Are you living beyond your means?
Living beyond your means?
No judgement, we’ve all been there at one point or another. But how do we curb this state of affairs?
We all know the story.
You get busy with family, kids and the general day to day juggle and demands of life and work.
You forget about the budget and the savings goals you have in place in order to afford the lifestyle choices you make like holidays, the new car, weekends away and the odd dinner or long lunch here and there, is this still living beyond your means?
But you still buy these things anyway, on credit, promising to yourself that you will pay it off soon.
Somewhere along the line you realise you are actually carrying this debt rather than paying if off or worse still, you simply can’t pay it off because there’s nothing left at the end of the month.
You can’t pay the bills on time, you don’t have any savings that you can use to help you out and you find yourself constantly robbing Peter to pay Paul.
Suddenly you realise, that maybe you’re living a little larger than maybe you ought to be.
Don’t get me wrong, we all have months where we spend more than we planned too.
We’re all human!
Maybe we splurge on something nice (or several things) or maybe its due to circumstances beyond our control.
But whether it’s a shopping spree or car repairs bill, we recognise these are special occasions or out of the ordinary expenses.
These are part of life. We pay them off and find ourselves back in the black again quickly.
These aren’t the kinds of expenses I’m talking about.
I’m talking about the regular, day to day lifestyle choices you make that you simply can’t afford.
The reality is that when you’re living beyond your means, you’re buying more than you can afford.
You’re saying “yes” more often to the things you want, than you can actually afford.
So what do I say ‘no’ to?
Now this is not the part where I tell you that your daily coffee is the culprit.
I’m not even going to tell you it’s the hairdresser, or your gym membership, or your weekly date night that has to go.
In fact, I’m not going to tell you it’s any one specific thing at all.
It’s up to you to decide what it is that stays and what it is that has to go.
There is no master list of expenses that we should all be working too. To get out of the spending rut, you have to decide what you will spend your money on.
For me, coffee is part of my daily routine.
I leave the house and buy a coffee as part of my morning outing with my daughter. I enjoy it and some mornings, quite frankly I need it!
I’m fully aware of the cost, but it’s a lifestyle choice I make that I can afford because I make sacrifices on other expenses.
It essentially comes down to what your priorities are. Priorities are personal and how we choose to spend our money is therefore a personal decision.
Living beyond your means action plan
So if it’s clear that you’re living beyond your means and you need a little direction with getting things back on track, here is a 5 step action plan to get you back in the black each month end:
- Work out a budget
Living beyond your means simply means you are buying things you can’t afford. How are you supposed to know what you can afford if you don’t know what it costs you to live?
Creating a budget isn’t about penny pinching and shopping at Hot Dollar (although they have the best wrapping paper and cards for $1! FYI).
Families have lots of expenses.
Mortgage repayments, cars, insurances, medical expenses, child care and schooling – the list goes on.
You need to know what these non-negotiable, fixed expenses come to each month so that you can work out what is left.
It is then up to you to decide how you will spend this money and on what which will depend on what your individual priorities are.
And then you have to stick to it.
- Reassess your expenses
Once you have your budget mapped out, have a look at what you’ve written down.
It’s often obvious to people that they should cut down on lifestyle expenses like eating out and new clothes.
But if this isn’t making a big enough impact on your bottom line, it might be time to broaden your definition of lifestyle expenses to include the things in your budget you might have previously thought of as necessary.
Be honest with yourself and really look at what your family needs in order to survive month to month.
If you can function without it month to month, then it might not be necessary.
It’s also a good idea to have a look at all your fixed expenses and compare across the market for possible discounts on products and services with competing companies.
If you don’t do this regularly already, then you will probably discover some savings straight away.
- Set some financial goals
Goal setting is a powerful tool to help you prioritise and plan for your financial future.
Writing your goals down will help you to articulate what they are and transform them from just an idea or a wish into a series of actual steps that you can work through.
Remember to make your goals SMART; specific, measurable, achievable, realistic and timely.
Start by thinking of what your financial priorities are.
These are big categories like paying off debt or purchasing a home.
Then work out what the individual goals are that support that priority.
Then write down a specific list of action items – the things you physically need to do in order to achieve those goals.
For example; your financial priority might be to be debt free.
A financial goal to support that priority might be to pay down your credit card debt by $2,000 over the next 6 months. And the action items might be look into a balance transfer and to set up an automatic payment to your card each week.
This process doesn’t have to take long.
Set the egg timer to 30 minutes and don?t overthink things too much to begin with. You will revisit these goals often so there is plenty of time to add to or change your list.
Think of it as a work in progress.
- Create a debt repayment plan
Paying off your lifestyle debts requires planning.
Take an honest look at what you actually owe. You might consider consolidating these debts if that makes financial sense in your circumstances and you can.
Now that you know what your net position is each month, and you’ve reassessed your expenses, you know what your capacity to repay debt looks like. Maybe it’s $50 a month, maybe it’s $500 month.
Consider it as a new expense. A cost to you each month that is non-negotiable. And look into automating this payment so that you don’t have to think about it and so that it actually gets paid.
If you have to make a decision about it each month, there’s a greater likelihood it won’t get transferred.
- Set time aside to revalue your financial goals
I know this is something that falls down the list of priorities, however circumstances and priorities change on a regular basis.
So revisiting your goals to be sure they still match your priorities will help keep you on the path to reaching them.
Again, this doesn’t have to be something you do every weekend, and it doesn’t have to take long.
If you keep your written down goals with the paperwork you revisit every month, like your budget or bills due payable account for example, it makes this an easier, quicker task.
We all have expensive periods in our lives and this is a normal part of life. But if you’re finding that this is a regular occurrence then it’s likely that you’re living beyond your means.
A little attention to detail and discipline is all that’s needed to turn things around again and get your lifestyle expenses back under control.