by Oscar R. Mondragon
Can You Afford The Life You Live? 5 Signs You Need to Notice Today
People say that as your income increases, so do your expenses. You might plan on making a budget or saving more as part of your retirement plan, but it isn’t uncommon to find that you have more month than you have income.
This is a prime indicator of the fact that you are leading a life that you can’t afford. In this article, we will look at 5 signs (red flags) that you should start noticing today about your lifestyle. If you find any two out of five flags present in your life, you are living a life that you simply can’t afford.
Signs Your Lifestyle May Be Too Burdensome For You
You're Always Afraid of Looking At Your Bank Account
If the above image represents you, it’s likely that, deep down, you know you are spending more than you have. This realization usually comes when you let the fear of being left out of social circles drive you to spend more. Such behavior is perhaps one of the most important elements of an overspending lifestyle.
You Are Unable To Pay Off Your Credit Card
Credit cards have now become the primary payment method for most as they offer incentives upon incentives to spend and consume. If you find that you always carry a balance on your card, it’s a sign that you have crossed the ‘affordability’ mark. Try to revert to spending cash instead of plastic money to introduce a little balance in your life.
You Are Unable To Save
Typically, we advise our clients to allot 15%-25% of their income to savings. However, if you find that you are unable to save even 5%, it means that you are living beyond your means. This is even applicable if you are currently paying off a loan. To do this, you might have to give up certain luxuries for the short term. If you’re leasing a car or house you can’t afford, it’s time to reconsider.
You Don’t Have a Rainy Day Fund
There are some transactions you may feel forced to put on your credit card because you have no other way to pay for it, such as getting a punctured tire fixed or replacing your dishwasher. We call this a ‘plastic pit’, where you can pay for something using your credit card but you have no ability to pay for it with cash or out of your bank account. We suggest creating a rainy day fund of at least $5,000 to start with. Ideally, 3-6 months’ worth of your monthly expenses. This will help keep you away from ‘bad’ debt.
You Don’t Have A Budget
Having a budget is a crucial element of financial planning. Any financial advisor, worth his/her salt, will recommend having a written budget or plan to help you manage your finances better. If you don’t have one or find that you can’t stick to it, there is a good chance that you are leading a lifestyle you can’t afford.
Going ‘all cash’ or trying to cut down costs can be rather challenging. If you need help or want to learn how to change your current lifestyle, we recommend giving our expert advisors a call and letting them help you get a strong grip on your finances.