Last Updated on 1 April 2022 by Gertrude
Articles and books telling us to live below our means irk me.
We cannot be the same in our spending; some people have affinities for expensive things, others don’t.
What is ‘Living Above Your Means?”
There are articles and reports of the most successful celebrities going bankrupt.
The financial advisors of these celebrities work round the clock to help these wealthy individuals start living within their means.
What can you do to avoid living above your means?
And you ask, does the money come to you then it disappears?
What makes money go?
What are the signs I must avoid for living above my means?
Have you ever found yourself stressing about money?
Do you struggle to pay for things often?
Is money always tight for you?
If your answers are yes to these questions, then chances are you are living above your means.
Oftentimes, our financial difficulties are a result of living above our means.
Millennials are a notorious bunch who want to live above their means by keeping up with the Kamaus.
Financial goals help avoid blowing away your money.
It is easy to know if you are living above your means.
A lot of us just ignore it.
Are you ready to swallow this bitter pill and find out if you are living above your means?
In this article, I will give you all the signs that indicate you are living above your means.
What Does It Mean to Live Above Your Means?
If you are making Ksh. 30,000 per month, but your expenses are Ksh. 100,000 a month, then you are living above your means.
Living above your means to spend above your limits.
It doesn’t matter if you are rich or poor.
Even the world’s richest man (as of 2021/2022) Elon Musk, cannot afford to go past his spending limit.
21 Signs You’re Living Above Your Means
So how can you tell that you are living above your means?
What are the signs?
Well, here are the telltale signs that you are living above your means.
- You don’t have an emergency fund.
You ask: what is an emergency fund?
An emergency fund is a money that you set aside to act as a cushion in a situation where you lose your current source of income.
This money is going to help you live off a given period of time until you get back on your feet.
Think about this for a moment: if you lost your job today, what would be the first thing you do?
If the first thing you think about is moving to a smaller house from the house you are living in then it means you are living above your means.
You have to have an emergency fund that will last you 3 to 6 months to pull yourself back up. Life happens. Your business may fail, you may lose your job or go through pay cuts.
You have to know that you are prepared when and if this happens.
Failing to have an emergency fund is a clear sign that you are living above your means.
- You are not saving or investing
A lot of people love the idea of saving and investing their money, but very few people actually do it.
If you are not saving or investing at least 10% of your income every single month, then you are living above your means.
You could either be paying off expensive bills or you have poor financial habits that cannot allow you to put some money aside to secure your financial future.
If you are not saving or investing your money, you are really treading dangerous waters.
If you want to learn how to save, I would recommend reading the Richest Man in Babylon to give you a good head start.
- You are living paycheck to paycheck
Living paycheck to paycheck means that you use all your earnings on expenses.
A person who lives paycheck to paycheck spends all their month’s income before they get the next one.
Does this person sound like you?
Ask yourself this: How long could you survive or afford to pay your expenses if you lost your primary source of income today?
A good sign that you live paycheck to paycheck is that you start spending your money immediately you are paid.
Your money can’t rest in your account because you either have bills to pay or you do not have the financial discipline to let the money sit and use it much later.
If you find yourself complaining too much about the 101 days of Njaanuary, then this is a sign you are living paycheck to paycheck and above your means.
- You are constantly in debt
If you cannot pull yourself out of your current debt, then you are living above your means.
You are always taking out loans and your debt balance keeps on growing every day.
You have debts from friends and you have exhausted all the loan apps.
You are getting debt collection calls from your creditors and have been blacklisted by the CRB.
You live in an endless cycle of taking loans to pay loans. If this is you, then you need to stop living above your means.
Always remember to separate wants from needs and sometimes if you have to take a loan to get something, you do not really need it.
- You use loans to upgrade your lifestyle
Using loans to upgrade your lifestyle is one of the clearest signs that you are living above your means.
You want a bigger phone, a bigger TV or a three-bedroomed apartment but you cannot afford it.
So you take out a loan to help you get to that lifestyle.
You are living above your means!
You have to comfortably upgrade your lifestyle without taking loans.
That is when you will know that you are living within your means. Evidently, that is the best place to be.
- You are spending more than 25% of your income on rent.
Can you calculate the amount of money you have spent on rent ever since you have started living where you are living now? Do that just now. Right?
The results are staggering. You have been spending a lot of money on rent with or without realising it.
A rule of thumb is that your rent needs to take less than 25% of your income.
If you go any percentage above that, then this is a sign that you are living above your means.
My advice for most people in their 20s who are just starting out is, if you can stay home with your parents, you can do that and save on rent before you are much capable of moving out.
- You don’t know how much money you are spending every month
This is also another clear sign that you are living above your means.
If you cannot give an account of where your money has gone at the end of the month, like putting your finger on something tangible that you have done with your money, then you are living above your means.
You are also not alone.
A lot of people are participants in this.
You can break this habit by starting to track your expenses and know how much money you are spending in a week or month.
You will be shocked by the results, but it is going to be worth it because you will know if you are living above your means or not.
- Your credit card balance keeps on growing
If you use your credit card too much and you are not able to cause a dent in your credit card balance, you are living above your means.
Do not use your credit cards to fund your lifestyle or use it for everyday expenses.
Your credit card balance will keep on growing and if you cannot pay it off in full, you will be left with high-interest debt and a low credit score to feel humiliated about.
When you use your credit card, make sure you prioritise what you are spending.
- You are spending more than you earn
This is also another clear sign that you are living above your means.
If you calculate your expenses and you find that they exceed what you earn as income in a month, then you are living above your means.
You have to go back to the drawing board and create a budget on how you are going to manage your finances and your spending.
If you do this, you will be more aware of things that you do not need.
You will also avoid getting into debt this way.
- You do not budget.
Budgeting allows you to create a spending plan for your income.
When you budget, you will create a list of all the important bills you need to pay and you will also avoid working outside the budget on things that you do not need.
A lot of people have said that budgeting has really helped them to live within their means.
They understood themselves and they eliminated unnecessary expenses and debts.
If you are not budgeting your money, then you are living above your means.
- You make financial decisions based on future income
If you are making any financial decisions based on future income that you are anticipating, you are living above your means.
You want to move to a bigger house because you overheard your boss want to give you a promotion. What if it doesn’t happen.
If you rely on a bonus, promotion or an inheritance to upgrade your lifestyle, then you are living above your means.
Work with what you have. Make sound financial decisions based on your current financial status.
You will save yourself a lot of frustration this way.
- You are not saving for retirement
Do you have little or no savings for your retirement?
Then you are living above your means and clearly setting yourself up for failure.
You need to prioritise your future self more.
Older people face a lot of health complications so imagine a situation where you cannot afford medical care because you didn’t prioritise saving for retirement.
You have to put retirement savings in your budget if you want to live within your means.
- Other people influence your purchases.
I’m told that your spending is influenced by 3Fs (FOMO, Friends, Family).
Is your FOMO (Fear of Missing Out) mentality making you live above your means?
Are your family and friends always asking you to go out on expensive dates you cannot afford?
If your answer is yes to these questions, you need to reevaluate yourself.
Keeping up with the Joneses is another pandemic that has gripped the hearts of many youths in Nairobi. You have to learn self-restraint if you want to make sure you live within your means.
- You purchase expensive items on emotions and whims.
When you go out and buy very big-ticket items without planning for them in advance, then you are living above your means.
Things like cars and houses are not things that you buy on a whim.
You have to plan and save for it before you go out and buy them.
Buying large expensive items based on emotions should show you that you are living above your means.
You will end up being strapped in debt that is going to be difficult to get out of.
- Your debit balance has remained the same for years.
If you cannot even scrape the surface of your debt balance in 5 years or less, then you are living above your means.
People who cannot easily pay off their debt are most likely taking out loans to fund their lifestyle or to pay other debts. This is why their debts keep growing.
If your debit balance has remained the same for years, you need to downgrade and stop living above your means.
- More than 28% of your income goes to your house.
This is the typical income versus the house.
If the amount of gas, heat, electricity and water that you pay is more than 28% of your income, then you are living above your means.
This is a result of living in places that have very high utility rates that you probably can’t afford.
It is wise to keep your housing expenses at or below 28% of your total monthly income.
This will allow you to live a balanced lifestyle and you will also have some funds available for other areas of your life.
The 28% recommendation may be hard if you live in Nairobi, but it is still a worthwhile goal to strive for financially.
- Money is tight at the end of the month.
If your money is tight at the end of the month, then it means that somewhere you are spending above your means.
If you cannot afford to have some little money aside to eat out or get yourself a pair of shoes because you have to settle bills or pay off loans, then you are living above your means.
You have to go back to your budget and rule out anything that you feel you can live without so you can make yourself feel free.
If your money is tight, you will always feel a lot of anxiety and pressure towards money.
- You own a car or a house you cannot afford.
So you moved into a house that you took a huge mortgage loan on and you cannot afford to pay for it.
Or the car that you drive is too expensive for you.
It is clear that you have a lifestyle that you cannot keep up with.
It is a sign that you are living above your means and you need to find out how you can rent out your car or house to support yourself.
- You can’t pay your bills on time.
If you always have to ask the landlord to give you an extension or your creditors to give you more time to pay your bills or debts, then you are living above your means.
If you are always also avoiding your bills, you are living above your means.
When you live within your means, you will not be too stressed about the end of the month approaching or when your boss doesn’t dispatch your salary on time.
You will have some money set aside for emergencies that will fill your cup at the moment.
- You have a very low credit score
Having a low credit score means that you are not paying your credit balances on time.
If you are only making minimum payments on your credit balances, then it means that you are living above your means.
Avoid maxing out your credit and overusing it.
You will be growing your credit card balance and it will be difficult to pay off any high-interest debts.
My advice is to treat your credit card as cash or avoid using it altogether for a while.
- You worry about small expenses
If you worry too much about small expenses, you are living above your means.
If you think that buying a bad of chips will make you lose your money, then it means that there is one area you are overspending.
You need to create a budget and track your expenses so that you can accommodate other small expenses that are not always included in your budget.
22. Your taste is expensive.
I have expensive taste in jewellery, clothes, handbags, sunglasses, shoes, houses and experiences and these things cost a lot of money. There’s no need to have guilt feelings about your personality.
The big thing here is to realise you have a high-end taste for things and ask yourself how you will contribute to making your lifestyle possible.
Living below your means doesn’t help if you don’t become honest with yourself.
Why Is It Important to Live Below Your Means
It’s important to live below your means to avoid health complications like depression and stress.
Living below your means doesn’t mean being stingy with yourself.
It means coming in touch with who you are and understanding what makes you live above your means.
You may live above your means because you believe in stretching yourself to achieve and have the discipline to achieve what you want.
Or you may live above your means because acquiring things make you happy.
You shouldn’t feel ashamed to be yourself.
Ask yourself, do you want to change your life after realising you live above your means?
What will you do to change your financial life?
FAQs on Signs You’re Living Above Your Means
- How do you tell if someone is living beyond their means?
You tell someone is living beyond their means when they:
Live paycheck to paycheck
Stop contributing to their retirement funds
A big portion of their income goes to housing
Have no savings
Have a car they cannot afford
No emergency fund
Buying to keep up with the Kamaus.
2. What are the negative effects of living above your means?
The negative effects of living above your means are stress and depression.
3. How do I start living below my means?
Start living below your means by tracking your expenditure, taking an extra job to help increase your income and being sincere with yourself.
4. Why is it important to live below your means?
It’s important to live below your means because you have peace of mind.
5. What is it called when you spend more money than you have?
It’s called overspending when you spend more money than you have.
6. What determines your wealth?
The value of assets determines how much wealth you have.
Resources Related to Signs You’re Living Above Your Means
Don’t tell me to live below my means. I feel blocked.
Tell me to increase my income because I have the potential, will and strength to achieve the kind of life I want.
Articles telling us to live below our means disturb me.
Some people thrive on pressure – they want to push their limits in spending so that they push themselves to earn more.
Identify your personality – what do you love to do with the money?
Is your budget, like mine, two pages long each month?
What can you do to make yourself achieve the kind of life that gives you pleasure?
Some people thrive on living below their means, some people cannot.
Don’t enjoy the fun parts of life at the expense of saving or investing in your future.
Reprogram your mind and set new goals.
Change your habits and stretch your dreams to achieve the lifestyle you crave.
Stretching your dream can be as fun as getting another job or starting a business or investing to have an extra income to secure your future.
No matter how much pleasure you achieve from buying things that make you happy, always plan for the future.
So, save for retirement, have an emergency fund and save to invest.
Set aside extra money set aside to help you get things you love.
Avoid being caught up in this social media wave or being caught up in flaunting everything that you have. \
Buy things or experiences because they are what make you feel rewarded for your effort.
Keeping up with the Kamaus, or anybody is the real killer of wealth.
Be wise and live as per your means.
The more sincere you’re with yourself, the bolder your financial steps to financial freedom become.
Are you struggling to live below your means and cannot?