Warning: You are living Above Your Means

You earn a decent income every month, and you budget well, but it seems like your income is never enough, why? You may be living above your means without even knowing it.

If someone is living beyond their means, they are spending more than they can afford.

Below are signs that you’re living above your means:

No Savings– If you struggle to save every month, i.e. you can’t save at least 5% of your monthly income- this could be a sign that your cost of living is higher than your income. The truth is, we all have different financial circumstances but no matter the situation it’s very important to set aside at least 5-10% of your income. Do not spend all your income because it’s not enough. If there is one thing you should learn from 2020, is the importance of saving.
What works well is to classify your savings as a “compulsory expense”, just like money for feeding, transportation, and other needs, with this it will not be an afterthought, but treated as a need.
One sure way for me is; when I am working towards a financial goal, I save first for the financial goal and then live on what is left, making sure everything fits into my means. Saving is a healthy financial habit that should be practised.

You run out of cash before the next pay — If you often find yourself with no money before your next salary, it simply means you have either spent all you earned before/immediately after receiving or you have spent more than you have earned, maybe as a result of debts and expenses incurred before payday. Is this the norm? It is a sign that your lifestyle doesn’t fit your income.  If your earning is too little, then focus on developing yourself, so you can increase your earning capacity.
Also try a 30day spending detox, to allow yourself to spend money on bare necessities — no purchases on credit to pay at month-end, cut everything else.
Nothing puts your finances in check more than a spending detox when you start to experience financial peace, and then you begin to think of investments, not expenses all the time.

You spend more of your income on housing– One of the main signs of living above your means is a housing cost that is too expensive, and this is because most times people stretch beyond what they can truly afford.
The personal finance income-rent ratio is 30%, but I will say 15%-35% considering your annual income, the benefit of proximity to work while saving on transportation cost. Hence, the 35%. But this percentage is still very high if you have other financial goals to achieve (which is almost certain).
Check this-If you live in Lagos, Nigeria, with an annual income of N3,000,000 and a rent of N 900,000 per year. i.e. 30% of your annual income. It will be difficult to meet other needs. Therefore, 15% is the most possible because there are other bills and financial obligations.
Nonetheless, over-all, if your cost of rent is higher than 30% of your annual income (irrespective of your level of income) then you are living way above. 

No Emergency Fund– if you don’t have an emergency fund set aside specifically for emergencies- it’s a sign!
People hardly prepare for emergencies these days, many went broke a few days into lockdown, they feel they do not earn enough to save and build an emergency fund. This is very true, but you can start somewhere and eventually build up to something substantial. Where there is a will, there is a way.  If you are yet to start, check here to know how.
Emergencies happen all the time, be prepared!

If you are concerned about cultivating financial independence and protecting yourself from the unexpected, you must first start by living below your means, and then grow your means.


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