In an age of plastic spending and mobile payments, living within your means can easily slide into living beyond your means.
And many of us fall into this trap without realizing it. Getting out of this trap can be “easier said than done,” said Nick Manley, LPL Financial Advisor* for SELCO Investment & Retirement Services.
“Living within your means can be challenging, especially in today’s society,” Manley said. “Debt can accrue quickly if you’re not paying attention, and with that comes added stress. You’ll thank yourself down the road if you can avoid the debt pitfall.”
Even if you feel like your excessive-spending lifestyle has become part of who you are, there are ways to reverse the trend. Check out these red flags and corresponding tips to help steer you away from the “living paycheck to paycheck” path.
Red flag: You're always carrying a credit card balance
Credit cards can help you build a strong credit history while providing a safety net when things are tight. But they can also create a false sense of security—start relying on them and you’ll get stuck with a heap of interest on top of your normal monthly payments.
The fix: Try doubling down on your monthly payments or, at least paying more than the minimum amount due. If you can swing it, stop using the cards—or at least slow your roll—until the debt is paid off. Another option is consolidating your debt.
Red flag: You stress about paying your bills
Most people stress about their bills—they just keep coming, right? You’re not the first one to feel this way, and you certainly won’t be the last. But at the same time, bills should be fixed into your budget, and you should be able to pay them easily without biting off the ends of your fingernails.
The fix: Identify your budget kryptonite. Are you spending too much for food? Opting for the premium cable package? Try seeking out bargains on your weekly grocery-store trips. Cut the cord on cable. Tightening the belt on your monthly spending goes a long way toward financial freedom. If you’re signed up for digital banking, you have access to several financial tools to help you stay on top of your budget.
Red flag: You can't sock away 5% of your pay
Financial experts recommend saving 20% of your monthly income. At the least, you’ll want to store 5% of your monthly take-home pay for your retirement and a combination of an emergency fund, other long-term savings, and paying off debt. If you can’t do that, you’re living beyond your means.
The fix: Again, look for opportunities to trim your expenses and restructure your budget.
“The ultimate goal is to create a budget that provides a ‘cushion’ so you can pad that savings account or emergency fund,” Manley said.
Red flag: Your mortgage payments is too much to handle
When it comes to mortgages, try following the “28 percent rule,” meaning no more than 28% of your gross monthly income should go toward a mortgage. Lenders generally abide by this rule, and so should you. If you’re above that, you’re in over your head.
The fix: Try refinancing your mortgage. If this still doesn’t put you in a good place, you may need to downsize. SELCO Mortgage Officers can help you decide the best plan of action.
Red flag: You lease a car you can't afford to buy or finance
If you’re able to cover your monthly payments but unable to put money into savings and keep up with your other bills, your car is too expensive.
The fix: If you like the style and model you have, consider looking for an older model that you can more easily afford. If your situation has become dire, you may mull selling the vehicle and finding alternate means of transportation until your budget allows for regular monthly payments.
Red flag: You're trying in vain to match your friends' spending habits
Thanks to the hyper-sharing culture of social media, the pressure to keep up with the Joneses is stronger than ever. If your financial decisions are influenced by your friends’ lavish ways, you’re likely spending more than you can afford.
The fix: Get to know your budget.
Living within your means starts with you. Identify how and why your spending habits have spun out of control, then if need be, consult with a financial professional to get back on track.
“Stay on top of your finances and hold yourself accountable,” Manley said. “Life will throw you a financial curveball from time to time, and you’ll want to be prepared for it.”
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* Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. SELCO Community Credit Union and SELCO Investment & Retirement Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using SELCO Investment & Retirement Services, and may also be employees of SELCO Community Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, SELCO Community Credit Union and SELCO Investment & Retirement Services. Securities and insurance offered through LPL or its affiliates are:
| Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value |
SELCO Community Credit Union (“SELCO") provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay SELCO for these referrals. This creates an incentive for SELCO to make these referrals, resulting in a conflict of interest. SELCO is not a current client of LPL for advisory services. Please visit https://www.lpl.com/disclosures/is-lpl-relationship-disclosure.html for more detailed information.
The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.
