Living Beyond Your Means
1. Low Credit Score
Having a good credit score is extremely important for anyone who is planning on buying their own home in the future. Not only that, if you are planning on financing your car or even getting a phone on contract, you need to have a good credit score in place.
You want to have a high credit score to show lenders that you are responsible with your money and can pay bills on time. If you have a low credit score, this can display to lenders that you are living beyond your means and are not a suitable candidate for a loan.
There is no need to panic if you do have a low credit score, but make sure you are paying down debt and do not apply for any more credit cards. Time and regular payments are the only way that you can improve this.
2. You Are Not Saving Enough
If you want to have a comfortable retirement, you need to start saving now. Most financial advisers would recommend that you save around 10% of your gross income for your later years.
If you are living beyond means, chances are you do not have this money to put aside. Furthermore, you always want to have a safety pot of money that you can dip into should any emergencies come up. This allows you to carry on saving without having to be sidetracked on your goals, or, worse, going back into debt.
3. Your Spending More on Your Credit Card
If you currently have a credit card, you should be placing your focus on paying this off completely. However, if you are finding that your credit card debt is rising, you are living beyond your means. Additionally, you need to pay off as much credit card debt as you can, rather than only the minimum payments.
Going forward, only put on your credit card what you know you can pay off at the end of the month.
4. Your Mortgage Is Too Big
If you already have a mortgage, have you considered that this may be too big and causing you to live beyond your means?
Work out what percentage of your income is going towards your mortgage, council tax and insurance each month. If this is more than 25% to 30% of your income, then it looks like your mortgage is a curse rather than a blessing.
It is mortgage lenders who have decided on this threshold number as, for the most part, it allows people to pay their mortgage and bills, but still enjoy a good quality of life.
5. Spiralling Bills
In the UK, it is now common practice to pay off bills in monthly instalments and put items on our credit cards. However, as we start to add up all these monthly instalments, it really can eat away into your income each month and quickly become overwhelming.
While you may currently have the mindset of ‘what’s an extra £60 per month, right?’ this can lead to you living beyond your means. To try and get control of your monthly payments, lay each of these bills out in front of you. This could be internet, TV, mobile phone bills and other gadgets that you are paying off.
Try to look at where you can cut down, such as reducing your television channels, to save extra money each month.
Living beyond your means is easy, but getting control over your finances can be hard. If you recognise these points in your finances, start working towards better financial health before letting the problem get worse.