Many of us are living beyond our means and struggle to get on top of our finances.

The hardest part is making the initial changes in order to gain some financial security and independence.

But how do you know that you’re living beyond our means?

Here are four simple tests. If you’re doing them then it’s time to start thinking about making some changes…

How To Know If You Are Living Beyond Your Means

1. You’re Shopping on Credit.

Racking up bills on credit by shopping for things like vacations, clothing and other items that are considered luxury is a recipe for disaster. If they’re not essentials then you shouldn’t be going into debt to purchase them.

This is how people end up creating tens of thousands of dollars worth of credit card debt and struggling for years to pay it off.

2. You’ve Gone Into Your Overdraft More Than Once in the Past 12 Months.

Overdrafts should only be there incase of emergencies. On the odd occasion that loads of bills come out at the same time as unexpected costs.

You shouldn’t be going into them regularly as the interest in itself can build to huge amounts. If you find your balance going into the minus figures regularly then this is one of the most obvious signs you’re living beyond your means. It’s time to look at your budget and see what needs to be cut!

3. You’re Paying Someone to Do Something You Can Do Yourself and Not Being Able To Afford It.

Repairs, cleaning, car washes, taxi’s etc. If you’re in debt and you’re paying for someone to do something that you could easily do yourself then you’re living beyond your means.

This services are there for convenience when you have the money to afford it. It’s not a bad thing to wash your own car, clean your own apartment or have a go at repairing something that’s broken (Providing it’s not dangerous!).

When you make a purchase, get into the habit of asking yourself if this is something that you could be doing, rather than shelling out for someone else to do it.

4. You couldn’t live without your job’s income for at least six months.

Living cheque-to-cheque is one of the worst habits to fall into. You need to be saving at least 10% of your paycheque so you can build a fund that would let you get by with no income for 6 months.

This is your failsafe. You’re never completely safe in your job. Lots could be going on that you don’t know about and company’s can close without much warning, if at all, given to their employees.

Having this back up is your safety net and god forbid, if the worst happens, it’s one less thing to worry about.

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