Six Tell-Tale Signs that You’re Spending More Money than You Can Afford
The secret to growing wealth over time is living below your means. This simply means that you need your spending to be consistently less than your take-home pay.
Unfortunately, many people find it difficult to keep their expenses in check. If you’re one of them, here are some warning signs you need to watch out for to avoid overspending once and for all.
A Lack of Savings
Saving is a big part of achieving many of your goals from buying your first home to setting up a comfortable retirement.
If you find yourself with no money left to save at the end of each month, it’s probably time to start evaluating where your salary is going.
Negative Net Worth
Another sign that your overspending is that you have a negative net worth, which means you owe more money than you have. This is a situation that a reported 15% of American households find themselves in.
One way to get out of this predicament is to declare bankruptcy. Just be reminded that this won’t absolve you of all debt and can even affect your chances of being approved for loans in the future.
One mistake you may be making is that you’re considering your pre-tax earnings when budgeting for your expenses. Remember that your take-home pay can be significantly different from the amount you’re left with after you pay federal and state taxes.
Of course, it could also be the case that your lifestyle is simply too expensive to keep given your current pay grade. List down all of your fixed and variable expenses to see how the total compares to your salary.
If your spending is more than the money coming in, you’d likely end up in debt.
Spending to Impress
Another red flag that you’re spending more than you can afford is that you have the tendency to buy expensive things or experiences to impress or keep up with your friends.
While doing this might make your social life thrive, it also puts your financial future in jeopardy.
Not Paying Credit Cards
Using credit cards come with a lot of perks. However, you won’t get to enjoy these if you fail to pay back what you spend.
As credit cards often come with high interest rates, you’d soon find yourself saddled with more debt than you can handle. It’s recommended that cardholders regularly pay their remaining balance or switch to a 0% interest credit card.
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