7 Signs You’re Living Above Your Means and 5 Ways to Fix It

Sometimes, you’re in financial muck so deep you’re not quite sure where you are.  If you haven’t kept tabs on your own financial health, you may think you’re alright without actually realizing that you’re not in a healthy spot.

In the end, we all want to get financially healthy – it’s important for your future as well as for the lifestyle you’re currently living.  But how do you know if you’re financially healthy?  Without going into a deep budget dive, there are a few signs you should look out for that should warn you that you’re living above your means.


1. You have no savings or fund for emergencies

You know you should have an emergency fund.  But when you got pneumonia and had to pay for your copays, you ended up racking up more credit card debt.

Studies have shown that having only $500 in savings is enough to cover 75% of emergency financial issues.  That seems like a small amount, but if you can maintain it,  you can prevent yourself from falling deeper into debt.  Without even a small savings fund, you’re likely to use debt financing to pay for your needs more often, and that leaves you deeper in debt.

2. You’re living paycheck to paycheck

This goes along with the previous point.  You find yourself having too much month left over at the end of your money.  If you’re stretching your dollars on the 29th of every month just struggling to get to payday, you may have an issue.  This isn’t a problem of savings as much as it is overspending.  If you reduce your spending by sticking with a budget, you won’t have to stress when you reach the end of the month, and you’ll be able to start saving.


3. You can only afford the minimum payments on your debt

If you can only shell out the minimum $39 credit card payment (or $74 or $242 or whatever it is depending on how much debt you have), you’re in trouble.  You really should be paying off your debt as quickly as possible.  Leaving it to fester will only cause you to pay more over time.  If you can only pay the minimum, that means your budget is being stretched too far to truly pay off the debts you’re holding.

4. You borrow money from friends or family to pay off bills

Or worse, you take out a loan.  You always need to pay your bills.  Unfortunately, if you can’t pay them without going into debt, you have a serious problem.  You should examine your spending immediately if you find yourself in this predicament.  Monthly bills should be covered by your regular earnings (ideally, they’d be less than 50% of your after-tax income).  If you’re spending so much that you have to borrow money to keep yourself afloat, you won’t be able to pay off debts quickly and get yourself out from the debt pileup that’s pushing you down.


5. You’re not saving at least 10% of your after tax income

Ideally, if you’ve read my article on the 50/30/20 budget you’ll know that you should be putting at least 20% of your after tax income into savings.  However, if you’re not putting at least 10% away, or towards debt, you’re living above your means.

Remember, living above your means doesn’t mean you’re spiraling into debt necessarily.  It just means that you’re not living a sustainable lifestyle that builds you wealth and keeps you afloat.  If you can’t put 10% of your income away every month, you won’t be building any savings or paying off your debt quickly, leaving you with rising debts and less of a safety net.

6. Your credit card bill isn’t going down each month

Another thing to look at is where your credit card bill is.  If you’re just paying the minimum, it’s not moving very much.  Ideally, you’d like to see a substantial decrease in the amount you have to pay towards your credit card every month.  This is a fantastic indicator because it’s a big numeric red flag.

Take a look at your statements and if you’re not seeing substantial changes, you need to make adjustments.  Even just paying an extra $25 a month will make a big difference in the long run.

7. You’re afraid to discuss finances with friends or family

A final warning sign that should alert you to financial trouble is if you’re afraid to discuss your finances with family or friends.  If you feel like you’ll be judged or if you feel afraid to share your debt numbers, you should be concerned because this is your gut telling you that your situation isn’t normal.

The best thing to do in that situation is the opposite of what you want to do – talk to someone you trust.  It could be your parents or your best friend or your spouse.  Explain the issue and that you’re having trouble and they’ll help keep you accountable.  They can encourage to stick with some solutions for your budget.


Speaking of which…

5 Ways to Fix Your Finances

1. Start a Budget

Start. A. Budget.  It doesn’t have to be crazy detailed.  Just make some big buckets and use it to guide your spending.  If you can keep yourself from spending too much every month and squeeze an extra 10% of your earnings for savings and debt payments, you’ll be making instant progress.  It won’t be easy, but a budget is a great way to open your eyes to where you’re spending too much money every month and how to stop.

If you need an example, take a look at the 50/30/20 budget that I mentioned earlier.  Tailor it to your own needs.  If you have high expenses and can only afford to put 10% away for savings, maybe adjust it to a 65/25/10 budget or something.  A budget is a guide and a path forward, not a restriction.

2. Refinance Debt

There are so many options available nowadays to refinance debt, it’s insane.  Take a look at Lending Tree or Credible, where you can find low-interest loans to refinance your credit card payments.  You can pay off credit cards immediately and pay significantly less per month, giving you more money in your budget.  If you’re drowning in debt, you should stop paying so much interest and keep your money to yourself.


3. Get a Side Hustle

I’m a huge proponent of a side hustle.  I think everybody in America should establish a secondary income stream on the side, and I talk about it a lot (The 10 Best Ways to Start Making Money as a Beginning WriterFive Side Hustles to Start TodayHow Do You Make Money?).  If you’re not earning some extra money on top of your day job, it can be difficult and frustrating to pay down your debt and expand your budget quickly.

4. Use the Snowball Method for Paying Off Debt

The snowball method is a fun one, and you can use it in conjunction with your refinancing or other actions.  Essentially, you pay off a small debt (say a $25 monthly credit card payment).  Once you’ve done that, you keep your budget the same, the additional money just goes towards the next piece of debt (that way you’re paying $75 a month instead of $50 for your next credit card).  It gets you out of debt quickly and gives you the motivational satisfaction of having accomplished something.

5. Start with Just $500 in Savings

What can you do with $500 extra?  I’ve already tackled this topic in detail, but I’ll say it again – Researchers have shown that just having $500 in savings will prevent 75% of your emergency spending issues.  There will probably be times when you have to spend more than that, but for the random problem that crops up every couple of months, you can likely solve it with just $500.  If you had to pay that on a credit card, that $500 builds up with interest pretty quickly.

If you can’t muster any more, put $500 in a savings account for emergencies, ASAP.  Then, when an issue arises, avoid using credit or going into debt in any way to pay for it.  If you can do that, you’ll already be making headway because you won’t be adding debt to debt.



You’re not alone.  Nearly 60% of Americans live paycheck to paycheck, and millions of families are living above their means every month.  But if you can make a few simple changes, you can start to fix your financial situation forever.  This is not a fleeting issue – your finances determine the vast majority of what happens in your life.  Get it fixed today and start your path towards financial freedom.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s