Living above your means simply indicates that you’re spending more than you’re earning and relying on credit or, more than you should be based on your income.

In 2012, the Australian Bureau of Statistics (ABS) warned that many people across the country are living beyond their means. The figures showed that one in seven households are spending more than they bring in.

Australians are currently living with higher debt, which is equal to 1.5 years of income whereas in the past they had debt equivalent to half their annual income.

Most people live above their financial means without even noticing what they’re doing. This leads them into deep financial trouble and, they end up losing everything they worked hard for.

This article will make you aware of all the signs that show you’re living above your financial means so that you can detect the issue at an early stage.

These signs will help you assess yourself to determine the kind of lifestyle you are living.

#1) You are failing to save 5% or more of your income

When you’re living within your means, you always manage to save a certain percentage of your income. All your monthly expenses should be within your income range to avoid borrowing every time you encounter problems.

However, it is not like saving money is compulsory or, when you do not save, you’re automatically living above your means but, if you’re employed you should have enough money to last you through the month.

#2) You have no funds for emergencies

Studies show that to save at least  $500 monthly is enough to cover 75% of emergency financial situations. When you encountered pneumonia and had to pay your co-payments, you ended up racking up more credit card debt.

When you do not have a small savings fund, you’re likely to often use debt to pay for your immediate needs, and that leaves you deeper in debt.

#3) Living paycheck to paycheck

If you are struggling to cover your expenses throughout the month before your next paycheck, it specifically means that you’re living beyond your means.

Living from paycheck to paycheck does not necessarily mean you lack savings, but it means you are spending more than you should be. Overspending means that you are buying things that you do not need.

#4) Using your credit card more often

When you use a credit card, you’re tempted to swipe for everything without realizing how quickly the balance is growing. And when the bill comes, and you’ve been charged more than you can afford to pay, and are paying interest on the money you’ve already spent.

You are more likely to pay less than you should have paid back. A credit card allows you to buy things you really cannot afford with your normal paycheck. You even cover your travel costs with your credit card.

#5) You can only afford to make the minimum payments on all your debts

When you only afford to make minimum repayments, it’s possible that your other debts are left unpaid. The more time you take to finish off paying your debt the more you’ll pay due to the interest rates.

When you’re not having any financial trouble, you will be able to pay off your debts with ease and speed. Making only minimum payments simply means that your budget is being stretched too far to truly pay off the debts you’re carrying.

#6) You use money borrowed from friends and family to pay off bills

If you’re struggling to pay off your bills without getting into debt, you have a serious problem. Some people go to the extent of getting a loan to pay off some debts.

When you’re living within your financial means, you can cover your monthly bills with your regular income  (ideally, these would be less than 50% of your after-tax income).

#7) You do not want to discuss finances with family and friends

Discussing finances does not mean you should tell your friends and family how much you earn. Rather, it means having financial topics like saving and investing to discuss. When you’re not interested in such topics, you may have a problem.

If you feel like people are going to judge you, you should be worried about your finances because your gut is telling you that your situation is not normal. And the best thing to do in such situations is to talk to someone you trust or even a proffesional, explain the issue, and that you are having trouble.

#8) Paying regular overdraft fees

Overdraft fees are charged when your account has reached negative numbers. Although overdraft fees can happen to anyone at some stage in life, when you start to pay them more often because you do not have any money in your account, your lifestyle is not sustainable.

#9) You do not budget

When you don’t have a budget, you start buying things that you don’t really need. However, when you dedicate time to become properly acquainted with your financial capabilities and responsibilities, you know when you cannot afford to do or buy something and when you can’t.

And when it is time to buy clothes or groceries, you only buy what is on the list you have created. People who are living beyond their means, refuse to acknowledge their financial limitations, constantly spending without any regard to what they can and cannot afford.

Change your ways today – no more living on paycheck

Living above your financial means is so amazing in the short-term as people will notice your lavish spending and compliment you. However, it’s dangerous to your finances and long-term well being.

Living a lie might lead to have a lot of health and emotional problems. When reality hits hard, you might be stressed, depressed, and broke. And you might lose all your assets. Here are the few things you might want to do, to stay within your lane.

Start budgeting

Your budget should contain all your monthly expenses and be used to guide your spending. Try to scratch out everything that you do not need and see how much you save. Budgeting is not easy, but it’s a great way to open your eyes to where you’re spending too much money every month and, how to stop.

Save as much as you can

On the budget you have created, if you have managed to cut out some unnecessary expenses, you can save the amount each month. Although it will not seem like much, it will make all the difference when you encounter cash emergencies.

When you’ve managed to save the money you cut from your budget, try to set a distinct amount that you will save monthly, which is more than the one you are currently saving. Get your spending problems fixed today and start your path towards financial freedom.