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. Here’s what I mean:
GA writes:
We have a $50,000 line of credit as well as $45,000 in credit card and personal loans. We have a child starting college in Sept, another following in 2 years and a 2 year old. I have tried to trim our budget but can find no leeway. Grocery seems to be the biggest budget buster. We have cut eating out to once or twice a month but still have to reach for our credit cards by the end of the month. Any ideas where I should look to trim the fat and how do I cut back on the grocery bill? It seems the costs are up every time I go to the store.
Here’s a frustrated soul who can’t figure out how to cope with rising food costs because there is no wiggle room in her monthly spending. With $95,000 in debt, a minimum repayment amount of just 3% would mean a monthly payment of $2,850 a month. OMG! I’m sorry, GA, but FOOD is not your biggest budget buster; debt repayment is.
And that’s exactly the problem so many people are facing. They can’t figure out how to repay the money they have borrowed and have a life at the same time. Not surprising, really. You’ve already spent $95,000 you haven’t yet earned (and that would be after tax dollars, I’d like to point out).
So what other 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 income being a guide. If you are a member of a company pension plan, that counts as savings. If you’re having money deducted automatically for bonds, that counts too.
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 and transferring 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?
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Tags: debt, over-spending, signs you're in over your head, too much credit
September 8th, 2008 at 10:36 am
Hi,
I’ve finally learned how to live within my means but it took me a long time and I’ve sadly paid a lot of interest to various lenders starting with my first credit card in college (really that should be banned!) I have less that $2000 left to pay and I’m free!! My husband and I will only have our mortgage left and we’re planning on having that paid off within ten years if not sooner… We set a rule a few years ago that we will either have the money to pay for something in cash or we just won’t get it. This week we’re finally going to be refacing the kitchen and NOT going into debt for it 
Thank you so much for all you do Gail! My heart goes out to all those in serious debt… I had so many sleepless nights over it myself… I’m really looking forward to this coming year and your new shows! All the best 
I’m so excited! I’ve been watching your show for a while now and really got serious about debt repayment and savings in the last year… I’m happy to say that my husband and I are now saving 10% and will be increasing that as soon as my line of credit is paid off this year
September 8th, 2008 at 11:14 am
Last night my husband and I did our budget for the upcoming year.
As you said in Friday’s blog, it s the beginning of our year really. We are making a concise effort to rid ourselves of the bit of debt we have and we are determined to live within our means. We are mad enough now we are going to stick to it. It is manageable, we just need to make it happen! Thanks for all of your info, you are an inspiration!
September 8th, 2008 at 2:30 pm
Just wanted to say Thanks Gail for all that you do. As our daughter was growing up, we knew that she was going to require braces at some point. It wasnt until last yr that I felt like I was really stressing over it. How are we going to come up with 6000.00 dollars without going further into debt ??? (6000.00 was my quote from her Orthodontist as she has severely malformed teeth). My hubby’s insurance through his employer only covers 1500.00. I have heard you mention the “get another job” tactic…over and over. So, I did it this spring. I already work part-time as a Nurse and that income goes towards our debt/living expenses. My plan was that the income from my “2nd job” was going to go into a seperate bank acct, and at bank I dont frequent. Currently, we have put aside 3000.00 dollars and counting. That does not include my hubby’s insurance portion. I am so amazed, so thrilled that it was just “that easy” to get a 2nd job and use that money for her braces. The stress of where this money is going to come from is *Poof* gone.
:)
September 8th, 2008 at 2:59 pm
Really, really, really dumb question here … but … the 10% we should be saving — is that 10% of gross or 10% of net?
September 8th, 2008 at 3:03 pm
Due to both of my parents being out of work at one time or another when I was a kid I have been very concous of living within my means (including an emergency fund). I have money set aside just for my car. It is 8 years old and it isn’t so much a question of if but when it will need repairs. Now that I just bought a house I am starting a fund for repairs and replacements (I think the appliances are roughly my age). I have several co-workers who make significantly less that I do and they purchase new cars every two years or so. I just don’t understand how they can swing a payment when I wouldn’t even consider a new car that often no matter what my income is.
September 8th, 2008 at 3:43 pm
BigAssSuperstar, go with net. Let’s be honest…gross never exists. You never see that money. Always, always, always work with net because that is money you can actually “play” with. If you build a budget on gross, you’ll always fall short and go further into debt.
September 8th, 2008 at 4:32 pm
Erran: I agree that net is what you actually *have* .. it’s the money you see, the money you can actually count. But 10% of gross is a lot more than 10% of net … so .. yeah, I guess that’s a lot more doable!
September 8th, 2008 at 5:05 pm
BigAssSuperstar, Gail’s blog entry states 10% of net income.
September 8th, 2008 at 5:07 pm
All valid slams (as usual)
My sis (who spends like there is no tomorrow) just threatened to put the digital cable on the chopping block because she doesn’t like the limitless violence and gore at her kids’ fingertips. Her husband put up a terrible stink about how he deserves that little luxury after working hard all day. BUT thanks to the deluxe cable and super-fast internet, that man barely sees his children after work (its even on during dinner) and sis is fed up with the brain-sucking entertainment that cost so very very much $ when their debt is spiralling out of control.
Short of just plain cutting it off and watching the fireworks come out of her husband’s ears, what choice does she have? He feels he is the-man-of-the-house and should be the ONE that says what stays and what goes…
I suggested she sit down with him and go over every single little expense and get HIM to draw up where to trim the fat since he doesn’t like her suggestions so much. I also recommended that they EACH have a mad-money allowance (fair is fair) and then she can’t complain if he chooses to buy smokes and fishing gear with it (or give up smoking to keep the cable?) and he can’t whine if she gets shoes and chocolate with hers.
September 8th, 2008 at 10:53 pm
After being left destitute by my ex, I ended up in debt just in order to survive. I stopped added to my debt and thought I was living, just, within my means - although I had nothing left at the end of the month, no savings and not making much of a hole in my CC debt. By following Gail’s advice, I have made a budget, used the jars and taken out an installment bank loan with single digit interest to put against my CC debt (24.5% interest!). My monthly payments are lower and I will be out of debt in one year, rather than 18 months. I am now saving 13.6% of my income and in a year’s time it will be increased to 25%! From seemingly barely living within my means - now I have a few dollars saved and living slightly more comfortably within my means. What?!? How can that be?
The lesson I learnt is that when we think we are living within our means but still broke, we need to reassess what our means are. Thanks for the great post Gail and for reminding us that credit is like burning money we don’t have and can’t afford.
September 9th, 2008 at 8:05 am
Hi All
I have been following Gail’ s page for a while now. I don’t watch her show because “cable isn’t in the budget” ha ha.
Anyway, my hub and I have just split up after 11 years married. Here’s the thing: much of our arguing was about money (or lack thereof) and NOW, we get to try to squeeze his rent out of our already crazy-tight budget. It’s too late for the”if only’s” (If only I’d saved more, If only we hadn’t done that reno, If only we didn’t travel before kids….) so let me be an example for ya! PLEASE BEGIN AN EMERGENCY STASH!!!!!!!!!!!! You WILL need it someday!
September 9th, 2008 at 9:20 am
Lynda, I don’t have cable either, but i have seen every episode of Gail’s show! You can view them on slice.ca (VERY WORTH IT!)
September 9th, 2008 at 9:28 am
i just wanted to say that after reading Gails Blog and watching the show, that me and my husband have finally started our emergency fund. we are on a tight budget and there’s not wiggle room, but after reading Gail’s blog entries i decided to just start small and go for it.
this is what we’re doing:
i started by having 10 dollars a week transferred into our savings account. i set up 10 weeks of automatic transfers. when those 10 weeks were up i upped it to 12 dollars a week (don’t laugh, i know it sounds silly, but it’s increasing it!) for 10 weeks. now that has almost drawn to a close and i’ve upped it to 15 dollars a week for 10 weeks!
i’ve also started a part time job and half of my earnings are going to go into the emergency fund as well.
i truly learned the importance of an emergency fund this year as my husband lost his job and there was also a series of unexpected expenses. we had no savings (none, not even 20 bucks!) and it caused an inordinate amount of stress individually and to our relationship. how nice it would have been to have a cushion–any kind of cushion!
thanks again gail!
September 9th, 2008 at 11:06 am
Very inspiring stories Ajana and Dinah - well done!
September 9th, 2008 at 12:57 pm
Hi Gail, There are so many inspiring stories here and it helps to keep me motivated. Thank you all for sharing! I thought I would add my latest success to the list. After living payday to payday I made a total turnaround after discovering Gail’s show. It has taken me over a year to change my habits but it is all so very worth it. I have trimmed back so much that last month I managed to save $1700.00 and completely pay off my Visa. I did that in one month! I still can’t believe how far I’ve come. I’m just so darn proud of myself. Just one year ago I always ran out of money before the end of the month and never had an extra dime. Now I count every penny. I have found so many ways to save money by just paying attention. I used to get a thrill out of shopping but I now get my thrills from saving money. Thanks Gail, your the best!
September 9th, 2008 at 1:24 pm
This is my first time posting, but I’ve been lurking for a while now. I’m so inspired with everything I’ve read today that I wanted to share my story, too…
The ‘living within your means’ lesson is one I’ve heard time and again on Gail’s show, and about a year ago, it really and truly hit home. I realized I’d begun paying for necessities with credit cards, and that I had no clue how much I actually owed. I totted everything up and was astounded to find I had nearly $24000 in consumer debt and absolutely nothing saved. With Gail’s lessons ringing in my head, I dedicated myself to a financial seismic shift…
Nearly a year has passed and my credit cards are nearly paid off, I have several thousand stashed away, and I have a post-debt plan for wealth-building! I never thought any of that was possible. My husband and I have learned to value experiences (time spent together) instead of the race to accumulate things. We find more joy in a picnic of homemade food in the park than the latest cellphone or digital music player. I no longer turn to stores when I feel blue… and to be honest, I don’t often feel blue anymore!
I made a decision to drive my own life and finances, instead of letting debt drive me. And I want to thank Gail and everyone on this blog for sharing their stories and inspiring me along the way!
September 9th, 2008 at 1:59 pm
Thats so nice Sabrina…yes, I agree…we can all help eachother out and keep eachother inspired. It really and truly helps to hear others’ experiences and attained goals. Lets continue to support eachother.
September 10th, 2008 at 11:12 am
Well, it’s been exactly 2 months since my husband and I were lucky enough to have been chosen to participate in the show. When Gail made her first visit to our home and reviewed our financial situation with us, my first thought was how the heck is this women going to get us out of this mess. I felt very guilty for our debt to the point that i ignored it and it just kept getting more difficult to manage. In less then 4 weeks, Gail was able to teach us how easy it was to live on a cash budget and how important it was to focus on debt repayment. Setting up a Savings, Home Maintenance and Emergency account were all things I previously thought were impossible. And I’m proud to say that we have successfully started all 3 accounts. Our debt repayment plan has us Debt Free in less then 2 years! I still get goose bumps when I say that. The only way I can summarize our experience is from a quote I read just recently “Aim for success, not perfection. Never give up your right to be wrong, because then you will lose the ability to learn new things and move forward with your life.” Thanks Gail for all you taught us and for all your words of wisdom off camera.
September 10th, 2008 at 4:00 pm
Hmmm…totally wonder what Gail is like off camera. There must be so much that is said and missed because the show has to fit into 22 minutes of television. Anyways, thanks for posting Lucy.
September 10th, 2008 at 8:44 pm
Keep up the momentum Sabrina!! One thing i found that helps me is BLOGGING!!
I never really considered it before. There are tons of us out here who are struggling day to day to live within our means! We all encourage one another and share tips & tricks! You may want to consider it! 
If you do, make sure you drop by and say hello 
Good luck to you!!