Many finance gurus advise against living beyond your means as one of the surefire paths to wealth-building failure. Basically, living beyond your means entails spending more than what you earn. This leads to debts and loans that one cannot pay. Ultimately, a person has no choice but to file for bankruptcy.

The good news is that not all such cases end in a Chapter 11 filing. That is if the following signs of living beyond your means are recognized and corrected before it’s too late.

Signs that  you’re living beyond your means

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You have zero or very minimal savings

You save less than 5% of your income. Yet, you should be saving at least 10-15% of your earnings. Worse, the month ends without you even putting away anything towards savings. With this kind of scenario, it’s not a surprise if you live from paycheck to paycheck.

“I used to say why save money if I’ll die tomorrow, I haven’t died yet and I have nothing to survive on”
― Bangambiki Habyarimana, The Great Pearl of Wisdom

To be on the safe side, you should put aside some savings and ensure you have a stash that is pretty much equivalent to 5-6 months of your monthly takings. You should also have an emergency fund that you can dip your fingers into in case of unexpected yet vital expenses (such as emergency hospital admissions).

You frequently exceed your credit limit

Does this always or mostly happen to you? This could mean that you are heavily reliant on your plastics and are quite the “swipe-happy consumer”.

The problem is that exceeding limits will lower your credit score.  Perhaps you can curb this habit if you can picture what you can do with the money you spend on settling over-limit fees. Also, hide your plastics and choose to use cash more.

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You’ve paid overdraft fees

Have you had to pay overdraft fees in the last 12 months? That means you’re using money that you actually don’t have.  You’re living beyond your means financially!.

To address this, make a budget and categorize your expenses by category. allocate an envelope to each category. Don’t mix the funds and don’t use plastic when the money in a particular envelope runs out. Else,  you will encounter serious financial issues.

Your credit score is under 600

Low credit worthiness can affect your chances of getting a much-needed loan. Protect your credit score – it’s for your own good, whether now or in the near future. You can do this by making sure you pay all your debts and avoid using credit cards frequently. To know your score, you can contact a credit bureau.

You scrimp on essentials and splurge on luxuries

Do you use food coupons for your daily eats and splurge $100 on a new pair of shoes or an I.T bag? Or do you skip meals just so you can buy that thing you’ve been eyeing online or in your favorite shop?

These signs should tell you that something is wrong and that you’re living beyond what you’re capable of.

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 You need to stretch payment terms

Sure, you can buy that house, but only if payment terms stretch to 30 years. Same goes for that car. You can absolutely take it home with you under a 36-month payment arrangement. Do these scenarios sound familiar? If you can’t pay a home after 15 years or a vehicle within 24 months, you’re spending too much than what you’re actually taking in.