Spiralling debt, unaffordable bills and a hard-to-maintain lifestyle are all consequences of living beyond your means.
Whether you’re spending all your money as soon as you get paid – leaving you with little for the rest of the month – or racking up credit card debt, living beyond your means can leave you in dangerous financial situations.
In this article, we’ll look at what living beyond your means actually is, what are some of the warning signs, and how to avoid it.
What does it mean to live beyond your means?
Living beyond your means refers to spending more money than you can afford based on your income, assets, and financial obligations.
It can look different from person to person, but it usually involves things like using credit, borrowing money or depleting savings to maintain a particular lifestyle.
The lifestyle will exceed your financial resources – for example, it could include things like living in an expensive house with high mortgage payments, taking out finance on a flashy car or going out to eat at high-end restaurants.
How do people usually get into these situations?
Not living beyond your means might seem simple – if you can’t afford to live a certain way, just don’t.
In reality, however, it’s not that simple. In today’s consumerist world, with adverts for all sorts of products all over social media, it’s easy to get lured into buying sophisticated items one might not necessarily need.
Other people also like to feel instant gratification, buying items as a “reward” as soon as they receive their wages.
Or you may fall into this trap due to poor budgeting and financial planning, lack of financial literacy or peer pressure.
Ramifications of accumulating debt
Accumulating debt by living beyond your means can have far-reaching consequences. Here are some of the issues that accumulating debt can cause:
- Financial stress and anxiety, negatively impacting your mental and emotional well-being
- Straining relationships, causing conflicts and arguments over financial matters
- Further difficulties with finances, due to high interest rates and late payment fees
- Anxiety about the possibility of bailiffs taking items away to repay debt, with the possibility of homelessness
- Hampering the ability to save for emergencies, retirement, or other important life goals
- Debt dependency, where you continually borrow to sustain your lifestyle
Ways people live beyond their means
It’s important to note that accumulating debt isn’t the only way that people live beyond their means. In reality, there are several different examples. Indeed, some max out credit cards to afford high-end fashion or first-class travel experiences.
Others spend all of their money as soon as they receive it or shortly after, leaving them with minimal funds for the rest of the month and no chance to save for emergencies or retirement.
Another example is addictive behaviours such as excessive gambling, including playing in the best high roller online casinos that often evoke a sense of luxury and prominence.
However, while the potential rewards may be alluring, it is generally a slippery slope that can result in substantial financial losses.
How to stop living beyond your means
If you’re reading this article and nodding your head in agreement, it might be useful to learn some tips to stop living beyond your means.
The first step is recognising that you have unhealthy financial habits. Then, there are some useful steps that you can take to break the cycle:
- Create a budget: Develop a realistic budget that outlines your income, expenses, and savings goals. You could use various apps to do this – or create your own budget in an Excel spreadsheet. Track your spending and identify areas where you can cut back.
- Prioritize essentials: Ensure that you cover your necessary expenses, such as housing, utilities, food, and healthcare before allocating funds to discretionary items.
- Reduce debt: Develop a repayment plan to tackle your existing debts systematically – try to move credit card debt to 0% interest cards if possible.
- Practice delayed gratification: Instead of instant purchases, think about items for 24 hours to one week before buying them. This will help you decide if you really want and need them.
- Increase financial literacy: Educate yourself about personal finance, budgeting, and investing. This knowledge will empower you to make informed financial decisions.
- Consider what your “living beyond your means” looks like: Are you always jetting off to tropical destinations, or do you buy too many clothes? Once you diagnose the sticking points that cause you to live beyond your means, you should be able to cut back.
- Adjust your lifestyle: Once you’ve discovered your sticking points, work out how you can cut back on them, making necessary adjustments to align with your financial means.
Final thoughts
Living beyond your means is a financial minefield that can have dire consequences. But by recognising it and taking control of your spending, it’s possible to break free from the cycle, enabling you to save and enjoy financial security. It can be tough to make the change, but it’s no way impossible!
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