enough

Even if you have GSIS or SSS, chances are, your social security pay will not be enough to cover your living expenses in the future. So, it’s important that you are already putting aside money for your retirement. Estimates say that you should be saving 10%-15% of your income. But even if you are paying off debt, it’s important to save at least 5% of your income. To accomplish this, savings should not be the deficit between your income and expenses. Pay yourself first after every payday, and put the money aside. Savings should be taken out of your income before you allot for your monthly expenses. Remember, it’s not about how much you earn. It’s about how much you save that will lead you to financial freedom.

No Emergency Fund
An emergency fund is an account where you stash money in the event of a personal financial problem, like losing your job or getting a debilitating illness. This is your rainy day fund and it should be liquid. You should be able to easily withdraw from it, in case of an emergency. So this means that it shouldn’t be invested in real estate where you need to find a buyer first before you can get a payout. Experts say that you should have a minimum fund three times the amount of your monthly expenses. So, if you need to spend PhP 50,000 per month to sustain your current lifestyle, you should have at least PhP 150,000 in your emergency fund.

Credit Card Balance

If you don’t get to pay the entire amount due on your credit card, it’s a sign that you are spending above your means. A credit card is not a license to spend money you don’t have. You should limit your credit spending based on how much you can really pay when the monthly bill comes.