In our recent blog, we took a look at some practical strategies to deploy in order not to spend beyond one's means, simply living within one’s financial capacity. Which drew our attention to just a few but very compressive points to expound on. How about we take a look at some of the signs which expose us to living beyond our financial capacity? Won't that be great? Well, we will be delving into that in the next few paragraphs. Just some few points but very comprehensive and very helpful too; what I expect and pray so. Without much ado let’s get the ball rolling.
1. Ignoring retirement/pension savings
Old age is an inevitable aspect of everyone’s life. Everyone is bound to that except an occurrence of untimely death or unforeseen events. But, as long as we are alive there is a promise of old age, the clock is ticking. This should draw our attention to the need that it is better to prepare for this inevitable stage of life; where there isn't enough strength, deterioration of health and possibly absence of friends and loved ones. Insurance covers, pensions schemes, annuities, and all sorts of long-term investment plans should be in place. If none is available for a person then this is a possible sign of living beyond financial means. I know people who ain't just not interested in any of these investments due to personal reasons. That’s fine by me. But if there is no reason and no payment of premiums for these future long-term investments then there is a potential high level of spending resulting in insufficiency.
2. No emergency fund
There is a very high probability of any one not having a retirement saving account or scheme not having a backup plan in times of emergencies. This means there is little or no chance of an emergency savings fund when there is no intention of having a retirement or pension fund. This might not sound so correct but there is a very high probability of such an outcome. Come on, didn't I make sense on that? I strongly believe you would agree with me.
3. Impulse spending
Another detection is the act of spending out of impulse. With this act, the individual just acquires stuff out of the blue, not because they are a necessity but felt like just buying. This act will soon squander the small money within the individual. I believe it is one of the acts people don’t know flies cash out of our pockets and accounts. Just randomly acquiring anything at all even when not in need will definitely make an individual spend beyond their means. Credit Card becomes the main worker now. It is always active buying here and then. Relying on credit cards will surely lead to a cycle of debt and extra need.
4. High housing cost/rent
living in a serene environment is always a priority for most of us. Not excluding me. Nevertheless, it’s not the same as living in fancy and luxury apartments and so on. If it's within the means of spending then why not? But always make sure a housing cost or rent doesn’t exceed 25% of pre-tax income, keeping you within a safe budget range always. There are also extra costs that come with the ownership of a house or rent. For example, the maintenance of the property and even the property tax.
These are some basic signs of living beyond one’s own means. There are definitely more to these but here is where we bring to an end the fantastic four. I would advice you do more research on this; DYOR!!! Feel free to share your thoughts and findings afterwards in the comment section. Corrections and contributions are highly welcomed, feel free to drop them in the comment section also. These are basic and I guess you have picked something from it. Check out for these signs to keep on track when it comes to financial wellbeing and staying within financial means. Hope to see you in our next section of financial education.
Gracias!