Are You Living Beyond Your Means?

We’re in a pickle. We aren’t saving enough and we’re carrying record levels of debt. Not just mortgage debt, though many of us have more than we can manage in terms of mortgage payments. Noooo. We’re carrying record levels of debt on our lines of credit, our credit cards, and the plain-ol’-boring loans. Why? Simple. We’ve forgotten how to live within our means. We’re ricocheting out of control, spending money we’ve yet to earn. We’re buying STUFF we think we NEED, when all we’re doing, really, is scratching our consumer itch. I mean to say, do you really NEED a TV? Do you really NEED another pair of pants? Do you really NEED that better-than-ever cell phone, camera or power saw?

The fact that we can’t seem to get to the end of the month before we get to the end of the money should be our first clue. And the folks who have borrowed… well, they just can’t seem to figure out how to repay the money they have borrowed and have a life at the same time. Not surprising, really.

So what clues might there be that you’re living beyond your means?

Are you saving less than 10% of your net income? Yes. Then you’re living beyond your means. You see, if someone in your family were to have a medical emergency or a blip in their employment, if your roof were to leak or your car give up the ghost, if you should have to cope with a major move, the care of an aging relative, or educational expenses, you’d be up a creek without a paddle. Right GA?  Ideally, you should save as much as you can, with 10% of your gross income being a guide.

Are the balances on your credit cards or lines of credit rising? Yes. Then you’re living beyond your means. Paying only the minimum on your credit cards or lines of credit while you continue to increase the balance you owe is a sure sign you’re a dope. When, exactly, are you going to have the money to finally get rid of the debt? Is some magical wand-waving fairy god mother going to pop into your world and woosh away your debt? Or do you figure that a windfall is in your future? Hey, WAKE UP! If you have a $5,000 credit card balance at 18.9% and make a minimum payment of just 2.5% per month, you’ll end up forking over almost $8,000 in interest over the 25 years it takes you to pay off the balance.

GA owes $95,000. Let’s say she’s averaging an interest rate of just 11%. And let’s say she makes a payment of $2850 a month (ouch!) It’ll cost her almost $19,000 in interest and take 40 months to pay off the debt. Over-extended? I guess so.

Are you missing payments on bills? This is a sure way to ruin your credit rating and increase your interest costs. And it’s a sure sign you’re living beyond your means. If you don’t have a handle on what your monthly bills are, and what it’ll take in income to keep current, then it’s time to get with the program. Get out all the bills that have to be paid every month and make a list. Rank the bills in order of priority. You HAVE to pay your electricity bill, but you don’t HAVE to have premium cable (or any cable for that matter.) Okay, now deduct your HAVE TO PAY amounts from your monthly income in order of importance. When you run out of money, cancel everything else.

Are you taking cash advances on your credit cards? Yes. Then you’re living beyond your means. Cash advances, putting your groceries on credit, applying for new cards so you can transfer balances so you can fool yourself into thinking you’re paying your debt are all signs that you’re in BIG TROUBLE.

I know it’s easy to get credit. I know it’s nice to have what you want when you want it. And I know everyone else is doing it. But just because they’re all walking off the edge of the precipice doesn’t mean you should follow them. And if you’ve been walking in lock-step with a bunch of fools who can’t control their spending to the point that they put themselves and their families at risk, then it’s time to change your pace.

You don’t have to be a follower. You don’t have to continue to do what all the other dopes are doing. You can stop the insanity, take control of your future, and commit to living within your means. I know you can. Do you know you can?

25 Responses to “Are You Living Beyond Your Means?”

  1. Thanks for the wake-up call Gail! I’ve really fallen off track lately and my resolution (New Year’s or not!) is to get back on track again!
    I need to sit my butt down and go through our finances again! Cheers and words of encouragement to those who are in the same boat – we can fix it!

    By the way – bought a copy of Money Smart Kids and am really looking forward to reading it!

  2. Working on my annual budget and expense review today.

  3. What I have learned in the last 8 weeks…

    I was brought up to be a saver. My mother taught me to save, save, save. She started me out quite young putting $25 aside every two weeks. I have a very healthy emergency fund and it has come in handy in recent weeks. I started a new job at the end of August. My employer is an insurance health care provider. Ironic that given their line of business they do not offer their own staff short term disability as a benefit (but that’s a whole other topic….)

    At the end of October I was in a car accident and was unable to work. I’m heading back to work the second week of January. As my employer does not offer short term disability I had to apply for EI Sick Benefits. I have never applied for EI before and had no idea how it worked or how long it took. This has been such an eye opening experience for me. I have been able to temporarily use my savings/emergency funds and therefore have had no impact to my finances, bills, etc. I say temporarily b/c as much as that’s what it’s there for, I hate seeing it flush away. We do not carry any debt other than our mortgage so I tested myself over the last few months and realized how little I really need to purchase to live. No new clothes, no new boots, staycation, etc…

    I often say to my husband: What if we had a lot of debt? What if I didn’t have all this savings? What if I was single with a couple of kids with no savings? What would I have done? It was very easy for us to cut back. We don’t spend a lot to begin with. Don’t get me wrong. It’s not easy. We rarely exchange Christmas gifts and this year we set the tone from the beginning. Less is more – we didn’t exchange any and we have small families so the rest was easy. No one was offended and everyone survived. Friends were a different story. I told friends of ours a few weeks ago that we wouldn’t be joining them for a big meal out at a nice restaurant. When they gave me a hard time I explained I hadn’t been paid and wasn’t going to use savings for a meal I didn’t really need. My husband and I laughed knowing all the couples going were going “for show” and would simply use their credit line to pay their visa. I just don’t get it.

    What is point after all this rambling? My point is that just as Gail says time and time again this is about not living beyond your means. As much as I have planned all my adult life (I’m 38), I still had no control over my employer supporting me while I couldn’t work and the wait time is so long for sick benefits that I needed a plan. I’m thankful I had one.

    Today I got my first EI Sick Benefit deposit. I’m not running to the mall with it, or running to a restaurant, I simply transferred it back into my savings account b/c as the last two months have taught me, I’ll never know what’s lurking around the corner.

    Cheers to everyone, and thanks for letting me ramble. 🙂

  4. It’s the essentials that are rising in my budget-the needs not the wants-while real income is staying pretty well the same. Property taxes up 5% in 2012, food up almost 10% this winter where we live, insurance always up 8% per year with no claims. There’s $150/month without even looking hard, about $300/month when I do. That’s a pretty good holiday right there.

    I’ve got no mortgage and no consumer debt so that’s made it easier for me to notice the smaller increases…like food!! Seriously, I think it’s that middle class erosion that nobody talks about much in Canada.

    I’ve taken Gail’s advice and I’m working more and I’m grateful to be able to. It’s puts a very fine point on things.

  5. avatar Julie V. T. Says:
    December 30, 2011 at 1:53 pm

    We were hoping to finish off the year well… paid off all consumer debt; my hubby has his student loan left, and we have our car and mortgage. Well, car broke down on Wednesday! Luckily we had some money in our small emergency fund… so today, we’ve got to fork over more than 900$. I’m a bit sad that our EF is almost gone, but happy on the other hand that we do have the money for it and do not have to use credit. Hopefully all the lessons that I’ve learned from Gail this year, will be carried over next year! I am (still) learning to live within my means… it’s getting easier to let go of the wants. I have a lot – a wonderful husband, a beautiful daughter, a son on the way, a home, food and we both have good jobs. What more could I want?

  6. @ all posters and Gail – firstly thanks to all of the inspiration that everyone provides. I have just competed my balanced budget (took a while) and ‘own up to your debt’ worksheet. Moving right along, I have been fooling myself. This really is the year to get finances under control. We have close to $100k in various consumer debt. With very healthy incomes, we are going to tighten our belts like crazy to tame this ridiculous amount of debt. I have moved on from berating myself to the action phase (telesis – in Gail’s new book).
    Sincere thanks to all of the people who post here. We don’t know each other, but knowing this community exists will keep me accountable.
    Warmest wishes to all for the new year.

  7. I also want to extend thanks to all posters here. You guys have helped us stay on the straight and narrow and given me lots of tips on different way to do things. I must confess that we did fall off the wagon in the last few months. Ouch. But we did build a balanced budget for 2012 even with me going on mat leave in 4 monhts. We have been living on my mat leave budget since getting prego but we did not adjust our expenses right away which is why we fell off course. We are back on track now and I am more determined then ever to stay that way in 2012.
    We have a retirement pot building up, education savings for our kids, emergency savings, and we will be ok to cover the expenses while I wait to get my Mat leave benefits to kick in. We also managed to accumulate all the big ticket items like the crib, mattress, stroller, high chair for under $200.00 thanks to familiy and craigslist.
    Hope everyone has a great 2012 and thanks again for keeping us on the right path

  8. avatar Elizabeth A Says:
    December 30, 2011 at 4:09 pm

    Just wanted to wish everyone here a Happy New Year and wonderful fresh start too! I look forward to hearing about your victories in 2012, and of all the things you will learn and share. I enjoy visiting with you all, and hope you enjoy the holiday with family and friends!

  9. I have been worrying night and day about friends of ours who are in a large amount of debt (mortgage, 2 lines of credit and credit cards) but retired.
    They have just been hit with a tax bill of several thousand dollars.
    I wanted to vomit. Yet, the spending in the household really hasn’t changed. It is as if there is magical thinking that all will be well.
    After they made some recent (wants not needs) purchases, I’ve made a firm commitment to stop worrying about them and just try and keep on track with my own finances.
    Aiming at paying off the LOC and continuing to plump up our EF.
    Good luck to all posters in their pursuit of being debt free.
    Happy New Year.

  10. Over the past couple of years we’ve been able to completely pay off all of our consumer debt and now just have a small mortgage that’ll be paid off in under 4yrs. Not having to make credit card/loan/LOC payments frees up so much money that it’s incredible. We’re able to save 25% of our gross income now, and that buys freedom. The funny thing is, we don’t have debt but we also don’t have a lot of the things our friends have….travel trailers, boats, recreational vehicles and the new car in the garage. I don’t miss that stuff, it takes a lot of time to take care of it, work to make money to make the payments, etc. Some of our friends look at us with envy because I’ve been able to go down to part time and we’ve been able to “buy” our lives back. However, they don’t want to give up the stuff to do the same thing. It really is true, it’s not how much you make, it’s how much you can keep. My life doesn’t lack one little thing, and the stress of not worrying about money is priceless. The only thing I would change, I would’ve tried to arrive at this point earlier in my life.

  11. 2011 is just about over…
    Time to look back and see what went right, wrong and learn to improve!
    2012 is ahead. …and time to make real change of cutting the wasteful spending that we did not achieve fulfillment from.
    Make the small changes and commit to buying only ‘stuff’ we need that we can pay fully at the end of the month.
    Happy New Year to all!

  12. @ Porchmouse – am hoping the New Year has a much more positive outlook for you!

    @Flowers – Halleluah Sister – I have said the same thing about the “middle class erosion” comment! It’s getting much more costly for needs!

    @ On my way – I am right there with you! May not be the same amount but I’m going to have to do some reigning in as well.

    @all posters – I really enjoyed reading everyone’s comments! So positive! What a great way to head into the New Year!

  13. What was did in 2011
    We actually have started a savings and emergency fund. We owe nothing on our credit card and paying down our line of credit.
    We stopped purchasing on credit thinking that we have earned the right to spend money that we haven’t yet earned. It is a great accomplishment.
    We have a balanced budget to go into 2012 with and our goal is to leave the long term savings for that purpose and build our emergency fund even more.
    We make our own coffee/lunches and bring them at work.
    Learned to appreciate my dear husband and lovely daughter and pets rather than spend on things I don’t need.
    Looking forward to 2012 and wishing everyone a prosperous New year.

  14. For one of the first times ever, I’m going to cringe when I see our credit card bill, having just come back from a fabulous holiday. The major expenses, flight and hotel were prepaid, but meals and activities and some shopping adds up. We have the money in the bank, but it will be hard to see the accounts drop. On the other hand, we had the trip of a lifetime! It was great to spend time with my immediate family (2 teens and a husband who has worked out of town a lot recently) and relatives that we don’t get to see. Money can by happiness, and it’s so much better than “stuff”!

  15. […] Are You Living Beyond Your Means? […]

  16. avatar Melaniesd Says:
    January 1, 2012 at 11:34 am

    **HAPPY NEW YEAR**** Gail and everyone who posts here!

  17. I have been a saver all my life though not to say I haven’t had times where I spent money only to regret it later. I had a heart attack in June and was diagnosed with Cardiomyopathy and have been out of work ever since. THANK GOD I have emergency fund. I have had NO money coming in for the last 6 months. I don’t have a mortgage or car payments and no credit card debt so I was lucky I didn’t have to worry about any of that, but I still had bills to pay. Plus now I have Doctors and Hospital bills which add up quickly. Having put money into a savings account every pay check SAVED me. Even if it’s $10 it adds up. Remember it’s not IF something happens will I be ready but WHEN something happens I WILL be ready.

  18. Gail, I’ve been a fan of yours for the past 13 or so years. I first fell in love with your message when I read “A Woman of Independent Means”. Since then, I’ve worked hard to build my emergency fund, pay off the mortgage on my principal residence, pay off all student and car loans and stay completely out of debt. I have a small balance on my line of credit, which was used to purchase stocks and the interest on the LOC is tax-deductible. However, the LOC balance will be gone by June assuming that everything goes according to plan.

    Thank you for your blog, your books, your TV shows. Yours is one of the very few voices shouting against the relentless urgings of the AdMan to buy-buy-buy! I love listening to your message of save-save-save. People need to live below their means and to save for the future wherever they can. I’m happy to be able to announce that I do live below my means! Listening to Gail’s message bolsters my ability to say “NO!” to the many, many daily temptations to spend my hard-earned money on stupid things that won’t really enrich my life.

    Keep up the good work, Gail – all the best to you and yours in 2012!!!

  19. Hi Posters, Hope someone can help me, I am 63 retired my husband is 60 *(Younger Man) Ha Ha. But our problem is serious, we have about 13000.00 in consumer debt and a pretty heafty student loan. however most of it is medical bills, with a couple cc with small balances. Our problem is we don’t have enough money, I used Gails budget worksheet today and am just able to make my bills. No money for bills. I get SS and my husband works, i have about 2900.00 of money per month to work with. I have tried to find a part time job with no success, no one will hire me, I believe due to my age. What do I do? If I do one bill at a time it will take me a long time, but at this point i see no other alternative. I don’t have the money to pay some on every bill. Any suggestions??????? Could you email responses to me at sandyfletcher05@ as i am not in this very often.

  20. It’s wonderful to see so many folks with a positive mental and financial outlook for 2012 – gail, my question is this – what do you do when you’ve cut down the expenses, held back on the purchases, worked as many hours as you could, but you still come up short at the end of the month? It’s one thing to have a plan, but sometimes, the budget just doesn’t stretch far enough, no matter what you do…

  21. Thumbs up Gail! I’ve been trying to break the follower habit for about a year and a half now. Last year alone I paid off almost $20,000 in debt. It’s hard work, but it can be done! Best of luck to everyone else in the same predicament, you CAN do it! Thanks for holding our feet to the fire Gail 🙂

  22. I am in Credit Crisis heading into deep doo-doo.
    I am separater with children
    Homeline max out
    Credit card max out
    spending more than I make on a montly base
    I am soon to loose every thingI worked for 26 years
    I need your help badly I am afraid my rope near to the END.

  23. yes way beyond

  24. Gail can you help to Guide me to get started in becoming debt free

  25. please contact me I need your help

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