Due to a tumultuous global economy and plodding recovery, more and more families are finding themselves living paycheck to paycheck. The security and peace of mind that came from being a member of the working class is becoming more and more difficult to obtain. Families are living with the reality of stagnant wages in the face of rising prices and lessened job security. Globally, food and housing prices continue to climb due to unpredictable weather and pressures from larger populations. Many families are looking for any room in a budget to adjust costs and reduce the household’s financial pressures. For even the most budget-minded individual, there are a few serious red flags that might indicate to you that you may be living beyond your means. Any of these situations can be adjusted to help reduce your financial stress, however coping with several at once may indicate that your family is consistently struggling to live within your means and serious financial planning may be in order.
Making only minimal credit card payments can be a sign of temporary financial issues, however quite frequently this can indicate that you have been using your credit cards for purchases you really could not afford and cannot pay off. Credit cards can carry very high interest rates and it can be very easy to find yourself underwater due to finance charges. Late fees or over the limit fees can only add to the problem and can turn even a small balance into a mountain of a finance problem. Making the minimum payments monthly on one or more cards or paying only minimums for six months or more is more than a temporary setback, it is an ongoing problem.
Utilizing payday loans can often get you through those times where your paycheck won’t get you through the end of the month, a sudden expense comes up and there is no opportunity to wait for payday. Payday loans are very short term loans that are made to individuals with poor or recovering credit with no collateral. Payday loans however carry very high interest rates and a better deal can often be found in short-term loans from reputable banks and lending institutions. Some individuals find themselves utilizing further payday loans to cover previous loans, causing this lending practice to become a vicious cycle that is nearly impossible to escape. If you are tempted to use a payday loan, first ensure there is no way to wait on the purchase until the money becomes available, and secondly try to use other options for borrowing that may use lower interest rates, such as family members or your own banking institution. Check out this personal loan vs payday loan comparison.
Spending to support a lifestyle has gotten more and more common in our material-focused culture. Children often want the best (and most expensive) of clothes and shoes and parents are concerned that without providing name-brand items, children may be targeted by bullies. Parents often want to be rewarded for their hard work as well, and avoiding the “I deserve it” mentality can be very difficult when a purchase is not in the budget. If you are purchasing cars, clothes, or other items because you don’t want to be seem without them or you simply have trouble motivating yourself without a reward, you may be living beyond your means and purchasing items you want and not necessarily need. This can be a very difficult habit to break and is even more difficult to explain to children, but it is vital that you and your family differentiate between wants and needs and prioritize spending accordingly.
Spending the majority of your income on housing may require a change in scenery. Everyone wants to live somewhere safe and secure, however if you are spending more than one-third of your income on housing, you might need to consider down-sizing. Housing is often the largest cost in a family’s budget but paying rent or a mortgage payment should not leave you penniless or unable to make ends meet. Prioritize safety and local resources when choosing a home and recognize that not all features that home-buyers enjoy are really necessary. Over the lifetime of a loan, the extra cost of a dishwasher or cathedral ceilings in the purchase price of a home may seem far more money that they are worth. A home is an investment, but it should never consume the majority of your income and if you were to experience a sudden loss of income, you do not want to risk the loss of your greatest investment. Check out this piece on mortgage affordability.
Surviving the current economic conditions takes planning and resolve. Ensuring you live within your means is the best method to cope with changing financial situations and protects you from sudden, unexpected changes. Financial planning ahead of purchases can save you and your family from headaches down the road.
