In most cases, people who are living beyond their means have their bad spending habits to blame for it. In fact, a lot of us are quick to judge overspenders. We think that they are irresponsible with their finances and that led them into debt.
While this may be a logical assumption, it is not always true for all situation. Believe it or not, sometimes, the financial situation of a person forces them to live beyond their means. These situations include having to deal with a sudden illness that bloats your expenses or leaves you unable to work. It can also be a job loss that completely removes your source of income. You can also be forced to deal with an economic crash that is similar to what happened during the Great Recession.
There are so many things that could happen to force you to live beyond your means. These are the situations that you have no control over. However, you need to know that although these situation happen by chance, it does not completely rob you of control over your finances.
While the rising cost of living is sometimes enough to push you over the edge of your financial situation, you can still keep it from destroying you financially. According to TradingEconomics.com, the average inflation rate of the US is at 3.32%. If you think about the rise of the average worker’s income, it may not be too difficult to connect why some people are living beyond their means. But with some careful planning, tough sacrifices and a lot of discipline, rising above these challenges may not be as impossible as it may seem.
Options to help improve your personal finances
One thing is for certain, if you want to improve your financial situation, you have to stop living beyond your means. There is no ifs or buts about it. Regardless of the situation that you are in, you need to take control of your finances and work on improving it for the better.
That is not to imply that this will be a very easy task. It is not. Admittedly, a lot of Americans have said that they are finding it hard to keep up with the cost of living in this country. This data came from People-Press.org and it revealed how 55% of households are falling behind the cost of living. Only 6% said that their income is rising faster. This shows that although the job market may be improving and more people have the means to spend, it does not mean everyone is able to live below or even within their means. It is tough because of the rising costs to live in this country.
But despite that, we all know that we cannot continue spending more than what we earn. We have to stop it because this spending puts us in debt. If you are earning $2,000 and you are spending $2,100 a month, that means that $100 is in debt. In one year, that is $1,200 – less interest and other fees.
In case you are in this financial situation, there are things that you can do to get out of living beyond your means. Here are some of our tips.
- Move to a smaller home. A smaller house will give you a lot of savings. If you are renting, that would mean a lower rental cost. A small home also means you are not spending too much on utilities. After all, a bigger home is more costly to heat or cool as the season changes. In case you own your home, you may want to sell it and use the built equity to find yourself a smaller dwelling place. That should help you pay less on mortgage. If the selling price of the new home can be covered by the equity of your previous home, you can probably pay it in cash and get rid of your mortgage debt.
- Declutter your life. Another tip is to get rid of the things that are just wasting space in your home. This includes old clothes, accessories, cabinets, and other things that you have not used in a year. You can sell them off and use that extra money to pay off debt or put in your savings.
- Cut up your credit cards. In most cases, people who are forced to spend beyond their means rely on their credit cards to pay for what is lacking. This is a very bad idea and it can quickly spiral out of control. Getting rid of credit card debt is tough because of the high interest rates. Do not put yourself in a position to have this type of debt.
- Get rid of your debts. While we are at it, you may want to get rid of your debts altogether. If you have balances, pay them off. Your current financial situation could make it hard but making sacrifices here and there should help you come up with the money to make payments. You want to get rid of the debt because of the money you are wasting on the interest rates.
- Ask for a raise. If your income is not enough to cover your expenses, it is also a good idea to ask for a raise. If you think you deserve one, this will really help you out of a difficult financial position. If this is not possible, opening other sources of income should help too.
- Live in a low cost community. Just like moving to a smaller home, living in a low cost community, city or state compared to the one you are living in can be a great help in your finances. Of course, this will depend on your career but if permitted, this should allow you to spend less each month without having to change anything about how you live.
- Make frugal budget and stick to it. Lastly, you want to create a frugal budget and use it to lower your expenses each month. This type of budget will not restrict you. Instead, it will encourage you to work within your income and concentrate on the important expenses in your life. Anything else that you cannot spend on will motivate you to be creative. For instance, if you love dining out but your budget cannot afford it, then you just have to find alternative ways to satisfy this want.
Grow your finances by living below your means, not within it
Bottom line is, you need to stop living beyond your means because it will never lead you to a better financial situation. In fact, the opposite will surely happen. It is only a matter of time. What you need to do is to live below your means.
Now some people make the mistake of living within their means. That is an improvement with living beyond your means. However, you need to know what will happen is you live within your means as opposed to living below your means.
On living within your means
When you live within your means, you are not in debt. However, you are not improving either. This means spending $2,000 if you have a $2,000 monthly income. There is nothing wrong with this – but only as long as you can avoid financial troubles. Once an emergency happens and you are forced to spend beyond that $2,000 – what are you to do? There is nothing left of your monthly income and that puts you in a very vulnerable position. You may not be in debt right now but you are one emergency away from borrowing money.
On living below your means
On the other hand, if you live below your means, you are spending but you make sure that there is extra at the end of each month. In an article published on CBSNews.com Suze Orman gave 3 keys to financial happiness. One of them is living below your means but – she said that it should be within your needs. That is also very important because it implies that you have to spend only on those that you need. Even if you can afford, do not buy it if it is not necessary.
Here is a video that will provide you with tips on how to live below your means.